Airtel Africa Regulatory News (AAF)

Airtel Africa plc

Year ended 31 March 2020

13 May 2020

A strong set of results which delivered against our IPO aspirations with performance sequentially improving during the year

Key highlights

· Customer base up by 11.9% to 110.6 million

· Revenue increased by 11.2% to $3,422m, with Q4 revenue growth up 15.1%

· Revenue in constant currency grew by 13.8% in the full year and 17.9% in Q4. Growth recorded across all business segments, with voice revenue up by 5.2%, data by 39% and mobile money by 37.2%

· Underlying EBITDA up 13.8% to $1,515m, with underlying EBITDA growth in constant currency at 16.3%

· Reported underlying EBITDA margin improved to 44.3% by 100 bps (up 94 bps in constant currency)

· Operating profit grew by 22.8% to $901m and increased by 25.4% in constant currency

· Free cash flow was $453m, more than double compared to the same period last year

· Earnings per share (EPS) before exceptional items was $7.3 cents and basic EPS was $10.3 cents, a decrease of $9.2 cents

· Net debt to underlying EBITDA was 2.1x, compared to 3.0x in March 2019

· The Board recommended a final dividend of $3 cents per share, to a total dividend of $6 cents per share

 (1) In July 2019, after the announcement of Initial Public Offering (IPO), the company issued 676,406,927 new shares. EPS has been restated considering all the shares as at 31 March 2020 had been issued on 1 April 2018 for like for like comparison. (2) The difference between reported currency and constant currency growth rates is on account of currency movements with reference to the US dollar rate.

Raghunath Mandava, chief executive officer, on the trading update:

"These are a strong set of results which delivered against our aspirations set out at the time of the IPO, with performance sequentially improving during the year. Revenue increased by 11.2%, 13.8% in constant currency, and underlying EBITDA by 13.8%, 16.3% in constant currency, to a reported $1,515m, underpinned by significant improvement in our Free cash flow generation and reduced leverage. These results also demonstrate the strength and resilience of our business and the effectiveness of our strategy - with all three business services, voice, data and mobile money, contributing to revenue growth. We have also continued to invest in future growth opportunities as we expanded our distribution, modernised and expanded our network with 65% of sites now on 4G, acquired new spectrum in Nigeria, Tanzania, Malawi and Chad, and entered into strategic partnerships in our mobile money business.

More recently, the markets where we operate have begun to be impacted by the COVID-19 and the related actions that governments have implemented to reduce the risk of contagion. Our priority has been to keep our colleagues, suppliers and customers safe whilst supporting the communities in which we operate. Telecoms businesses provide strategically essential services to ensure the functioning of economies and communities and are, therefore, more resilient compared to some other sectors. In Africa, the spread of the COVID-19 has lagged the rest of the world and, therefore, it is difficult to precisely forecast what the impact of this will be on customers and business. However, our performance during the month of April has been resilient as the business continued to deliver constant currency revenue growth, although at a lower rate.

We enter this period of increased volatility in a strong financial position and our view on the medium-term opportunities across our footprint has not changed, as these markets will continue to benefit from strong population growth and the need for increased connectivity and financial inclusion.

Finally, I would like to thank wholeheartedly our employees and partners, without whom none of this would be possible."

Key financial information

(1) The revenue in above table includes intra-segment elimination of $91m for the year ended March 2020 and $64m for the year ended March 2019, $24m for Q4 2020 and $24m for Q4 2019.

 (2) Mobile money revenue post intra-segment eliminations with mobile services is $220m for the year ended March 2020 and $170m for the year ended March 2019, $58m for Q4 2020 and $44m for Q4 2019.

(3) Underlying EBITDA includes other income of $17m for the year ended March 2020 and $26m for the year ended March 2019, $3m for Q4 2020 and $5m for Q4 2019.

 (4) Operating profit includes $5m CSR (Corporate social responsibility) expense in the year ended March 2020 and $4m in the year ended March 2019, $1m for Q4 2020 and $2m for Q4 2019.

 (5) Profit before tax in the year ended March 2019 included a $24m share of loss from joint ventures and associates.

 (6) In July 2019, following the announcement of the Initial Public Offering (IPO), the company issued 676,406,927 new shares. EPS has been restated considering all the shares as at 31 March 2020 had been issued on 1 April 2018 for like for like comparison.

Financial review for the year, ended 31 March 2020

GAAP measures

Revenue

Reported revenue grew by 11.2% as 13.8% constant currency growth was partially offset by currency devaluation. The strong performance was largely driven by the growth of our customer base, up by 11.9% to 110.6 million, as well as a 3.3% growth in ARPU. Across the regions, Nigeria and East Africa continued to deliver strong performance, and performance in Francophone Africa continued to improve with revenue up 4.1% in Q4 2020. Revenue growth was broadly based across all key segments: voice up 5.2%, data up 39.0% and mobile money up 37.2% in constant currency terms.

Operating profit

Reported operating profit was $901m, up 22.8% and 25.4% in constant currency. This was the result of strong revenue growth with broadly stable operating expenditures as a percentage of revenue.

