Airtel Africa PLC

LSE:AAF

Earnings Call Transcript 2022-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the Airtel Africa 9 Months and Third Quarter Results Conference Call. [Operator Instructions] Please note that this call is being recorded. I would now like to hand the conference over to Segun Ogunsanya. Please go ahead, sir.

[Olusegun Ogunsanya, MD, CEO & Director]

Thank you for joining us on today's call. For those who may not know, my name is Segun Ogunsanya. I'm the CEO of Airtel Africa Plc. And on this call, I'm joined by our CFO, Jaideep Paul, and our Deputy CFO of Investor Relations, Pier. We would shortly be answering any questions you may have. But first, I would like to provide you with a brief overview of the quarter and I am pleased to once again be able to report very strong growth across all of our key metrics. Before I take you through the details of the financial numbers, it is important to know that these are an outcome of the continued strength of our operational performance. This quarter we have returned to strong growth of our customer base in Nigeria, our largest market, added almost 2 million customers in Nigeria, taking the group customer additions to 3.1 million this quarter. We continue to invest in our network and in our distribution infrastructure with 5G now installed at 83% of our tower sites. In November, we won approval in principle to operate PSB, Payment Services Bank, to provide money, and super-agent licenses, giving us even further impetus for unlocking the mobile money opportunity available from a market with a total population of around 200 million people, the largest in Africa. I will talk in more details about this, on some of our strategic and operational developments this quarter in a moment. But now let me summarize the key financial outcomes. Our third quarter posted very strong growth with our group revenues reaching $1.2 billion with a constant currency growth of 20%. With continued improvement in operating efficiency, this led to even stronger growth of 26.8% in EBITDA to $605 million. [indiscernible] mobile money continue to be our key service growth drivers, together contributed to 44% of our group revenues in the quarter. We also continue to see a strong growth in our voice revenue. It is up almost 10% year-on-year. Our total customer goodwill are finally returning to the levels seen prior to the introduction of the new Know-Your-Customer requirements introduced in Nigeria in December 2020. In the last quarter, we [indiscernible] about 2 million of this in Nigeria, taking our total year-on-year growth to 6.9 million customers or about 6%. Voice revenues posted year-on-year growth of 9.9%, almost 10% in the quarter. Slight slowdown related to [indiscernible] like in Q1, but still reflecting year-on-year customer growth of 5.8% and a voice ARPU growth of 5.2%. We still fundamentally believe that these low unique customer penetration levels across our footprint, our 14 countries, combined very low minutes of usage, [indiscernible] a very, very long runway for voice revenue to continue to grow. Very decent data customer growth rate of 11.1% year-on-year was supported with particularly strong data ARPU growth of 24.6%, delivering very strong data revenue growth of 37.7% year-on-year. Mobile money, [indiscernible] similar decent metrics with currency related revenue growth of 29.2% year-on-year. This was due to strong transaction value of 28.7% with active customer base growing by 19.6%, and ARPU growth of 8.1%. While still very strong, our growth rate is slightly lower than what we are expecting, mainly because of some new levies imposed in Tanzania in the June quarter. It will be a few quarters before this falls out of the base line. So excluding Tanzania, if you exclude numbers from Tanzania, mobile money business grew 37%. All the regional segments, Nigeria, Franco and East Africa continue to demonstrate very high revenue growth rates. Nigeria grew by 23.3% year-on-year, East Africa 21.9%, and Francophone Africa grew by 13.5%. This [indiscernible] and improved operating efficiencies led to increased flow-through [indiscernible] EBITDA margin in the quarter up to 49.6%, a jump of almost 270 basis points over Q3 of last year. Unfortunately, foreign exchange changes had an adverse impact of $16.2 million on constant currency revenue and $6.6 million on our underlying EBITDA for the quarter. This is largely driven by devaluation of Nigerian naira and Central African franc, both partially offset by appreciation of the Zambian kwacha and Ugandan shilling.In terms of the balance sheet and cash flow. At the end of December, our leverage ratio was 1.4x underlying EBITDA with a [indiscernible] just over $3 billion. And in Q3, we generated operating free cash flow of $418 million, which is $120 million more than in Q3 of last year. This is slightly down to the growth in our EBITDA. And this morning, we also announced our intention to redeem $500 million 2023 bonds in March this year, much earlier than their maturity. There are few other strategic and operational announcements I would like to highlight for the quarter. Perhaps the most significant recent news [indiscernible] sometime last year, approvals in principle for both a payments service bank or PSB license and a super-agent license, both in Nigeria. We're definitely working very, very closely with the Central Bank of Nigeria to meet all the conditions to receive the final operating licenses and commence operations in Nigeria. This should enable us to [indiscernible] digital financial approvals reaching millions of Nigerians who up to now do not have any access to traditional financial services. Also in Nigeria, we announced in December that we have completed the buyout offer for Airtel Networks Limited, our Nigerian subsidiary. This [indiscernible] 99.96% of our largest subsidiary after paying $147 million for 8.22% minority holdings. Regarding the NIN/SIM Know Your Customer regulations in Nigeria. The deadline for final [indiscernible] reservation [indiscernible] has been difficult. This has been deferred multiple times since [indiscernible] spent some time in December 2020. It has been deferred till March of 2022 now. We continue to make further progress in capturing NIN and verifying this with the Nation Identity Management Commission, NIMC, but a lot of improvement has been required in the connectivity for all operators, not only us, all of the operators in the country with the National Identity Management Commission database. We've also made further progress on our asset monetization and investment opportunities for the group. We announced the first closing of towers sale in Madagascar in November, for which gross proceeds would be around $52 million. And just around the quarter ended in January of this year, we also announced first closing of towers sale in Tanzania for the receipt of an initial $159 million of the $173 million gross proceeds. Out of this $176 million gross proceeds, $60 million will be used to invest in network, sales infrastructure, and for distribution to the government of Tanzania as one of our shareholders. We've also received $175 million for our proceeds from the second closings of the mobile money minority investment transactions with The Rise Fund, Mastercard and Qatar Investment Authority in November of last year. We're also able to announce Chimera as an additional investor putting $50 million in early December. In total, we have received $550 million from the minority stakes here in [indiscernible]. Finally, in November of last year, we launched our sustainability strategy during half year results. I'm very, very pleased that we were able to [indiscernible] our 5-year [indiscernible] partnership with UNICEF, including financial and in-kind contributions of $57 million. We're working with UNICEF to accelerate rollout of digital learning through school connectivity and clear access to learning platforms across 13 of our 14 countries. By providing equal access to quality digital learning, particularly for the most vulnerable children, our partnership will help to ensure that every child has the real opportunity to reach their full potential. In terms [indiscernible] and despite the COVID-19 pandemic seemingly diminishing in terms of impact in our reported results, we see very big events, giving the potential for yet more new strains of the virus and any further actions that may be required by government to minimize spread in our territories. More fundamentally, the opportunities for sustainable profitable growth that scale from under-penetrated market for mobile voice, for data, and for mobile money. I'm still very confident that we'll continue to deliver on our growth strategy. And with that, I would now like to open the line for questions, for which I'm going to be joined by Jaideep and Pier. Operator, I now hand over to you to please open and manage the queue and this session. Thank you.

