Conference Title: 3Q 2015 Results Md. Hasan, Senior Specialist, Communications, Grameenphone Ltd. Date: Monday 19 th October 2015

Transcription

1 Company: Grameenphone Ltd. Conference Title: 3Q 2015 Results Presenter: Md. Hasan, Senior Specialist, Communications, Grameenphone Ltd. Date: Monday 19 th October 2015 Md. Hasan: Dear correspondents and respected members of analyst community, as you know, we publish our financial reports on quarterly basis regularly. Today we will share our third quarterly report of the year But first I would like to apologize for the sudden change at venue. We really appreciate that you all joined us here today on such a short notice. As always, we have divided our program into three separate parts. In the first part, our CEO, Mr. Rajeev Sethi will present the business highlights of our third quarter of the year. The second part will be led by our CFO, Mr. Dilip Pal. He will basically give a presentation on our financial aspects and details. The third part of the program is for the analysts and media correspondents. We will take questions from them and will have discussions on them. So to begin with, I would like to request Mr. Rajeev Sethi, CEO, Grameenphone, to share his presentation. Rajeev Sethi: Good afternoon, Assalamu alaikum and thank you to all of you for coming here at such short notice. We had a sudden change in the plan because of some external unavoidable circumstances. Our apologies for that. Thanks again for being here. As it s been mentioned that I ll take you through the brief highlights of the last quarter and then our CFO Dilip will take you through the financials. If you look at the third quarter, it s been a pretty encouraging quarter for us. We ve reached fifty five and a half million subscribers now. In this quarter we added 2.4 million Net Adds which has been one of the highest Net Adds which we ve had over the recent few quarters. So, it was a very encouraging performance, a strong uptake on subscribers. And subscribers are voting their choice on it. They are speaking about their choice and Grameenphone remains their preferred operator. We also reached our revenue twenty six and a half billion. Internet users are still one of our key drivers. We, and Grameenphone, believe that internet should not be for few, it should be for all and that s our ambition. And by 2017, we will be reaching 50 million internet subscribers. Because we feel that s the big game changer in a country like Bangladesh. Towards this, pretty interesting quarter 15.2 million in total subscription number, 1.8 million new internet subscribers were added during this quarter. Competition continues, especially on the voice side. We ve seen this from the last quarter of last year for Q4 of And we do not see any lift up on that. We ve seen a further dilution on the reliance rates on voice. But towards the end of the quarter we saw this flattening out. So there are some encouraging signs on that also. So at an overall level, very interesting quarter for us, pretty promising quarter for us. And we hope to continue and strengthen the remaining part of this year. As I mentioned, we consider this to be a strong performance in this quarter, led by the subscriber growth. We are maintaining our subscriber numbers which are detailed out here. The numbers for this quarter for the industry are published up till August. The September numbers for the industry are not out. But up till August we move from a 41.9% where we think is a bit of last quarter to around 42.1%. There is a

2 small increase in the subscriber share which we ve had. And we believe this will also help us increase or maintain our revenue market share in this quarter. Data encouraging growth continues. Double digit growth sequentially on data for the second quarter and running just below 17% annual growth on data. Again, this is pretty encouraging. That means data is really driving our growth as we move along. Growth in quarter three over quarter two in terms of subscription and revenue is 247 million as compared to 245 million. Historically, quarter three for the industry has been a big quarter. After a long time, we are seeing that quarter three has a growth over quarter two on subscription revenue. As I mentioned, despite a price pressure especially on voice this has been a very encouraging quarter for us. So overall, we see a subscription growth which is leading to a small increase in the market share on subscribers. It is up till August. September numbers will be up soon. Internet continues to be the strong growth driver for us. As I mentioned, internet for all is a strong pillar of our strategy. It s an ambition which we intend to fulfill by Towards that, we are continuing to expand on our 3G coverage. As we speak, more than two thirds of our customers are in a position to avail our 3G service. That s been a rapid expansion over this quarter. And we intend to continue on this journey because we know that internet experience is much better on this data technology which is 3G at this point of time. We also supported the internet week of Bangladesh which was spread across the country in this quarter. You would have seen few initiatives we have taken along with the ICT ministry and the BASIS which were our partners on this. The idea for this is to generate awareness about internet. It also generates relevance for internet because that s the biggest barrier which customers have in this country in using internet. Many of them are not aware of how to use internet or why to use internet. And this is an initiative on that direction. We go up and explain to potential users on both how to use internet and what purpose to serve by using it to increase value to their daily lives. And the next point which has been mentioned here is the Easynet platform. This is also a step in the same direction. It s a platform where a customer who is using internet for the first time or who potentially even does not have internet activated on his mobile, in case that person clicks on internet browser on his device, lands on to a page where there are videos, tutorials, which teaches that individual on how to use internet and what are the benefits of using internet. And it also teaches about the products and different services which we have available for internet. So, it s a full-fledged platform which educates people, especially those people who have not chosen internet in the past and in our mind, will help us take down the barrier. On the pricing sides, we took further steps on simplifying our product portfolio, making it more available. Users can use scratch cards on internet and we ve seen very good response on that. And also, launching the new social packs both on making it monthly sides because we know that most of the customers, who use it currently, use it likely for the social media. So we launched specific service packs both on weekly and monthly sides, which has driven us, given the internet numbers up here, from a 13.4 million, as I mentioned in the last quarter to 15.2, one of the best quarters and it s continuing in this journey over the last two quarters. Having said that, we also know that internet is both good and bad. It s how you use internet. And one of the biggest social barriers which specifically pull off an older generation which parents like we have, it s better we use internet in the right manner. And we feel as a socially responsible company,