Net finance costs

Net finance costs increased by $18m driven by higher other finance costs which more than offset reduced interest costs of $64m as a result of lower debt. The increase in other finance costs was primarily driven by higher impact of devaluation on foreign exchange denominated liabilities largely driven by $75m increase in Q4 2020 as a result of the devaluation of Nigerian naira, Kenyan and Ugandan shilling, and Zambian kwacha.

Taxation

The total tax charge amounted to $190m, versus a tax gain of $78m in the previous financial year. This was due to the higher operating profit and withholding tax on dividend declared. FY 2019 also benefited from one-off items amounting to $170m for deferred tax recognition in Nigeria and a $55m reversal of a tax provision.

Profit after tax 

Profit after tax was $408m, down by 4.4% due to a one-off deferred tax recognition in Nigeria in the year ended 30 March 2019 and a lower exceptional item gain in the current period. Post one-off tax benefit, profit after tax for the year increased by $43m or 17%.

Basic EPS

Basic EPS was down 47% to $10.3 cents, due to an increase in shares issued. If all the shares as of 31 March 2020 had been issued on 1 April 2018, the restated basic. EPS for the year would have been $9.8 cents and $10.3 cents for the year ended 31 March 2019. Restated EPS reduced as a result of higher tax and finance costs. This was primarily the result of a $75m, or $2.0 cents per share, higher impact of foreign exchange on debt due to the devaluation of the Nigerian naira, Kenyan and Ugandan shilling and Zambian kwacha in Q4 2020.

Alternative performance measures

Underlying EBITDA

Underlying EBITDA grew by 13.8% to $1,515m. This was largely driven by 16.3% constant currency growth, partially offset by currency devaluation. The reported underlying EBITDA margin of 44.3% improved by 100 bps, and by 94 bps in constant currency.

Foreign exchange had an adverse impact of $76.5m on revenue and $31.7m on underlying EBITDA, largely driven by the devaluation of the Zambian kwacha, Central African franc, Nigerian naira and other East African currencies.

Tax

The effective tax rate was 48.6% compared to 41.9% in the previous year largely as a result of the profit mix between countries and higher withholding tax on dividend declared. The effective tax rate at 48.6% is higher than the weighted average statutory tax rate of approximately 32%, largely due to the profit mix between various countries.

The adjusted effective tax rate was 38.7% compared to (1.0%), largely as a result of recognition in the prior year of deferred tax assets in Nigeria amounting to $170m.

Exceptional items

Exceptional items of $112m include $72m gain related to the expired indemnity to certain pre-IPO investors and $ 51m gain related to recognition of deferred tax asset in DRC. The previous year's $119m exceptional items include $170m in deferred tax recognition in Nigeria partially offset by $41m of accelerated depreciation resulting from a network modernisation.

Free cash flow

Free cash flow grew by 201% to $453m, largely due to the underlying EBITDA increase and reduced interest payments related to lower debt.

EPS before exceptional items

EPS before exceptional items was down 48.2% to $7.3 cents, primarily due to the increase in the number of shares issued. If these shares had been issued on 1 April 2018, the restated EPS before exceptional items would have been $6.9 cents for the year ended 31 March 2020 and $7.4 cents for the year ended 31 March 2019. Restated EPS reduced by $0.5 cents as a result of higher tax and finance costs primarily as a result of a $75m, or $2.0 cents per share, and higher impact of foreign exchange on debt due to the devaluation of the Nigerian naira, Kenyan shilling, Ugandan shilling and Zambian kwacha in Q4 2020.  

Net debt and leverage

Net debt was $3,247m compared to $4,005m in March 2019. The $758m reduction in net debt is due to an increase in cash of$680m from the IPO proceeds and a $122m proceeds from cancellation of derivatives. As a result, leverage improved to 2.1x at the end of March 2020 from 3.0x at the end of March 2019.

COVID-19

In the countries where we operate, the spread of the COVID-19 has lagged the rest of the world. The situation is rapidly evolving, and in the last few weeks several governments in Africa have taken decisive actions to reduce the risk of contagion, including banning all commercial flights, closing educational facilities and in some case all non-essential establishments, limiting social gatherings and encouraging social distancing and working from home.

During these unprecedented times, governments have recognised the telecoms industry as a critical and essential service. We are working closely with them to keep people connected and the wheels of the economy turning. Our performance during the month of April has been resilient despite customers behaviour being impacted by lower disposable income and restrictions on movements. The business continued to deliver constant currency revenue growth, although at a lower rate. Increase in data and mobile money revenue growth more than offset revenue decline in voice.

We are constantly monitoring how the situation is evolving to identify key risks and take immediate action to put in place adequate mitigation plans to minimise any potential disruptions from the pandemic to our business.

GOVERNANCE: We have a dedicated executive COVID-19 committee mandated to regularly identify risks, agree on action plans and monitor their execution. As an outcome of the committee's role, the CEO and CFO have regularly updated the Board on the risks and actions identified. This ensures a direct channel between local management and executive and non-executive directors to ensure actions are agreed and executed quickly.