[Operator]

[Operator Instructions] Our first question is from Maurice Patrick of Barclays.

[Maurice Graham Patrick, Managing Director]

I just have 2 or 3 quite quick ones. First question is on mobile money. Did I hear you say correctly that you grew 37% if you exclude Tanzania, I guess the first question. Was that right?

[Olusegun Ogunsanya, MD, CEO & Director]

Yes, if we exclude Tanzania, the growth is 37%.

[Maurice Graham Patrick, Managing Director]

Great. And what was the mobile money revenue growth in Tanzania?

[Olusegun Ogunsanya, MD, CEO & Director]

In Tanzania, we actually had a small decline versus previous year. Like I said in my initial introduction, the government introduced some levies in the quarter ended June. And those levies affected P2P and cash out. So customers also moved away from mobile money to other alternatives. We are working with the government. They will reduce the levies. But the levies are still relatively high and we continue to cycle the impact of this high levels on mobile money in Tanzania. It's an industry level problem, not only limited to us.

[Maurice Graham Patrick, Managing Director]

Has there been any recovery in the Tanzanian mobile money revenue?

[Olusegun Ogunsanya, MD, CEO & Director]

Yes. We've slowed down the deceleration in this quarter when this increase in levies came in the June quarter. We did [indiscernible] for the very high level of deceleration and the growth phase actually declined. But in the third quarter ended December, we've managed to bring back some of the momentum. And I'm looking forward to neutralizing the impact of these levels sometime before the end of the financial year.

[Maurice Graham Patrick, Managing Director]

Okay. Great. And then if I can ask on Nigerian mobile money. I'm not sure you said it in your prepared remarks, but do you have an expected timing for launch of services in Nigeria?

