Safaricom PLC (SCOM) Earnings Call Transcript

Good morning, good afternoon or good evening, depending on where you're joining us from. Welcome to the Safaricom Half Year '21 Results Conference Call. Before I hand over to Peter Ndegwa, our CEO, I would like to request that you submit your questions to the panelists using the Q&A tool or platform, which is available at the bottom of your screen. I would also like to request that you read the disclaimer on Page 2 of our investor presentation available on the Safaricom website. I will now hand over to Peter.

Thank you, Cyndia. Just to confirm that you can hear me well before I start.

Yes. I can hear you, Peter.

Okay. Good afternoon, good morning, everyone, depending on where you are calling from, and welcome to the Safaricom H1 F '21 investor conference call. I will just say a few words. You'll have seen that our results would have been uploaded this morning, and you'll have seen the recording of our results. If you have not watched it, you can watch it. I wanted to start by acknowledging the presence of my exco, starting with our newest kid on the block, who is Dilip, joining us as CFO from the 1st of November. Dilip joins us from DTAC, which is the largest telecommunications company in Thailand. He has over 29 years experience, started his career in Coke and then went on to work for Vodafone India and then joined the DTAC Group, starting in Bangladesh and then later in Thailand. We are delighted to be welcoming Dilip to the Safaricom family as CFO, and I'm looking forward to working with him as we take this business to even new heights. I want to thank Ilanna, who many of you know, for the period that she has acted, held the fort, in the past few months since Sateesh moved on to a new role. Ilanna has done a great job and will be speaking to us as acting CFO and will continue to be with us for the next few months as we transition to delivering the new CFO. I also want to invite -- I mean to also acknowledge that some of my exco on the -- online: Sylvia Mulinge, who is our customer -- Chief Customer Officer; Steve Chege, who is our Chief Corporate Affairs Officer; Rita Okuthe, who is our Chief Enterprise Business Officer; and Sitoyo, who is -- who looks after Financial Services; but we also have Debra Mallowah, who is our Business Development Head. And all of them will be involved in the Q&A, depending on the questions that you have. I will now hand over to Ilanna to highlight a few elements related to the results that we announced today, and then we will get straight into Q&A. Ilanna, over to you.

Thanks. Thank you, Peter. Hello, everyone. Thanks for taking the time to join us here this afternoon. As I'm sure you've seen from our earnings release this morning, I'm not going to go into too much detail. I'll leave as much time as possible for Q&A, so I will just give some highlights. Our service revenue declined 4.8% in the period, and EBIT declined 10.5%. The impact -- this was driven by the impact of our response to COVID-19 and in zero-rating M-PESA transactions. And just to call out, that excluding M-PESA, our service revenue would have grown marginally in the period. Voice and fixed enterprise were under significant pressure in quarter 1. We did see this improve in quarter 2. Mobile data and fixed performed -- Fibre to Home performed very well for the period. And the overall underlying health of our business and as is visible from our growth in our customers across all revenue streams have also grown in usage. We did see a good momentum in quarter 2 performance with an easing of restrictions, opening up of the economy and some innovations from our commercial teams, which we mentioned this morning. Our service revenue grew 8.3% quarter-on-quarter in quarter 2. And this growth was largely seen across all our main revenue lines, and we've got momentum there going into half 2. And we achieved good cost savings, which helped alleviate some of the pressure on contribution margin, but we weren't able to cover the impact from free fees, hence the profit at the time. And we also saw some behavioral shifts in the period of M-PESA commissions actually growing in the period driven by deposits, which put further pressure on the P&L, but we do believe is potentially a good behavioral change that will stand to us in the future. So I think with that, I'll hand back to Peter for any further remarks before we go into Q&A.

Thank you, Ilanna. I do not intend to go into any further comments, just to invite -- for us to go into a Q&A -- the Q&A session. Cyndia, are you the one who is moderating the Q&A?