SAFETY: Our priority is the health and wellbeing of our employees, outsourced partners and customers, and we are making every effort to ensure that our OpCos have taken all necessary steps to ensure their safety. All offices have an agreed policy in place for remote working, working in shifts and social distancing practices, depending on the critical needs of individual functions. All full-time employees have medical insurance, with additional provisions being made in case there is a need to help with medical costs over and above insurance cover.

The outsourced staff in our call centres have all been given the option and equipment to either work from home or, if necessary, from the office following strict social distancing practices. Safety protective equipment and hand sanitisers have also been made available to all our outsourced partner staff in shops.

The safety of our customers is paramount to us. We have executed various social educational digital campaigns explaining best practices during the COVID-19 outbreak, and the importance of being safe. We have also made a number of sites across our businesses accessible free of charge to give students continuous access to quality education.

In addition, we have implemented a number of initiatives to support our customers, including zero transaction fees on money transfers, free text messages, extra bonuses on data bundles through Airtel Money subscriptions, and increased availability of home broadband products to support working from home.

NETWORK: In these challenging times, our network remains the main source for many people for social interactions, work and entertainment. We have already seen an increase in data traffic, and our priority is to keep our 110m customers connected to the network. We implemented key business continuity plans to ensure that both active and passive maintenance services can be safely carried out even when the movement of people is restricted. We have also identified key spare part components and made them available at different strategic locations across our markets. All of our Network Operations Centres can be operated remotely if needed.

DISTRIBUTION: Continuous and increasing lockdown measures may have some impact on our ability to both expand our distribution system and keep adequate levels of stock. So, we have increased stock levels of SIM cards and recharge vouchers by 30% to 50% to ensure availability in our shops over the next few months. We are also encouraging customers to use more digital methods of recharge, including through SMS, bank portals, our app, Airtel Money and E-Recharge to minimise the impact of any possible disruption to our distribution network. For example, Airtel customers in Nigeria can now recharge their phones using SMS through their credit cards or bank account details.

CAPITAL EXPENDITURE: The current pandemic may affect the timely deliveries of capital goods. Our capex deliveries are planned ahead of time, and as a policy we carry a deployable stock of network active equipment in our warehouses. Currently we have around $280m of capital work in progress and $250m of capital commitments which are expected to be fulfilled, so we have enough deployable materials in our warehouse to ensure timely rollouts across our markets.

Our strategy of diversifying our sourcing across four major providers is also protecting us from a company- or country-specific supply chain risk.

MOBILE MONEY: As a result of the actions taken by governments to reduce the risk of contagion, the mobile money business has been affected by social distancing measures and non-essential service closures, reducing the ability of customers to deposit and withdraw cash. Several governments have also asked mobile money operators to waive fees on certain transactions, including person-to-person and merchant payments. We have engaged with governments and regulators to allow certain mobile money outlets to be classified as essential services so that customers can fully access mobile money services. Mobile money represents 9% of the Group's gross revenues.

LIQUIDITY: We enter this period of high volatility with a strong financial position. Free cash flow more than doubled in the last 12 months to $453m, and with a 44.3% underlying EBITDA margin we benefit from strong profitability. Our net debt to underlying EBITDA ratio continued to improve to 2.1x at the end of this financial year. Our cash balances in conjunction with up to $814m of committed undrawn facilities ensure we can meet our financial obligations.  We have $2.3bn in long-term debt with the first repayment of €750m due in May 2021. The next major debt repayment of $505m is due in March 2023.

We have agreed to extend the maturity of $254m of debt facilities loans due to mature in December 2020 and January 2021 by an average of 18 months to two years, further improving our liquidity.

We have identified other ways to conserve cash, reduce costs and mitigate risks from COVID-19. We have conducted a review of our operating expenses, and discretionary spend has to a large extent stopped. There is a travel ban across the business which has resulted in significant savings. We have also deferred the salary review for management and employees until there is more clarity on the COVID-19 impact. This will be now reviewed by the Remuneration Committee in June and, if required, again in September.

We intend to continue to invest in our network and spend our planned $650m to $700m of capex in the next financial year, in line with our guidance. A detailed analysis of this planned capex indicates that, in a worst-case scenario, we would be able to reduce it significantly without compromising network quality by prioritising expenditure.

After considering the uncertainty caused by the COVID-19 pandemic the Board has recommended a final dividend of $3 cents per share. This means the total dividend will be $6 cents per share or $226m, amounting to 50% of free cash flow.

See page 26 for our going concern assessment.

FOREIGN EXCHANGE: The global economic slowdown combined with lower oil and commodity prices has resulted in currencies devaluing across our markets, including the Nigerian naira, Kenyan shilling, Ugandan shilling and Zambian kwacha. By far our largest exposure is in Nigeria, which represents 40% of our revenue and 49% of underlying EBITDA. We estimate that 1% of Nigerian naira devaluation will have a negative $13m impact on revenues, $8m on underlying EBITDA and $6m on finance costs.