[Olusegun Ogunsanya, MD, CEO & Director]

We were going to [indiscernible] sometime in November of last year. The Central Bank indicated in the approval, in the premium approval that it required about 6 months. 6 months will take us to March, so we offered that we would get the final approval before the 6-month deadline that the Central Bank indicated. Principle that was granted to us [indiscernible], but it indicated that within 6 months they would grant the final approval. So we're working within this time frame.

[Maurice Graham Patrick, Managing Director]

Okay. So final approval before March '22. And then how long will it take you, roughly speaking, to launch services do you think after that?

[Olusegun Ogunsanya, MD, CEO & Director]

We've been working on launching mobile money in Nigeria for the last 2 years. Pretty confident that we're ready to launch as soon as we get the license. We're confident that we will launch as soon as we get the license.

[Maurice Graham Patrick, Managing Director]

Okay. And is there any reason why the penetration of mobile money in Nigeria shouldn't follow the trends in other markets where you have the service?

[Olusegun Ogunsanya, MD, CEO & Director]

We continue to execute mobile money that we've done in 12 of our countries, is in distribution, and therefore costing on the very small customer journey. I see no reason why the path goes very different in Nigeria.

[Operator]

Our next question is from Rohit Modi of Citi. [Operator Instructions] It seems there's no response from that line. Our next question is from Nikhil Mishra of HSBC. [Operator Instructions] There is also no response from that line, unfortunately. Our next question is from Tajudeen Ibrahim of Chapel Hill Denham.

[Tajudeen Ibrahim, Head of Research]

I think it will be nice if you can let us know what sort of difficulties do you see to the CBN granting you a final approval on the PSB. I understand that they require that we meet some conditions. And it would be nice if you can share with us your views on those conditions in terms of meeting those conditions.

[Olusegun Ogunsanya, MD, CEO & Director]

Yes. They've listed some conditions. None of the condition is difficult to meet, I must say. They are traditional conditions which are required if you're going to work in the financial sector. And once again, I see no reason why we could not be able to meet any of those conditions. They are purely within some regulatory, but they are fairly easy to meet. I see no reason why we're not going to be able to meet any of them in time for the launch.

[Tajudeen Ibrahim, Head of Research]

My second question is around 5G license. Would you please speak to the 5G license, as you did not win that license when it was auctioned. Can you please speak to what we should expect in the short to medium term in terms of how your response to competition in that space?

[Olusegun Ogunsanya, MD, CEO & Director]

We do have enough spectrum in different bands in all of our countries to launch 5G whenever we choose to. I believe that use cases for 5G, they're not yet fully developed. They are evolving through the years, but I expect them to be fairly developed. But in the meantime, if there's any need for us to launch 5G, we have sufficient spectrum in other bands to do launch 5G in countries.

[Tajudeen Ibrahim, Head of Research]

Sorry, the country in this case is particularly Nigeria. So that's what I was referring to.

[Olusegun Ogunsanya, MD, CEO & Director]

And I'm confirming to you that if we choose to launch 5G in Nigeria, we do have sufficient [indiscernible] of the bands to launch 5G when we choose to.

[Operator]

Next question is from Manvendra Singh of HSBC.

[Manvendra Pratap Singh]

So a few questions from my side. Just a clarification, firstly, on the previous one. I assume that it means your license in Nigeria is technology neutral. So you can do 5G on your existing license. So that's first clarification. The second question I have is on your growth rate in Francophone markets. There appears to be some slow growth there. So just wondering if the issues there are more temporary in nature? Or is there any specific structural reason? Any specific markets which are kind of weighing on the overall growth? So that's the second question. And then the third one is on data consumption. Generally, looking at your data consumption within the 3 clusters you have, just wondering whether you see there is -- what kind of trends are you seeing there in terms of year-on-year growth rates. And whether you see that growth rate being sustainable in the future? Or do you see some slowdown in the data consumption trends going forward?