Yes, Peter, I'll moderate the Q&A. So we already have our first question. This is from Samuel Njihia of Faida Investment Bank. So I think it's more of a financial question. There was an increase in provisioning for receivables. What led to this? And what do these receivables relate to?

Ilanna, I'll hand over to you.

Thank you. So yes, overall, receivables increased versus March. 2 main drivers: first, repayments to do with the timing of communication authority invoicing that happens every year that should unwind as we move through to half 2; the second, relating to trade debtors, we did see an increase in trade debtors, most notably, interconnecting and colocation, which gave rise to the increase in receivables balance. And we are working with the parties locally in terms of a way to unwind the debt. You can also see it in the provision that we have made in the period. We have, I suppose, been prudent via our commissioning in the period. More from the point of view of kind of prudence from an ordering point of view than anything, we're actually conservative from a repayment point of view, but we do see an increase in interconnecting and colocation debt on the repayment element that will unwind in the half.

Thank you, Ilanna. Our next question comes from Linet from Absa Kenya. Kindly unpack why short-term borrowings went up significantly in H1. Where do we see net debt at in full year '21, '22?

Ilanna, please?

Yes. Thanks, Linet. So yes, short-term borrowings did increase in half 1. We're showing a net debt position. So to fund -- so we use pretty much our cash to fund early payment of dividend, so the borrowings are there just to support our working capital commitments, including CapEx. And in terms of full year position, and if we exclude the potential investments in Ethiopia, we should close with a net cash position. The loan that's taken in half year is a time -- more important from a timing point of view to facilitate the earlier payment of dividends to enable us to meet our working capital commitment.

Thank you, Ilanna. The next question comes from [ Fred Tilling Smith ]. Please, can you give an update on your expected timing around reintroduction of fees on M-PESA transactions?

Thank you for that question. I'll take that. As you know, just in terms of history, we offered to go with free P2P from mid-March to support the country. We have supported the country for 6 months now, 7 months, and it has cost us KES 9 billion for H1. We are not in a position to say when we will go back to charging. We do know that we will go back to charging at some point. We are not in a position to announce that. When we are ready to do that, we will come back to you and announce that. We have also been closely in touch with the Central Bank during this period. And we are working together to make sure that we have a position that is fully aligned between ourselves and them. But as I said, I wanted to reinforce that we went through -- we went with this direction to support the country during this period, to support a cashless environment but also to cushion Kenyans during this period. Kenyans are aware it's not going to be there -- the 3 transactions are not going to be there forever. But at this stage, we are not in a position to say when we will stop -- when we will go back to charging.

Thank you, Peter. Danesh, I believe Peter has responded to your question as well. So I will move on to [ Willis' ] question. This is regarding Ethiopia. How soon should we expect operations and revenues from Ethiopia?

Is that a question from Linet? Did you say that?

From [ Willis ], from [ Willis ].

From [ Willis ], yes. So thank you, thank you, [ Willis ]. I should say that it's -- our intention to invest in Ethiopia is a long-term play. It's not to generate near-term revenue. Just to indicate where we are, we submitted an expression of interest some months back. We are about to submit a bid, although we are waiting for the time to come through from the Ethiopian government, which had been delayed. We expect those, what they call ITT, which is the time that allows us what to bid for to come through in the next 30 days, and we are required to submit a bid within 30 to 40 to 40 days thereafter. Our intention is to go with a consortium. Safaricom will be the lead with approximately 51%. Of course, we will be sensible in terms of the kind of bid we have in terms of returns to shareholders, our ability to fund any investment that we make. There's challenges in terms of whether mobile money will be included and what time frame that would be. However, all I can assure you is that the Board will consider the overall bid in the context of ensuring that shareholder value is protected. We do not believe that dividends -- ability to pay dividends will be impacted by an investment in Ethiopia. But I do need to say that, at this stage, we do not have a view as to -- or we are not in a position in terms of the time profiles or indeed the debt levels that we would have to put on the balance sheet to be able to navigate our way through the bid. But when that is ready, we'll be able to share. We are waiting for the ITTs for us to be able to respond. And we'll seek the relevant approvals, both in terms of the Board itself and when the time comes from the regulatory authorities, but also our shareholders. I'll leave it there, unless there is any further question on Ethiopia. But just one more. Ethiopia is going to be a strategic investment. As I said at the beginning, it's a long-term play. We hope that even if we went in with a pure telecom license, that a mobile money license would then be allowed within the relative short period of time. That is 2 to 3 years, which is what the government has messaged. Because long-term, we believe that we will get an appropriate return if we combine a telecom operation with a mobile money operation.

