Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Empty and chief executive Officer Ralph Mupita joining us today. Ralph,
Speaker 2: thanks so much for being with us today. So I
Speaker 2: wanted to start with what you noted in the earnings report,
Speaker 2: which was macro headwinds that the company is dealing with,
Speaker 2: one of which pretty big headwind is currency volatility. I mean,
Speaker 2: how is the company thinking about protecting itself going forward
Speaker 2: from this because it's happening in a few different markets
Speaker 2: that you operate in.
Speaker 1: Yeah, look, I mean our underlying performance from our point
Speaker 1: of view was very strong and resilient. You know, we
Speaker 1: look at, you know, how is the business actually developing
Speaker 1: in terms of subscriber growth, What is the traffic we're
Speaker 1: seeing in our network, What is the transaction values and
Speaker 1: volumes you see on the fintech platforms. Those have been
Speaker 1: strong and very encouraging. And when we look at that
Speaker 1: kind of underlying performance, you know, pretty much across most
Speaker 1: of from it's kind of basically trending in line with expectations.
Speaker 1: The two main challenges that we faced in the period.
Speaker 1: One is the very sharp devaluation of the Naira. The
Speaker 1: Narra ended last year nine h seven versus the US
Speaker 1: dollar in this half is average fifteen hundred, so quite
Speaker 1: a lot of volatility. But between Q two and even
Speaker 1: up to now, the NARRA has been actually fairly stable
Speaker 1: and on a more recent forecast via Standard Bank Group
Speaker 1: Securities forecasts, you know, the pressure on the narrow is
Speaker 1: is projected to abate somewhat as inflation. Expectations are that
Speaker 1: inflation in Nigeria should start to come down and that
Speaker 1: rate tightening cycle in Nigeria will remain and therefore take
Speaker 1: pressure off the NARRAW you know, going forward. So you know,
Speaker 1: if you exclude the narrow impact in particular, actually were
Speaker 1: a very decent top line growth would have had a
Speaker 1: decent set of earnings growth off. So the underlying business
Speaker 1: remains strong, and you know, we see growth as our
Speaker 1: best way to protect kind of the earning stream over
Speaker 1: the next the medium term to kind of restore positive
Speaker 1: earnings growth, you know, for the whole business. But the
Speaker 1: main issue has been the NIROD evaluation.
Speaker 2: Yeah, and in particular with that, Ralph, I mean that
Speaker 2: Nigeria accounts for nearly a third of the company's earning.
Speaker 2: So are there things that you're thinking about doing as
Speaker 2: you sort of a wait for the volatility to debate.
Speaker 1: Look coming on the volatility side, I think it's much
Speaker 1: more near a term, so it's not medium to long term.
Speaker 1: As I mentioned, you know, inflation cycle is anticipated to
Speaker 1: kind of peak in Q three, maybe a little bit
Speaker 1: into Q four and start trending down. If I use
Speaker 1: standard bank forecasts on inflation, Nigeria should be somewhere like
Speaker 1: in the early twenties from the kind of early thirties.
Speaker 1: So that moderation, you know, should also relieve some cost
Speaker 1: pressure in the next couple of quarters. But the underlying
Speaker 1: growth in Nigeria is very healthy. The one big issue
Speaker 1: we remain focused on is really around you know, some
Speaker 1: teriff increase relief that will need expensive been growing you know,
Speaker 1: quite sharply, so we've been engaged with authorities around a
Speaker 1: tarraff increase, which we should then support the restoration and
Speaker 1: growth of earnings. But beyond Nigeria, in South Africa, you know,
Speaker 1: we had a decent set of results. Our service revenue
Speaker 1: was up three point three that's a business that we
Speaker 1: think has the potential to go four to six percent,
Speaker 1: you know, given the capex that we've put into that business.
Speaker 1: So South Africa can step up a bit more in
Speaker 1: the near term in terms of its own top line
Speaker 1: growth and its earnings contribution. The rest of the portfolio,
Speaker 1: Garna has been growing actually very very strongly. Uh in
Speaker 1: Ghana you know, continues to grow you know, both data
Speaker 1: and fintech businesses in a well all above you know,
Speaker 1: forty percents on those bearers. So there's a portfolio effect
Speaker 1: of the other markets that can also grow. And the
Speaker 1: fintech business in the period grew very strongly twenty seven
Speaker 1: percent service revenue growth, the EBIDA margin growth, the EBIDA
Speaker 1: margin delivered by that business has also been very very strong.