Other significant updates

Dividend

The Board has recommended a final dividend of $3 cents per ordinary share. The proposed final dividend will be paid on 24 July 2020 to shareholders who are on the register of members at the close of business on 3 July (the record date). We will announce more details in due course. We paid an interim dividend of $3 cents per ordinary share in November 2019.

Airtel Africa plc IPO

On 28 June 2019, Airtel Africa plc announced the successful pricing of its IPO on the London Stock Exchange at 80 pence (NGN 363) per share. The offer comprised 676,406,927 new shares (637,178,959 shares available to institutional investors outside of Nigeria and 39,227,968 shares available to qualified institutional investors and high net worth investors in Nigeria). Unconditional trading of the shares on the London Stock Exchange began on 3 July 2019 and on the Nigerian Stock Exchange on 9 July 2019.

FTSE 250 inclusion

On 9 September 2019 it was announced that Airtel Africa plc would be added to the FTSE 250 index as from 23 September 2019.

Airtel Malawi plc

On 24 February 2020, Airtel Malawi made its debut on the Malawi Stock Exchange as the largest IPO in Malawi's history. The listing, which debuted at a price of MK12.69 ($2 cents) per ordinary share consisted of secondary offer of 2.2 billion shares, representing 20% of issued share capital. Gross proceeds amounted to MK27.92bn ($37.5m) and the price implies a market capitalisation on admission of MK139.59bn ($187.4m).

Nigeria spectrum acquisition of 900 MHz

In March 2020, Airtel Networks Limited (Airtel Nigeria) acquired from Intercellular Nigeria Limited 10 MHz spectrum in the 900 band for $70m, excluding the Nigerian Communications Commission ($94m including NCC fees, in line with the NCC Spectrum trading guidelines).

In June 2019, Airtel Networks Limited (Airtel Nigeria) acquired a spectrum of 20 MHz in 2600 band.

Tanzania additional spectrum

Airtel Tanzania has been allocated an additional spectrum of 10 MHz in the 1800 band for an annual fee of $0.6m. This brings Airtel Tanzania to 22.5 MHz of spectrum in the 1800 band. Airtel Tanzania has been authorized by the TCRA (Tanzania Communications Regulatory Authority) to use 10 MHz in the 700 band for eight months from 21 October 2019. The licence of 700 band will be issued post completion of a total of $12m payment to the regulatory authorities in June 2020.

Other spectrum allocations

Additional spectrum has been acquired in Chad (5 MHz in 1800 band) and Malawi (10 MHz in 2100 and 5 MHz in 1800 band) during the period. 

Airtel TV

In February 2019, we launched Airtel TV in Uganda. Now we have more than half a million installations across Nigeria, Uganda and Zambia. We also launched Hollywood and premium international content on our platform, with movies and TV shows from MGM, Lionsgate, BBC and NBC Universal as well as local content, primarily Nollywood. Hollywood content has brought high-quality marketing promotions and trailers, increasing registrations and product loyalty.

Western Union

In January 2020, the Group signed a strategic partnership with Western Union. This will allow Airtel Money customers to reliably send and receive international money transfers directly from their phones using our mobile money wallet. This paves the way for Airtel Africa to further cater to the needs of local and global community members to move money and enable international cross-border payments. This partnership helps Airtel Africa to take an active part in the international money transfer business that happens to and from its operating countries.

Mastercard

On 9 October 2019, the Group announced a partnership with Mastercard which allows Airtel Money customers to make online payments globally using a virtual Airtel Money Mastercard. Airtel Money customers, even those using a feature phone, are also able to make in-person payments at outlets using QR codes. To date, there are over 1 million shops across Africa that accept Mastercard QR payments. Approximately 700,000 are in Nigeria, our largest market and where we have applied for a payment service bank licence.

Ecobank

On 21 October 2019, the Group announced a partnership with Ecobank which will allow millions of Airtel Money and Ecobank customers across Africa improved access to mobile financial services and a variety of mobile transactions.

Earnings call

Management will host an analyst call today at 9.30am UK time. Details on how to access the call are on page 18.

Information on additional KPIs

An investor relations pack with information on the additional KPIs and balance sheet is available to download on our website at airtel.africa/investors.

Strategic overview

To achieve our vision of enriching the lives of our customers, we have a clear business objective: to grow market share profitably and create superior enterprise value. Our 'Winning with' strategy describes the six strategic pillars through which we are actively working to achieve this. Cutting across all these pillars are our commitments to transforming lives, driving sustainable development and acting as a responsible business.

The Group is well positioned to capture growth opportunities presented by promising underlying macroeconomic and demographic trends in a fast-growing region that is vastly underpenetrated in terms of mobile and banking services. The Group's footprint is characterised by low but increasing levels of mobile connectivity, with unique user penetration at 45% highlighting the potential for growth across the footprint.

The Group's strategy underpins its medium-term aspirations for delivering growth in revenues and earnings, as does our belief in enhancing connectivity and digitising the countries where we operate. To this end, we have invested to expand our network footprint and 4G sites to enhance network capabilities and support our future business growth. A combination of an under-penetrated telecoms market, a young population and rising smartphone affordability, along with low data penetration and a relatively unbanked population, provide growth opportunities for our data and mobile money segments.