[Olusegun Ogunsanya, MD, CEO & Director]

Let me start with the simplest one. You're asking if in Nigeria we have the spectrum technology neutral. So I can confirm to you that yes, you can deploy whatever technology you want in any of the spectrum bands you have, so it is technology neutral. Your second question is on Franco. You're wondering why the growth base was muted. Yes, we had a couple of headwinds in 1 or 2 countries that slowed down the growth, especially on voice revenue, some changes in [indiscernible] slowed down the growth. But what we did was to really double down on operating efficiencies. So even though we had a muted top line growth, we still had the EBITDA in the region north of 40%, which is in the right direction given where we were 2, 3 years ago in Francophone [indiscernible] Franco with [indiscernible] investment in 4G in the last couple of years. We've seen the results. [indiscernible] has continued to grow very rapidly and the slow down we saw was [indiscernible] countries where we are changing [indiscernible] connection rates during the period under discussion. And the last question is on the sustainability of data revenue. As you know, we don't give [indiscernible] guidance. All I can say, historically, we've delivered very strong double-digit double growth in data revenue. What are the key drivers of data revenue? One is 4G net will continue to [indiscernible] footprint. Second, 4G devices. We continue to see increase in penetration of 4G devices in our countries. And as we see increased use of 4G, we see a lot more data being consumed. And [indiscernible] couple of months and years, we see a lot more 4G devices coming into our markets post disruption caused by COVID. So I see those trends continue, increased 4G penetration. We are still going to continue to invest in distribution. We're going to continue to invest in expansion of 4G footprint. As I speak now, in Nigeria, almost all of our sites, I mean, are 4G. A number of are 2G sites, of course a number are 4G sites. In East Africa, close to 80% of our sites already have 4G on them. And in Franco Africa, we're close to 75% of our sites having 4G on them. So those 2 key drivers would continue to support the consumption of data in our territories.

[Manvendra Pratap Singh]

Great. I have one more question on the 5G side. What is your view on 5G as a last mile home broadband enabler in Africa, generally? Do you think that is the real opportunity of 5G in Africa?

[Olusegun Ogunsanya, MD, CEO & Director]

Given the fact that we are at a very low level of fiber band in Africa, I believe that 5G may be a good complement to fiber broadband. It's never going to replace fiber broadband. But I think both can be used to complement each other. So there's a role for 5G to play in broadband.

[Manvendra Pratap Singh]

Congratulations on your great set of results.

[Operator]

Next question is from Faisal Al Azmeh of Goldman Sachs.

[Faisal Al Azmeh, Research Analyst]

Congratulations on the strong set of numbers, again. Maybe, just a few questions in terms of outlook and just to help to understand how the interest or financing cost has been changing over the quarters. How should we think about that over the coming quarters? We've seen a meaningful move up Q-on-Q. If you can give us some color on that? And then maybe, just again, I know we do repeat this question quite often, but just generally on CapEx, do you feel comfortable where CapEx levels are? Or should we expect them to move a bit higher into next year as you sort of ramp up your operations in Nigeria?

[Olusegun Ogunsanya, MD, CEO & Director]

I'll take the CapEx question first, and Jaideep would answer the financing question you asked. In terms of CapEx, I believe with CapEx around $650 million, $700 million, $750 million mark, we are going to be able to cover business in our 13 countries. I don't see any rapid increase beyond the wide band of $650 million to $730 million, $750 million in Keppel's investment in our 14 countries, including investment economics behind the mobile money opportunity in Nigeria. Jaideep, you want to respond to the financing question, I didn't get the part very well.

[Jaideep K. Paul, CFO & Director]

Yes. So on the financing question, let me first say that in quarter 2, if you see our announcement, we mentioned that we had a one-off benefit there, coming out of Tanzania settlement, and we had roughly about $14 million of benefit in Q2. So from a Q2 to Q3 movement, we need to add back that $14 million in the interest cost. If you add it back, it remains absolutely [indiscernible] between Q2 and Q3. We also have an interest on these obligations, which is more or less again at the same level, marginally increased because of the number of sites which have gone up. That [indiscernible] FLO or finance lease obligation, that interest component also is classified under the finance cost. So these are the 2 major items. And then there is a derivative and exchange loss of roughly about $40 million. That's predominantly coming from the devaluation into few countries, and that impacted us by about $40 million because of the devaluation. So that's the construct of $122 million of the total finance cost for Q2.

[Operator]

Our next question is from Tracy Kivunyu of SBG Securities.

[Tracy Kivunyu, Research Analyst]

Congratulations on a great set of numbers. Two questions from me. First, what is the drivers behind the slowdown in voice revenue growth in third quarter of 2022 in Nigeria, considering that you had quite some strong net adds in the same quarter? And then second, could you please share with us some data points on smartphone penetration across Nigeria, East Africa and Francophone for comparison?

