The earnings season is here and FY20 financials have revealed that Lusaka Securities Exchange (LuSE) listed Airtel Zambia Plc recorded a 21.0% leap in its top line to K2.6billion. This was mainly supported by a 16.0% growth in its clientele base to 6.8million manifesting fueled by a 77.0% and 29.0% expansion in data and voice traffic growth in pandemic times.
WORK FROM HOME ERGONOMICS TRIGGERS INVESTMENT IN CAPACITY AUGMENTATION
This growth was necessitated by an appetite surge for augmented capacity for which the MNO invested in additional spectrum to the tune of $12.5million in 10MHZ, of an 800 spectrum band alongside other 4G network upgrades, as the telco geared up for improved service offerings. Further investments of K615.2million were made in capital expenditure and distribution infrastructure. Work from home (WFH) strategy for operational resilience across the corporate space helped push the telco’s earnings in the pandemic period.
FX RISKS DRIVE FINANCE COSTS WIDER ON DEBT RECEIVABLE MISMATCHES
Operating income nonetheless grew 7.6% to K719million compared to the previous year but however exchange rate depreciation was a major finance cost driver for Airtel Zambia Plc. With a stock of foreign currency denominated debt to service using local currency cashflows, the telco hemorrhaged K768million in revaluation losses did dent overall profitability to K341.1million (in red). As a consequence, earnings per share (EPS) slumped sharply to a -K3.21 (negative) value. Other cost drivers bearing the brunt of currency rout pressures include foreign currency denominated invoices and operational related costs to include mobile money frauds etc. Airtel’s equity position as such, is in the negatives, a technical insolvent position homogenous across the industry.
Airtel remains sensitive to Environmental, Social and Governance (ESG) concerns through championing sustainable investments such as giving K5million towards the government fund in the fight against COVID19.
DIGITAL BANKING A SILENT KEY DRIVER OF BRAND LOYALTY
Loyalty to brands remains linked to the emergence of digital banking following integrations with commercial banks. More and more Zambians are using mobile phones for transactability purposes linked to mobile numbers. However the market continues to reflect an advertising niche that telco’s have underutilized but could leverage on to widen penetration rates. Such areas include, the new user space taken up by millennials whose appetites have significantly evolved.
Outlook for the 2021 and the Airtel stock, remains similarly themed with previous years weighed by upside risks posed by sovereign related posture concerns.
The Kwacha Arbitrageur