During the reporting period, we continued to make clear progress across each of our core strategic pillars: Win with network, Win with customers, Win with data, Win with mobile money, Win with cost and Win with people.

Win with network

The Group's strategy to invest in the 4G network through single RAN technology has resulted in better 4G coverage and enhanced the network's capacity, making high-speed data available to more of our customers. We aim to create a leading, modernised network that can provide the data capacity to meet rapidly growing demand and enhance connectivity and digitalisation in our markets. This is possible through:

• Building and modernising our network through optimal end-to-end design, including spectrum additions, carrier aggregation and fibre rollout

• Providing best-in-class customer experience on video and social media platforms

• Delivering voice quality index while improving network uptime

With continued investment in the 4G network across our footprint, 65% of our total sites are now 4G. During the year, the Group launched 4G services in Democratic Republic of Congo, Tanzania and Niger, making 4G services available across all our 14 countries.

We continued to modernize our network across all countries.

The Group continued to invest in building large fibre capacities, adding more than 8,000km of additional fibre (43,000km in total). In FY 2020, we increased the number of sites on fibre and long-distance fibre capacities. This has helped us to support more uptime and offer high-speed data to more customers.

The Group also acquired additional spectrum, adding 2600 band and 900 band frequency in Nigeria, 1800 band in Chad, 1800 band and 2100 band in Malawi. The Group continued spectrum refarming activities to maximise network capacity.

In FY 2020 investment activities resulted in total capex of $642m, excluding spectrum acquisitions.

Win with customers

Sub-Saharan Africa is characterised by low penetrated markets, with unique subscriber penetration at 45%. The continued focus on building exclusive channels, combined with a simplified digital onboarding app to provide seamless onboarding customer experience have enabled us to add quality customers, resulting in 11.9% growth to 110.6m customers across our footprint. The Customers growth remains well diversified across our three geographical segments, increasing by 12.5% in Nigeria, 13.5% in East Africa and 7.1% in Francophone Africa. Overall churn is stable at 5.0%.

The Group continued to invest in its distribution network to increase our quality customer base. During the year, the Group added more activating outlets for KYC and exclusive franchise stores. We will increase penetration through:

• Strengthening the distribution network to ensure depth and width, and to win more quality customers

• Enhancing the customer experience through simplified processes, including the Know Your Customer process

We are also driving loyalty and consumption through our high-quality service, which is enhanced through our digital on-boarding app. Smart offerings approach and tailored pricing strategy includes:

• Simple, transparent offerings

• 'More for more' bundles offering lower unit prices, longer validity, and more content in exchange for a higher recharge cost

• Segmented offers based on balance, usage and type of device

The digital app captures all regulatory requirements and allows most activations to be completed within minutes of a SIM sale. The Group's processes for improved self-care through the My Airtel Africa app and our interactive and dynamic IVRs have helped to resolve customer queries more quickly, resulting in an improved customer experience. The attractive pricing propositions led to 9.5% higher usage per customer, contributing to a 5.2% increase in voice revenue.

Win with data

Data growth is a key pillar of the Group's strategy. We aim to maximise the value of data-based services and increase data penetration in all our markets. That means encouraging smart phone ownership and increasing data usage at scale. Our approach includes:

• Continuously investing in the 4G network

• Developing home broadband business

• Developing enterprise business

The improved LTE network offered by the industry has contributed to increased smartphone penetration. The percentage of 3G and 4G enabled smartphones increased to 32.6% from 30% in the previous year. This has resulted in data customers increasing by 18% to 35.4m, representing almost 32% of our total customer base.

Increased take-up of larger data bundles has helped to push data usage per customer to 1.8 GB per customer from 1.2GB per customer in the previous period. All this has contributed to 39% data revenue growth in constant currency.

As a result of the increased penetration and usage of 3G and 4G data customers, data ARPU increased by 20%.

Win with mobile money

The Group continue to work on enhancing financial inclusion across its footprint through building greater confidence and interest in Airtel Money. The lower penetration of traditional banking services demands mobile money services to fulfil the needs of largely unbanked customers. We aim to drive the uptake of Airtel Money services in all our markets, harnessing the ability of a profitable mobile money business model to enhance financial inclusion in some of the most 'unbanked' populations in the world. We are working to achieve this model by:

• Further strengthening our distribution platform of kiosks, mini shops and dedicated Airtel Money branches, so that customers can access cash

• Introducing additional mobile money services, including merchant and commercial payments, benefits transfers, loans and savings

• Building international money transfer services through partnerships

Expanded distribution and an enhanced offering contributed to a 4m increase in mobile money customers to a total of 18.3m, leading to a $34.5bn (Q4 annualised) transaction value in constant currency.

Mobile money continues to be Airtel Africa's fastest-growing business segment, delivering revenue growth of 37.2% in FY 2020. It is an increasingly more important part of our business and currently accounts for 9.1% of our total revenue.