[Olusegun Ogunsanya, MD, CEO & Director]

Okay. In terms of voice revenue in Nigeria, last quarter, the quartile ended December, was particularly affected by government instruction that a number of services will be shut down in the other part of the country. As you may be aware, there are some issues in the northern part of the country with some terrorist activity been hitting in the last quarter. So for security reasons, the government asked all the operators to shut down a number of sites that affected outgoing voice revenue, and it did impact the voice revenue that came out of Nigeria, despite the fact that we did manage and increase in the net addition. So more or less, that was all up in Nigeria. But I'm glad to say that most of the sales have been reopened now. They reopened some late December, some in January with -- where we already were in voice, also, we should begin to see voice revenues grow very strongly in Nigeria again. On the 4G and smartphone penetration, I'll just give you a couple of examples in countries. If you look at Nigeria, for instance, smartphone penetration is about 40%. If you go to probably a most advanced country, Gabon, we get about 60% smartphone penetration; 4G is 40%, 3G is 20%. So in the range, we've got one of the lowest in Rwanda. In Rwanda, the smartphone penetration is only 16%, 17%, unless they can go between 60% and 70% in Rwanda, about 40% in Nigeria and about 60% smartphone penetration in Gabon. After the smartphone issuance, you can see we have 4G with smartphone combination of 4G and 3G.

[Tracy Kivunyu, Research Analyst]

If I may ask a follow up to that, then why are we seeing the lowest data usage per customer from the Francophone region if you're able to reach such high smartphone penetrations in some of the subsidiaries looking at that region?

[Olusegun Ogunsanya, MD, CEO & Director]

Yes. I just mentioned, I mean, Gabon. Gabon is an outlier. So Gabon is not representative of all the countries in Franco. Gabon is the catalyst for some other important countries. So it's still got a number of countries where smartphone penetration is still relatively low. And as I said in my opening remarks, we were a bit late in investing in 4G in Francophone. We're just catching up. We still -- when we compare the number of 4G sites we have in Franco, as a percentage of total size, it's relatively lower than we have in East Africa and in Nigeria. So that's one of the key reasons why we have a slower decelerated growth in Franco compared to maybe East Africa, but we're catching up.

[Operator]

Our next question is from Stephanie Wu of HSBC.

[Stephanie Wu, Head of Emerging Markets Equity]

I wanted to follow up on the UNICEF initiative you highlighted, the education for all. Can you give us some more detail around -- what does this entail from the Airtel side? What's the potential reach? And you're looking to provide devices for kids. And then related to that, maybe you can talk a little bit about what the Google tie up with products that might mean for Airtel Africa as well? And are there any plans to kind of launch devices or sell devices into your 14 countries, and again, tie it back to the UNICEF initiative?

[Olusegun Ogunsanya, MD, CEO & Director]

Thanks for the excellent question. The UNICEF partnership is one of the initiatives on the sustainability agenda. Like I said, I launched these in November of last year, and I'm very excited as to what we're going to be doing with UNICEF to create digital inclusion in touching countries in Africa. What are we doing with UNICEF? We're going to give 1,400 schools internet access. We're going to give over 1 million children access to digital education. And beyond, I'm going to make a number of sites free to access. You don't have to spend anything to access mobile certification or site. Since the combination of the declared initiatives, internet access to some schools, there will be free access to some educational sites and supporting the schools with digital technology. All of this came to $57 million that we're putting behind it, most of it behind, some of it in cash. So that's a good summary of what we're doing with UNICEF. And every country is working with the local UNICEF to deploy those initiatives. In terms of the Google partnership, yes, the partnership works fine between India and Google with 2 different entities, but it doesn't need to leverage on any opportunity or will, but we are 2 different companies for now where there's an opportunity to leverage on what they've done in India. I will speak to my colleague in India and find the creative synergies which are what we're going to need to do in Africa.

[Stephanie Wu, Head of Emerging Markets Equity]

Okay. And just to kind of -- sorry to ask again, but just in terms of accessing obviously educational and services. Are you going to be providing devices as well because without the devices or device penetration, it's still relatively low per household, right? So are you providing devices to children?

[Olusegun Ogunsanya, MD, CEO & Director]

It depends on the needs. I mean there are certain countries, the needs are going to be different. So we're going to be working with UNICEF. They're going to try also what they need. And based on what they need, we would access and decide where we must place really to find the support. So nothing is excluded on a country-by-country basis. And whatever is required in the country to provide access, we work with UNICEF to deliver the access.

[Stephanie Wu, Head of Emerging Markets Equity]

Okay. Great. And then I just had another question on Naira convertibility and monies in Nigeria. I mean what is the current -- can you give us an update on the central banks done to the queue, to the tax rate, capital from Nigeria, et cetera, et cetera. Can you give us some update?

