Airtel Africa FQ1 2025 Update

Airtel Africa FQ1 2025 Update

July 26, 2024

Airtel reported earnings on July 25. KPIs and constant current results looked good. For example, the total customer base grew 8.6% to 155.4MM. Data usage per customer increased 25%. Smartphone penetration increased 4.7%. Mobile money subscribers grew 14.9%. The negative in the quarter was related to currency headwinds. The Nigerian currency had another large step down in January which had a material negative impact on USD results. Assuming African currencies stabilize at current levels or depreciate at much more modest clip (consistent with history), Airtel should start showing significant USD revenue and EBITDA growth starting in the March 2025 quarter.  One thing I’m going to keep an eye on is margin compression. In the quarter, constant currency EBITDA margins decreased by 424bp y/y to 45.3%. The driver of this is local market inflation and higher fuel costs. Management has an efficiency plan in place to improve margins, and I will watch progress closely.  Airtel currently trades at 3.4x EBITDA (including all lease liabilities in my EV calculation). This is very cheap, even for an African company.  It currently trades at a 5.5% dividend yield. Another thing to keep an eye on is the eventual IPO of Airtel Mobile Money. Mobile Money took on outside investment in March 2021. As part of that investment, management committed to IPO’ing the Mobile Money business within 4 years. On the most recent conference call, management reiterated its commitment. As such, we should see an IPO of Mobile Money by March 2025. What is Mobile Money worth? TPG and Mastercard invested at a 4.8x revenue and 9.8x EBITDA multiple. Assuming those same multiples, Airtel’s 79% stake in MobileMoney is now worth £2.8BN. Airtel’s entire market cap is £4.0BN. Mobile Money generates just 19% of total company revenue.