The Group continued to enhance its customer offering by entering into partnerships with leading institutions such as Mastercard and Western Union. Partnerships like these improve customers' access to digital payments and financial services, allowing people to receive funds from 160 different countries conveniently and affordably.

Win with cost

The Group has an efficient operating model, focused on enhancing our cost efficiency and digitalisation initiatives. We embrace robust cost discipline and continuously seek to improve processes to deliver one of the highest underlying EBITDA margins in the industry. We use latest technology to optimally design our network to bring enhanced efficiencies to our capital expenditure. This enables us to build large incremental capacity at low marginal cost. Our initiatives include:

• Cost efficiency initiatives to optimise site operational and maintenance expenses, and bandwidth cost

• A detailed deep dive on all expenses aimed to improve operating margin in individual markets

• Optimal design for vendor service delivery

In FY 2020, underlying EBITDA margin expanded by 100 bps to 44.3% as a result of double-digit revenue growth and cost efficiencies.

Win with people

The Group's employees have demonstrated a strong growth mindset, which has enabled them to think differently and foster innovation across all levels. A focus on learning and mastering functional expertise has helped build a strong knowledge base along with enhanced leadership and cross functional competencies. The Group's expanded leadership team, which includes three regional heads, as well as the strong functional chiefs, working collaboratively with independent and empowered local OPCO managements led by Managing Directors, have provided with executional agility which drives faster growth and keeps the Group closer to the markets it operates. The reward systems are based on simple and consistent metrics which drive the right behaviours. 

Financial review for the year ended 31 March 2020

Nigeria

(1) The operating profit in above table includes CSR (Corporate social responsibility) expense of $1m for the year ended March 2020.

Reported revenue was up 24.1%, with almost the same growth in constant currency. This was underpinned by 15.1% revenue growth in voice and 68.1% in data.

Voice revenue at $850m, up by 15.1%, was supported by a 12.5% increase in the customer base and a 1.2% increase in average revenue per user (ARPU). We expanded our customer base as a result of efficient sales and distribution network supported by the accelerated rollout of our network infrastructure and 4G leadership.

Data revenue growth of 68.1% was supported by a 14% growth in data customers and a 42.2% increase in data ARPU. This growth was driven by an accelerated 4G rollout (with 68% of total sites now 4G), a 1.8% increase in smartphone penetration, and affordable products in our data bundles. 47.5% of total data usage is now through the 4G network. Data revenue accounted for 31.7% of total revenue, up 8.2%.

Other revenue decreased by 17.2%, affected by the rollout of new directives issued by the Nigerian Communication Commission on content-based revenue.

In FY 2020, underlying EBITDA margin increased by 449 bps due to the revenue growth and operating efficiencies. Exceptional items include $5m one-off gain, largely as a result of the reassessment of the customers 'life cycle' which led to a deferment of customer acquisition cost.

Capital expenditure amounted to $325m, up from $180m year on year as the business continued to expand and invest in further rollout of network infrastructure.

The $419m operating free cash flow was up 13.8%, largely as a result of double-digit underlying EBITDA growth partially offset by higher capital expenditure.

East Africa1

(1) This business segment includes Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia.

(2) The above table includes intra-segment eliminations of $56m for the year ended March 2020 and $ 40m for the year ended March 2019, $15m for Q4 2020 and $16m for Q4 2019.

(3) Mobile money revenue post intra-segment eliminations with mobile services is $157m for the year ended March 2020 and $114m for the year ended March 2019, $43m for Q4 2020 and $30m for Q4 2019.

East Africa reported revenue grew by 9.0% and increased by 13.6% in constant currency. This was broadly based across services, and partially offset by currency devaluation in Zambia and Kenya. All countries, with the exception of Rwanda, delivered double-digit revenue growth. Performance improved in Q4 2020 largely as a result of an increase in voice and data customers in Tanzania, Uganda and Kenya.

Voice revenue at $606m, up by 6.2%, largely driven by a 13.5% increase in customers and 15.8% increase in usage per customer slightly off-set by ARPU drop of 3.3%.

Data revenue grew by 20.3%, driven by 22% growth in data customers and a 4.6% increase in data ARPU. There was growth in all countries underpinned by the rollout of more than 2,400 of 4G sites, a 2.9ppts increase in smartphone penetration, and simple and affordable products through 'more for more' data bundles. Data revenue accounted for 25.6% of the total revenue in East Africa.

Mobile money revenue grew by 43.7%, largely driven by growth in Zambia, Tanzania, Uganda and Malawi. This was driven by a 28.9% increase in customers and a 21.4% growth in transaction value per customer, supported by the expansion of our distribution network through more agents, kiosks and Airtel Money branches. Expansion slowed in the second half compared to the same period in the prior year, which benefited from an extensive distribution rollout in Zambia.

The underlying EBITDA margin was 40.4%, an improvement of 37bps compared with the previous financial year. Q4 2020 underlying EBITDA margin declined by 111bps due to higher operating expenses resulting from our investment in network expansion, higher marketing spends, and increased regulatory charges in Kenya, Uganda and Rwanda.