3 as the leading mobile operator, as the prime driver of internet in this country, we should make people aware of how we use internet in a safe manner. That s where we launch a safe internet guide to our parents. It s there for both parents and their kids and it s pretty easy to use. It s not very text heavy, but it s pretty easy to use kind of a guidebook which parents can use to educate their children about the safe measures which they should be adapting while using internet. And also for parents to keep a watch on how their kids are using internet and educate them in future. Another step in the attempt on making this entire world safe and happy for young kids, we ve launched something which we can use guiding as children s help line. Which is launched in collaboration with the UNICEF and Ministry of Social Welfare. It s basically a simple help line, a toll free help line. Any kid who is under distress, in whatever situation, can just call this number and this will be manned by professionals who are skilled, capable, resourced to provide relevant help for children. All of this I am highlighting because we feel like as Grameenphone we have a responsibility of not only doing business in this country by providing access to both voice and internet but we can help empower society that impacts society in a positive manner. So, beyond the performance which we are extremely proud of, we have an area which we also want to speak about and we are happy to share with you guys. On the regulatory side which always has significant updates. I ll take a couple of minutes to take you through the significant updates on this. Most of you must be aware that the new SIM Registration Process through NID would be live towards the end of this year. 16 th of December is the Go Live day for that. And we re working very closely with the rest of our competitors in this field and the government to ensure that by 16 th of December we are ready and we are able to provide a hassle free simple registration process for new customers. And we are confident about launching it on 16 th of December. As I said, the most of the focus would be ensuring that this process is very simple and hassle free for customers who come to register the SIM cards. The second area which would see light of the day is mobile number portability. Around end of quarter one of next year, this would be available as a service for all customers across Bangladesh. They will be able to change their mobile numbers to different operators. Basically, while moving from operator A to an operator B, you can carry your mobile number forward. This, we believe, will be a very positive step for the industry and we definitely welcome this move. Though the impact of that for the industry given that there are multiple SIMs, you know that most of the people here use at least one SIM hand set, potentially one more SIM card in the wallet. So, most of the people use multiple SIMs. It remains to be seen how many people we lock for that. But at an overall level, it s a very positive development for the customers because it puts freedom of choice back in to the hands of the customers. The third area on regulatory is on the NBR s claim for the SIM Replacement Tax. We are working on an administrative solution and we want the solution to be an administrative one and not a legal one. But having said that, we ve received a demand from NBR to pay the SIM tax. So we filed an appeal for that. And this process is now under the appeal s process. And as we move forward, there will be further updates on that. But as I said, as Grameenphone, we are still hopeful and wishing for an administrative solution on this. At the same time, this appeal process will continue on its own course. And lastly, there s a BTRC audit. This is something not new. BTRC, as a regulator, is empowered to take audit of all operators as the team s head.