[Olusegun Ogunsanya, MD, CEO & Director]

We are creating it in number of countries, I mean, in 14 countries, and we continue to maintain sufficient cash balances in H2 to take care of cash requirements. So I just want to put your mind at least that we do have sufficient cash balances in mid-H2 to take care of our cash requirements. Specifically in Nigeria, we have lots of challenges in the last couple of years, and I believe that the central bank is probably in a better position now, given the increased prices of oil, to moderate the liquidity problem in the country. But we don't take Nigeria in isolation. We look at the portfolio of countries, given the fact that we've got flows coming from 13 other countries. Are we concerned? Yes. Is that going to be a major problem? No. We continue to invest in Nigeria. We continue to use our mega balances that need to pay for spectrum. You continue to hear that -- you've seen what we did last year by buying out [indiscernible] operation in Nigeria. So we do have sufficient requirements that we deploy our mega balances to sell for now. And we have these -- taking care of the CapEx requirements, I can confidently say that I don't see any barrier to continue investment in operations in Nigeria.

[Stephanie Wu, Head of Emerging Markets Equity]

And just to clarify, I mean, currently, Nigeria revenue contribution is nearly 40% or so. And if we get the license and move, our money really kicks off, I mean, how large is Nigeria contribution going to be if everything goes according to plan?

[Olusegun Ogunsanya, MD, CEO & Director]

My plan is to grow every country in the portfolio. We got 14. We continue to grow a lot of them. Of course, I love Nigeria to keep growing. And as much as I'm clear on that policy, we are going to continue to grow the other 13 countries.

[Operator]

[Operator Instructions] Our next question is from Vik Sharma of RMB Morgan Stanley.

[Vikhyat Sharma, Equity Analyst]

I was more interested in your partnership with Flutterwave that you've done. And somehow it's mostly in East Africa, Nigeria is still kind of kept out of it. So I think the potential of now that mobile money is going to probably enough get an impetus with this -- your super-agent license, do you plan to obviously have that kind of a tie-up with these money transfer apps in Nigeria as well?

[Olusegun Ogunsanya, MD, CEO & Director]

We do have other partnerships with international money transfer companies with Western Union, with number of banks as well, across Africa. Almost all of those who are partners -- [Technical Difficulty] Nigeria, who wants to commence operations in Nigeria. And in terms of Flutterwave, we also have a couple of opportunities to partner further with another payment gateway in the country. These are not exclusive contracts. We continue to explore the best for every country, but we're very happy with our partnership with Flutterwave in East Africa. And once we clear as to license conditions in Nigeria, we'd exploit avenue partnership with Flutterwave and other payment gateways in Nigeria as well.

[Operator]

Our next question is from Maurice Patrick of Barclays.

[Maurice Graham Patrick, Managing Director]

Very interesting set of results circumstantially. If I can ask a couple of more questions. First of all, in the next 12 months, do you foresee there being any more spectrum auctions or spectrum allocations or grants in your markets at all?

[Olusegun Ogunsanya, MD, CEO & Director]

A couple of spectrum or licenses are due for renewals. In Nigeria, we're going to renew spectrum for 3G in the 2.1 gig band. We have some time, about 2, 3 months' time. Other countries, I mean do come up for renewal at different times. Yes, we're going to pay for the renewal of licenses in the number of countries in the next financial year.

[Maurice Graham Patrick, Managing Director]

That's the biggest -- okay, so there are some other ones. Are those in much smaller markets or are you able to spell out which market?

[Olusegun Ogunsanya, MD, CEO & Director]

It is all going to be Nigeria, yes. Nigeria is going to be the biggest, yes. And that -- we use 1 gig that is...

[Maurice Graham Patrick, Managing Director]

And should we use the kind of the most recent spectrum auction results as the kind of the benchmark for the life cost of that?

[Olusegun Ogunsanya, MD, CEO & Director]

We've not engaged with regulators, so I don't have the format they're going to use. If you look at historic renewals, they all have been based out whatever amounts that -- when the original spectrum was issued and those renewals are usually converted into Naira at the current rates. That's all we have done in regards to renewals. But I mean, of course, I don't speak for the regulator. I'm not sure what they are going to do. We're going to start a conversation with them in another couple of months. Being in a better position to predict, we're going to conclude the conversations. But in the past, it's again based on historical figures.