Exceptional items include $10m one-off gain, largely as a result of the reassessment of the customers 'life cycle' which led to a deferment of customer acquisition cost.

We invested $181m in capex, slightly lower than the previous financial year. FY 2019 capex was higher due to network modernisation in East Africa. Due to this lower capex and higher underlying EBITDA, operating free cash was up 78.6% at $304m.

Francophone Africa1

(1) This business segment includes Niger, Chad, Gabon, Democratic Republic of the Congo, Republic of the Congo, Madagascar, and the Seychelles. This was previously called Rest of Africa.

(2) The above table includes intra-segment eliminations of $34m for the year ended March 2020 and $ 24m for the year ended March 2019, $10m for Q4 2020 and $6m for Q4 2019.

(3) Mobile money revenue post intra-segment eliminations with mobile services is $59m for the year ended March 2020 and $51m for the year ended March 2019, $15m for Q4 2020 and $12m for Q4 2019.

Performance in Francophone Africa was impacted by macroeconomic weakness in some countries. Reported revenue was down 3.2%, but it was broadly flat in constant currency, as growth in data, mobile money and other revenue did not fully offset the decline in voice revenue. Performance was mixed across countries, with growth in Democratic Republic of the Congo (DRC), Gabon and the Seychelles offset by a decline in other countries in the region. Revenue increased by 4.1% in Q4 2020 as a result of improved performance across services.

Voice revenue decreased by 9.5%, largely due to a drop in interconnect usage charges in Niger, Madagascar and Chad, and overall market weakness in some countries in the region. Revenue in DRC was also affected by rationalisation on bonus offers.

Data revenue grew by 22%, largely due to a 21.8% increase in customers and a 10.4% increase in data ARPU per customer. We saw revenue growth across all countries, with the exception of Madagascar. This growth was supported by our accelerated rollout of more than 1,600 of 4G sites, with 56.7% of sites now on the 4G network. It was also driven by a 3.1% increase in smartphone penetration and our popular data bundle offers. In FY 2020, we launched 4G services in Niger and DRC.

Mobile money revenue was up 28.4%, with our largest markets Gabon and DRC accounting for 82% of revenue in the region. This double-digit revenue growth was supported by a 28.1% increase in customers and the continued expansion of the distribution network.

Our underlying EBITDA margin decreased by 435 bps due to higher operating expenses resulting from investment in network expansion and higher marketing spends. While FY 2019 had $13m in one-off benefits, FY 2020 was affected by a one-off quality of services charge in few OPCOs. Excluding these one-offs, underlying EBITDA margin decreased by 190bps.

Exceptional items of $12m mainly contributed by accelerated depreciation resulting from a network modernisation. 

Capex was at $133m, a drop compared to the $190m in the previous financial year which was higher due to network modernisation in Francophone Africa. In FY 2020, we continued to invest in modernising the infrastructure and rolling out the 4G network, more than doubling the number of 4G sites in the region.

Mobile services

(1) Mobile service revenue after intersegment eliminations amounted to $3,199m for the year ended March 2020 and $2,910m for the year ended March 2019.

(2) The operating profit in above table includes CSR (Corporate social responsibility) expense of $1m for the year ended March 2020.

Reported mobile services revenue was up by 10.0%, 12.5% in constant currency, with both voice and data revenue contributing to this growth.

Reported voice revenue grew by 2.9% while constant currency growth was 5.2%. This growth was largely driven by a 11.9% increase in customers as a result of the expansion of distribution and network infrastructure. Total minutes on the network grew by 20.6% and voice usage per customer grew 9.5% supported by the launch of exclusive voice bundles. ARPU dropped by 4.5% in constant currency terms, largely driven by a drop in interconnect usage charges across key markets in East Africa and Francophone Africa. The Q4 2020 voice revenue growth of 8.4% in constant currency was driven by a 17.5% increase in voice usage per customer.

Data revenue was up 39% in constant currency, largely due to a growth in data customers, the accelerated 4G network rollout and increasing data usage. The customers base grew by 18% as a result of accelerated rollout of 4G network across all markets, as well as a 2.5ppts growth in smartphone penetration. 32% of our total customers are data users, up from 30.4% in FY 2019. Overall data usage grew by 81% and data usage per customer was up 56.3% to 1.8GB per customer per month, largely linked to our 4G network expansion and popular data bundles. ARPU increased by 20% as a result of higher penetration of 3G and 4G customers.

Data revenue accounted for 27.2% of our total revenue, up from 22.2% in the previous financial year. For the quarter ended March 2020, data revenue was 28.2% of our total revenue.

Mobile money

(1) Mobile money service revenue post intra-segment eliminations with mobile services is $220m for the year ended March 2020 and $170m for the year ended March 2019.

Reported mobile money revenue was $311m, up 32.9% and 37.2% in constant currency. This was driven by a 28.7% increase in customers and a 31.0% growth in transaction value. We continue to expand our distribution network through investing in exclusive kiosks and Airtel Money branches. The continued focus on expanding distribution network through partnering with financial service providers and enhancing product offering continues to attract more customers and reduce churn.