4 We ve received a notice from BTRC that they will be carrying out audit for GP. This is part of a regular process and we again welcome this and hoping to work along with the regulator to carry this process in the right manner. I think this is mostly the summary of our strategic approach for this quarter. So, I ll hand the mike over to Dilip. Dilip Pal: Hello everybody, welcome to you all and a very good afternoon. So, on a reported basis, highlights are that revenue grew 3.3% year on year on a quarter basis and EBITDA margin of 50.8% and earnings per share of 3.07 and we spent BDT 4.6 billion on Capex. Now, normalizing one time impact of the payment of the charge which we have appealed against, the SIM replacement tax, which has been already mentioned in regulatory update, we have taken a charge in P&L in this quarter. The revenue growth comes to 3.8% year on year basis and EBITDA margin 54.2% and earnings per share which is reported as 3.07, on an underlying basis is Clearly after a sluggish start of this year in quarter one, majorly driven by the political disturbances and also from a competition intensity on the voice price, which resulted in a year on year quarter growth of 1%, Quarter two sequential recovery was growth of 0.4%. This point of year witnessed a growth of 3.8% as I mentioned on underlying basis. This was driven by mainly three things. One, subscriber additions. Secondly, we have seen a very healthy increase of usage growth and also our continued growth on our VAS. In terms of subscriber addition, I see Rajeev has already mentioned about 2.4 million increase which is the highest. To fill the number in Q1, we actually added just about 500 thousand net additions. In Q2, it was about 1.1 million and this quarter was 2.4 million. And of the reported numbers which are available up to June, July and August, for the three months, we almost have close to 45% of the net add share which is higher than our subscriber market share of 42%. In terms of annual growth, year on year we have seen a growth of 10.4% and data revenue growth continue to remain healthy, quarter on quarter grew 15% and year on year basis 68%. We added 1.8 million subscribers in Q3 and internet subscriber base has gone up by 50%. In quarter three of last year we had 10 million subscribers and in this quarter we crossed 15 million. And also to mention here is our healthy ARPU growth on data. Our data ARPU is actually on year on year basis have grown by 12%. And this is mostly driven by the very healthy usage growth we ve seen in data usage. In spite of having 50% increase in the data subscriber, the ARPU growth was quite healthy on data front which was actually for the quarter was about 51 BDT. Data revenue now contributes 8.8% of revenue which has crossed 2 billion in last quarter is now 2.3 billion in quarter three. In terms of ARPU, AMPU and APPM, we have seen the headwind on pricing still continuing. A year on year ARPU decline is 5.7% which is driven by the APPM dilution of 7%. Though we have seen an increase in AMPU depends on minutes of usage per user of growth of 1.4%. And this is also a good trend I mentioned about in earlier point, the price has decreased but we ve also seen an AMPU increase. But the price dilution and AMPU increase are not sufficient to cover the revenue decline what you are seeing. So while you are talking about a 10.4% minutes of usage growth, the revenue growth was only 3.8%. And also to mention here that towards the end of the quarter three we have seen some stability in the voice APPM but we don t see that going away completely in near future. In terms of OPEX, the one of charges we have

5 taken is mostly reflected here in a quarter three OPEX. As you can see, our underlying OPEX was 9.3 and we quoted OPEX of 10.2 Billion. And on a 9.3 basis, sequentially our OPEX was lower than quarter two and also on a year on year basis 9.3 throughout the last year. So, throughout the year, we kept a close watch on our OPEX and our operation started really giving results to ensure that our OPEX to sales is kept at a very healthy level which is resulted in EBITDA margin on an underlying basis of 54.2% and also even the 3.8% growth on revenue, the underlying growth on EBITDA on year on year was 3.7%. So we re still maintaining an absolute growth in EBITDA on year on year basis. Rajeev has already mentioned about it. We have been investing and mostly investing in 3G coverage. 70% population coverage which was mentioned earlier. Two third of our population has access to 3G. And in this quarter, we have added close to 12 hundred 3G sites. And also we added close to 200 2G sites to increase our 2G service as mentioned. And we are also looking at investing on IT infrastructure to keep better user experience and also, the volume growth that we re getting on the data is also supported by good Capex investment year on year. Overall, starting from quarter one which were January February where it could not impress much because of the political disturbances. We really increased the pace of investment towards quarter two and kept it till quarter three and so far we have invested close to 15 billion which is what we have invested in the full of last year, Operating cash flow is healthy if I normalize with the one of charge. It s close to ten billion. That s the average on higher service that we are maintaining even in 2014 as well as And which is also giving a very good operating cash flow margin. Now, coming to net profit after tax, as I mentioned, net profit after tax on a reported basis is showing a decline of 22.5% and if we normalize, we can take home to one of impacts that comes to 5.5%. Similarly, the impact from the earning per share, as I mentioned, was quoted as 3.07 goes up to Now, there is a marginal decline in earning even on underlying basis on year on year basis. This is mainly a case of, as I said, we have been investing more than last year and also last year in quarter three we had political issue related loss which we don t have as much as we have faced last year. So, that s kind of impacting our earnings per share from the last year 3.96 coming down to So, in summary, what I d like to say that we have seen improved top line performance in quarter three and we continue to focus on our OPEX which means that we have been able to maintain our EBITDA and also improve sequentially and our revenue growth also continue to grow which is driven mostly by data which is extremely promising. We are adding lot of new subscribers in our record every month and that will continue to lead our revenue growth. And we continue to add investment to increase our 3G footprint and also 2G coverage, wherever we have coverage holds and also to ensure that we give better customer experience and therefore IT investments in both space. So that was the financials. Thank you.