[Maurice Graham Patrick, Managing Director]

Okay. And then a separate question, please, just on operating leverage. So you've shown consistently strong EBITDA growth across your markets in the last couple of years, especially. Can you sort of help us walk through kind of the mix of like gross margins, COGS? So just to give us a sense of like if you keep growing at 20%, where EBITDA margins can end up?

[Olusegun Ogunsanya, MD, CEO & Director]

I would ask Jaideep to get into the details, but we continue to deliver results through expansion in our top line. We've been growing very strong double digit in the past, north of 20%. We also continue to optimize the expenses. So our growth is driven by 2 priorities, growth in the top line and optimization of the expenses. Those are the 2 key drivers of our performance. But I'm going to ask Jaideep to go into the details. Jaideep, please.

[Jaideep K. Paul, CFO & Director]

Okay. So firstly, let me clarify, I won't be able to give any forward-looking guidance or any indicative number, but I can quickly tell you that generally model which we follow. So the model is very simple. That our endeavor is to keep the EBITDA flow-through at a 55-plus level, 55% level. That means if we are generating incremental revenue of $100 million, we should expect at least a 54%, 55% flow-through in the margin, EBITDA margin, after considering the interconnect cost, the incremental site training costs, the sales and distribution costs, marketing and other administrative expenses and so on and so forth. So broadly -- and as you see in our P&L, if you look at our P&L, most part of the cost is the network cost and the sales and distribution costs, apart from human resource expense and a little bit of market -- and some marketing spend. These are the 4 items. And out of which, the human resource expense is more like a fixed cost. Sales and distribution is a variable cost because we pay and it's predominantly prepaid market, so we pay a margin of -- average margin of 7%, 8%. There's an interconnect cost, which is deducted from the revenue. And then there is a network cost, which is variable as well as fixed. That means once I put the tower, then it becomes my fixed cost. So if you look at all this modeling -- and then, of course, we have the regulatory expense, which is again a variable expense. So -- because it is primarily linked to the revenue, primarily. So that's the way we try to engage our model whenever the incremental revenue comes up, 55%, at least that is our endeavor to keep a flow through of 55% in the EBITDA margin.

[Operator]

Our next question is from Tajudeen Ibrahim of Chapel Hill Denham. No response from that line. Our next question is from [indiscernible], RBC.

[Unknown Analyst]

Sorry, just one more context to the asset monetization that you spoke about earlier. You mentioned that you had a program or initiative of [indiscernible]. I would like if you can provide more details on that? And how is that affecting the overall strategic -- strategy of Airtel Africa?

[Olusegun Ogunsanya, MD, CEO & Director]

Sorry, can you repeat your question? I didn't get the first part of it.

[Unknown Analyst]

You said you mentioned about one asset monetization program that's in way. I said, could you please provide more context to that? And how is that affecting your overall strategy?

[Olusegun Ogunsanya, MD, CEO & Director]

Okay. It's basically around the assets that we've been selling. We started with the towers a couple of years ago. In the early days of telecom, you needed to be a competitive advantage where [Technical Difficulty] for you to lead an efficient location. So we started selling our towers years ago. We still have about 2 to go. We have Gabon. We have Chad. We put Malawi up for sale as well. And like I said in my introductory remarks, we're just going to pay some money for the towers in Tanzania. We sold the balance of towers in Rwanda. We sold Madagascar. So that was a key element of asset monetization program. Selling the asset was a [Technical Difficulty] noncore and nonstrategic to our strategy and that piece is one of it. The second thing is what we've done around the mobile money business, which showed minority in place. We collected $550 million, selling about 21% of our mobile money business. That is second piece. And we continue to find opportunities that would bring cash, but would not affect the implementation of our strategy.

[Operator]

[Operator Instructions] We have a follow-up question from Stephanie Wu of HSBC.

[Stephanie Wu, Head of Emerging Markets Equity]

Just wanted to follow up on the monetization. I think previously, after the Mastercard, TPG and QIA investments, I think maybe there was some messaging that you wouldn't be selling anymore. And then the next kind of monetization would be the IPO at some stage. So can you just talk about how Chimera came in here and whether there's going to be kind of further sell down and whether maybe the IPO timing is pushed back? Or is it still on track? And so how we should think about inviting additional kind of private equity investors in ahead of IPO?