Underlying EBITDA increased by 53.4% to $150m, driven by revenue growth and a lean cost structure. As a result, the underlying EBITDA margin grew to 48.2%, up from 41.7%. Total transaction value was up 31% in constant currency, amounting to $34.5bn (Q4 2020 annualised). This was primarily driven by the expansion of the distribution network.

Active customers grew to 18.3m, up 28.7% on the previous year, with Airtel Money customers representing 16.5% of our total customers. Excluding Nigeria mobile money customers, 26.5% of our total customer base consisted of Airtel Money customers as of 31 March 2020. ARPU was up 14.2%, driven by a higher transaction values and increased contribution from person-to-person money transfer and merchant payments.

Forward looking statements

This document contains certain forward-looking statements including "forward-looking" statements made within the meaning of Section 21E of the United States Securities Exchange Act of 1934, regarding our intentions, beliefs or current expectations concerning, amongst other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the economic and business circumstances occurring from time to time in the countries and markets in which the Group operates.

These statements are often, but not always, made through the use of words or phrases such as "believe," "anticipate," "could," "may," "would," "should," "intend," "plan," "potential," "predict," "will," "expect," "estimate," "project," "positioned," "strategy," "outlook", "target" and similar expressions.

It is believed that the expectations reflected in this document are reasonable, but they may be affected by a wide range of variables that could cause actual results to differ materially from those currently anticipated.

All such forward-looking statements involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual future financial condition, performance and results to differ materially from the plans, goals, expectations and results expressed in the forward-looking statements and other financial and/or statistical data within this communication.

Among the key factors that could cause actual results to differ materially from those projected in the forward-looking statements are uncertainties related to the following: the impact of competition from illicit trade; the impact of adverse domestic or international legislation and regulation; changes in domestic or international tax laws and rates; adverse litigation and dispute outcomes and the effect of such outcomes on Airtel Africa's financial condition; changes or differences in domestic or international economic or political conditions; the ability to obtain price increases and the impact of price increases on consumer affordability thresholds; adverse decisions by domestic or international regulatory bodies; the impact of market size reduction and consumer down-trading; translational and transactional foreign exchange rate exposure; the impact of serious injury, illness or death in the workplace; the ability to maintain credit ratings; the ability to develop, produce or market new alternative products and to do so profitably; the ability to effectively implement strategic initiatives and actions taken to increase sales growth; the ability to enhance cash generation and pay dividends and changes in the market position, businesses, financial condition, results of operations or prospects of Airtel Africa.

Past performance is no guide to future performance and persons needing advice should consult an independent financial adviser. The forward-looking statements contained in this document reflect the knowledge and information available to Airtel Africa at the date of preparation of this document and Airtel Africa undertakes no obligation to update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on such forward-looking statements.

No statement in this communication is intended to be, nor should be construed as, a profit forecast or a profit estimate and no statement in this communication should be interpreted to mean that earnings per share of Airtel Africa plc for the current or any future financial periods would necessarily match, exceed or be lower than the historical published earnings per share of Airtel Africa plc.

Financial data included in this document are presented in US$ rounded to the nearest million. Therefore, discrepancies in the tables between totals and the sums of the amounts listed may occur due to such rounding. The growth numbers YoY are provided on constant currency basis unless stated differently.

About Airtel Africa

Airtel Africa is a leading provider of telecommunications and mobile money services, with a presence in 14 countries in Africa, primarily in East Africa and Central and West Africa.

Airtel Africa offers an integrated suite of telecoms solutions to its subscribers, including mobile voice and data services as well as mobile money services both nationally and internationally. We aim to continue providing a simple and intuitive customer experience through streamlined customer journeys.

For more information

Airtel Africa Investor Relations

Email: investor.relations@africa.airtel.com

Phone: +44 207 493 9315

Website: airtel.africa/investors

Conference call

The management team will host an analyst and investor conference call / webcast at 9:30 AM UK time, on Wednesday 13 May 2020, including a Question and Answer session.

In order to participate in the conference call and ask questions, please follow the instructions:

1. In the 10 minutes prior to the start, call the appropriate participant dial-in number:

· Standard International: +44 (0) 2071 928000

· United Kingdom Freephone: 08003767922

· United Kingdom Local Call: 08445718892

· United States: 18669661396

· United States, New York 16315107495

· Nigeria, Lagos: 12278975

· Nigeria, Lagos: 12278750

· India: 18002666102

· South Africa, Johannesburg: 0105007996

· France: 0805103028

2. Provide the operator with the conference ID 6638469

In order to only listen to the conference call and/or follow the presentation you can access the webcast in two ways:

· Webcast link if you access from your laptop: https://edge.media-server.com/mmc/p/nrbdwmuz

· QR Code if you access from your mobile:

Consolidated Financial Statements

Consolidated Statement of Comprehensive Income 

(All amounts are in US Dollar Mns; unless stated otherwise)

 (1) transaction with NCI reserve is net of tax impact of USD 6m.

(2) dividend to NCI includes tax of USD 1m.