Speaker 1: So when you look at the portfolio, I think you'll
Speaker 1: see different parts of the portfolio, you know, contributing to
Speaker 1: the overall group results. And as I said, in Nigeria,
Speaker 1: they still pent up demand and growth that we see
Speaker 1: for both the core connectivity business and our fintech business.
Speaker 2: Right Ralph, just sticking on the other parts of their portfolio.
Speaker 2: Also in Iran, on on the earnings report, you noted
Speaker 2: the uncertainty around what is happening in Iran, especially with
Speaker 2: with sanctions from other countries. I mean, are there plans
Speaker 2: to adjust or speak with authorities there. How is that
Speaker 2: affecting the rest of the group.
Speaker 1: No Iran, We've continued to manage Iran in the same
Speaker 1: way over the last five years, since the years sanctions
Speaker 1: came in. We haven't been able to get you know,
Speaker 1: any of the dividends in that market out. You know,
Speaker 1: obviously the Swift financial system is not open to Iran
Speaker 1: you know flows, so you know, the accumulated dividends that
Speaker 1: we are on lending the company in Iran is about
Speaker 1: three billion, So we don't anticipate to see any upstreaming,
Speaker 1: you know, coming out of Iran. But what we reported
Speaker 1: was that the earnings grew thereby you know, over eighty percent,
Speaker 1: and that's a very healthy clip for earnings growth in Iran.
Speaker 2: Are there markets, Ralph that you're potentially considering exiting MTN
Speaker 2: is considering exiting. I mean, we talked about around potentially
Speaker 2: the challenges that are there, but there's also been some
Speaker 2: challenges with Sudan as well, and that's another geopolitical story
Speaker 2: that's having an effect on the company. Are you thinking
Speaker 2: about potentially exiting either of those markets?
Speaker 1: So the market we've announced we've done the exit on
Speaker 1: it is Afghanistan. So we've completed the exit of Afghanistan
Speaker 1: in February and now we've done Guinea Bissal So Guinea
Speaker 1: Bissa is done, so what we're working with. We have
Speaker 1: an offer from tellusl to acquire Guinea Conacrey. So those
Speaker 1: are the markets where we have exit plans in execution.
Speaker 1: So that is challenging for sure. The ongoing conflict makes
Speaker 1: it very difficult for us to be able to provide
Speaker 1: consistent connectivity. Some sites do come down as a consequence
Speaker 1: of the conflict there. You know, we continue to best
Speaker 1: we can to keep that network up, so we are
Speaker 1: putting you know, more sites back on air to enable connectivity.
Speaker 1: There's been a massive dispersion of the population of Sudan
Speaker 1: and it is really you know, tragic what's actually happening there.
Speaker 1: You know, kids nineteen million children not going to school
Speaker 1: since April of last year. So, I mean, these effects
Speaker 1: are very profound. So in Sudan we're continuing to manage
Speaker 1: best we can. We've have had the impacts, you know,
Speaker 1: the impayment we took and also the impact we've seen
Speaker 1: on growth. But you know, the exit plans as formally communicated,
Speaker 1: the only other market we're looking at right now is getting.
Speaker 2: Conacree okay, okay, So no plans in the near term
Speaker 2: for Sudan at this point, no plans, Okay, no plans, Ralph.
Speaker 2: Before we let you go, I wanted to know what
Speaker 2: you envision the business looking like in the next few years.
Speaker 2: Obviously there's a lot of macro headwinds that you can't
Speaker 2: anticip paid how it's going to affect the business. But
Speaker 2: how are you how are you thinking about it and
Speaker 2: your growth strategy over the next few years.
Speaker 1: Yeah, we believe that in the market that empty and
Speaker 1: operates in, we've got two main engines of growth that
Speaker 1: are structural because of pent up demand. The one is data.