[Olusegun Ogunsanya, MD, CEO & Director]

Chimera came in at very small amount, $50 million, and that came in the December quarter. Beyond Chimera, we don't have any immediate plans for selling down additional equity in the money business. In terms of IPO, we gave you guidance in March 2021 when we started. We're going to do IPO within 4 years. That time frame still remains. We have not changed our plan of the -- we're going to have IPO within 4 years, which is 4 years from 2021.

[Operator]

Our next question is from Tajudeen Ibrahim of Chapel Hill Denham.

[Tajudeen Ibrahim, Head of Research]

Just a follow-on question. Is it likely that you consider inorganic growth in your FinTech business sticking around the Mobile Money business? Can you speak to that?

[Olusegun Ogunsanya, MD, CEO & Director]

We continue to explore opportunities for growth. We're in 14 countries. Mobile money business is at different stages of development in each of the 14 countries. In the advanced countries, we have got very, very good mobile money business. We've got another 5 or 6 countries where the mobile money is still at early stages. So the mixed bag of highly developed countries, highly penetrated and some countries lately penetrated, still at the early levels of maturity. I think we do have enough to strike the balance from. In addition, we have this mobile money opportunity in Nigeria. So meaning that in 14 countries, we do have enough scope for growth. But I mean, we don't say no to any opportunity. We keep on looking for any other opportunity for assets to look at. Therefore, now the focus is on doing what we are within the 14 countries.

[Tajudeen Ibrahim, Head of Research]

Okay. So the next question is around your cash expectations in terms of how you utilize cash going forward, considering the moderation in the leverage and also the fact that you redeem in your bond earlier than expected. So beyond March, what would be a priority in terms of disbursement of cash?

[Olusegun Ogunsanya, MD, CEO & Director]

I'm going to ask our CFO to speak to that. But very clear as to what we're going to do with our balance sheet. One, we want to leave this debt in foreign currency. Two, we want to push as much data as possible to you, of course. We don't want any foreign currency debt in the vertical. And the intention is to reduce leverage -- to a leverage that we're very confident with. And I will ask Jaideep to speak the details of this. Jaideep, please.

[Jaideep K. Paul, CFO & Director]

Yes. I think largely, Segun, you have covered most of the part. I just want to add that as you have seen that we are paying off one of the bond repayment of about $505 million of bond. Today, that announcement has been made. The next obvious target is to make the -- get ourselves ready for payment of the balance $1 billion bond at the holdco level, which will be falling due in May 2024. So we'll be obviously getting ready for that. And as Segun has mentioned that we don't intend to keep any debt, which is very, very inefficient from a tax perspective to keep any debt at a holdco level. So the endeavor is to also push down debt, as Segun mentioned, in the holdco as much as local currency possible, and therefore, create the cash at a holdco level to get ready for the payment of that $1 billion bond.

[Tajudeen Ibrahim, Head of Research]

Okay. So now you talked about foreign currency debt. Can you speak to what the mix is between foreign currency and local currency debt in your book, the percentage mix?

[Jaideep K. Paul, CFO & Director]

Yes. The percentage mix will be around 50-odd percent -- I would say, in the range of 50%, 55% currently. But that is also, to some extent, driven by the current situation in Nigeria where we had to take some dollar debt to pay off the vendors because we can't stop investing in Nigeria being our largest market. So therefore, you see a little bit of increase in the dollar debt to pay off some of the vendors. However, on a steady state, once situation normalizes, I'm pretty sure that this will further come down, and it will be more towards, I would say, 70% local currency -- 70%, 80% local currency and maybe 20%, 25% foreign currency debt. That's the ultimate objective. And also, as I mentioned, the objective is not to keep any debt at a holdco level, because it's extremely tax inefficient because we don't get any tax shield on the interest cost which we bear. So that's the whole objective.

[Tajudeen Ibrahim, Head of Research]

Okay. So the final question is on rating, your credit rating. As a company, you don't seem to have a credit rating. Where are you on this? Any plans underway?

[Jaideep K. Paul, CFO & Director]

No, at this moment, we don't need a credit rating. Obviously, we can do a credit rating when we need to go in the market to borrow a large part of the fund. But at this moment, we don't require it. So we have not gone ahead and done anything on that front.

[Operator]

That was the last question for today. I would like to hand back to Segun for any closing comments. Please go ahead, sir.

[Olusegun Ogunsanya, MD, CEO & Director]

Just like to say thank you to everyone, and I look forward to discussing our full year results in a couple of months. Thank you.

[Jaideep K. Paul, CFO & Director]

Thank you very much.

[Operator]

Ladies and gentlemen, that concludes this conference. Thank you for joining us. You may now disconnect your lines.