Speaker 1: I mean now we have about sixty percent odd of
Speaker 1: our customers are using smartphones, means the balance is still
Speaker 1: using two G capable phones, so the growth rate in
Speaker 1: a data adoption remains very strong. So we see that
Speaker 1: as fueling growth. On the fintech side, many Africans are
Speaker 1: excluded from you know, financial services as we know it,
Speaker 1: and we've been building a platform there of you know,
Speaker 1: more modern services including remittance, bank tech payments, and e commerce,
Speaker 1: and that's actually fueling growth as I said, the growth
Speaker 1: rates that we see there on these advanced services has
Speaker 1: been about fifty eight percent growth in the period. So
Speaker 1: those two in particular going to fuel growth, and we
Speaker 1: anticipate that in going forward you'll still see growth driven
Speaker 1: by data and fintech. I think what you're going to
Speaker 1: see more and more is you know, you know, carving
Speaker 1: out the infrastructure, particularly around fiber, and you know, creating
Speaker 1: an opportunity of co investment with third parties to accelerate
Speaker 1: you know, investment in infrastructure. We're not using our own
Speaker 1: balance sheet. We're going to focus on partner capital there
Speaker 1: as well. But I think the three drivers of growth
Speaker 1: will be the connectivity business driven by data, the fintech business.
Speaker 1: As we move into more advanced services, and infrastructure in
Speaker 1: particular fiber and data centers and there you're going to
Speaker 1: need partnerships, you know, to be able to create these
Speaker 1: also open access platforms and also leverage our partner capital.
Speaker 1: There's no space now balance sheet to fund all that growth,
Speaker 1: but we can see the opportunity with a much more
Speaker 1: partnership model. That's how we see the business going forward.
Speaker 2: Does that sort of speak to as well to the
Speaker 2: IHS partnership with with MTN. I mean, is that sort
Speaker 2: of getting past the previous issues that the two companies had.
Speaker 2: Is that part of the future growth strategy that you're
Speaker 2: thinking of.
Speaker 1: No, the way we think about infrastructure, you know, you know,
Speaker 1: many companies look at a telco infrastructure and they you know,
Speaker 1: have the tower co, the fiber and the data centers
Speaker 1: as you know, different verticals. We've sold most of our
Speaker 1: towers already and they're all sitting in our investment in
Speaker 1: HHS with a twenty six percent shareholding. So in the
Speaker 1: way we think about infrastructure, you know, there's no tower
Speaker 1: companies there. It's mostly on the fiber and the data
Speaker 1: center side. I mean, so what we are focused on is,
Speaker 1: you know, how do we get you know, to see
Speaker 1: value being truly reflected in the IHS share price. We
Speaker 1: think the market undervalues that business, but I mean it's
Speaker 1: for the management team there to demonstrate by execution the
Speaker 1: business remains fundamentally undervalued. So at these current share prices,
Speaker 1: you know, for us, you know, we're not looking to
Speaker 1: sell out of IHS. You know, at the current share price,
Speaker 1: we think the business is more valuable than this, and
Speaker 1: you know, the governance issues that we've had in the past.
Speaker 1: As we communicated last week, we're looking to amicably resolve them,
Speaker 1: particularly now that the major contract renegotiations in Nigeria and
Speaker 1: particularly have now been closed. That's been a successful set
Speaker 1: of discussions, and so we'll move into discussing the governance
Speaker 1: issues over the next while ahead. You know, myself and
Speaker 1: Sam Darwish we'll be talking around those and you know,
Speaker 1: will take proposals to our respective boards in due course.
Speaker 2: Are you expecting the market then to value the company
Speaker 2: at sort of somewhat closer to what you're expecting or
Speaker 2: do you think this might continue a little bit longer.
Speaker 1: Look, it's difficult to say. I mean, there are you know,
Speaker 1: I think part of the impact on the ch share
Speaker 1: price is also the uncertainty or what the market may
Speaker 1: see as uncertainty around Nigeria. Can you get currency, can
Speaker 1: you get hard currency? Whereas the narrare going to find
Speaker 1: its level. So I think there are some uncertainties that
Speaker 1: you will see into the CH share price, which you
Speaker 1: see similarly into the MT and group. I think also
Speaker 1: you know, is you know has got you know, has
Speaker 1: got a particular debt profile and maturity profile. I guess
Speaker 1: the market is looking at that. But I think the
Speaker 1: governance concerns, if they are addressed amicably, I think will take,
Speaker 1: you know, quite a bit of uncertainty about the long
Speaker 1: term prospects of the company. So I think the market,
Speaker 1: you know, we'll see a conclusion on governance issues very favorably,
Speaker 1: you know, uh, you know particularly uh you know that
Speaker 1: these are it will be agreed between ih s UH
Speaker 1: and the mt and Group.
Speaker 2: Ralph Mapita, mt N Chief executive Officer, I really appreciate
Speaker 2: your time today, Ralph