Thank you, Peter. I believe that also responds to [ Donatas' ] question. I think we can then move to Silha's question. Ilanna, this is a follow-up on the short-term borrowings. Any detail on duration or cost of debt, please?

Yes, thanks. Hi, Silha. I hope you can hear me. Sorry, my Internet went funny there.

Yes, we can.

And yes. So Silha, I don't think we're going to get into the details of the cost of debt. I think I mentioned it earlier, but apologies if it wasn't very clear. The debt is purely timing, so it will be repaid within this financial year. Now obviously, if we're successful with the bid in Ethiopia, there will be additional debt taken on our balance sheet. But to put -- the fact you have encased the question as coming from one of worry, our net debt-to-EBITDA ratio at half 1 was 0.27, which compares very favorably. If you compare to say like a Vodafone, they would operate at 3x EBITDA. So our balance sheet is very underleveraged, undergeared from the point of view of sustainability, but the funding that we took in half 1 was to facilitate kind of timing of working capital commitments and would be repaid by end of year.

Can I add to that, Ilanna? I hope that the shareholders and investors are not going to complain with us paying dividends, Silha, because one of the reasons why we went for a bit of additional funding is to fund working capital for other projects, including CapEx, as Ilanna has mentioned, to enable us to use our free cash flows to be able to pay dividends, which we paid a few months earlier than normal. And it was a recognition of the fact that it was an unusual year. Of course, going forward, we are going to go back to the normal timing in terms of paying dividends. But certainly, if we hadn't paid dividends earlier, we would not have been constrained. So it's a purely timing issue, is a short-term matter that should net -- I mean, should watch itself by the end of the year, as Ilanna has messaged.

Thank you, Peter. We have a question from Ali Al-Nasser. He says, thanks for the call. I was under the impression that the deadline for zero-rating was December 31. Are you now suggesting that zero-rating can be -- can extend beyond this deadline?

No, no. But we're not suggesting anything like that. I'm just stating that we are not in a position to make an announcement of when we will go back to charging. We do think that we will go back to charging at some point relatively soon. I do not want to commit to a date, whether that is December, Ali, or later. But in not committing, it doesn't mean that we think that the deadline will move beyond December. One of the things we are sensitive about, we do not want to discuss matters that we may be having in the background with regulatory authorities at this stage. But I would want -- I would not want anyone to read in us not committing to a date, that we think this date will shift beyond December.

Thank you, Peter. So we have a follow-up question from [ Fred Tilling ]. Your customer churn rate has increased to above 30% from around 20% last year. Please give some insights around why this has moved up.

Yes. The advantage of having a great team is that you can delegate some of the questions. So I will ask Sylvia Mulinge, who looks after customer -- our consumer business, but also a Chief Customer Officer, to answer the question on churn.

Hello. Good afternoon, good morning from wherever you're looking in. Yes, our churn did go up in half 1, but that was a deliberate effort that we have put in, in terms of cleaning up the fraudulent registrations on our network. We had quite a bit coming through during the COVID period. And we have spent the first half of the year cleaning that up. So if you look at the underlying churn, that's within control. It's still within the 20% range. But we've taken strict measures in terms of cleaning out all the fraudulent registrations that had happened. So that has shown up. It should stabilize by the time we're exiting this quarter and we get back into the normal range of performance that we've always had in the past. So under control.

Thank you, Sylvia. So we'll move on to Sunil's question. He has 3 questions. The first one is can you please explain the one-offs in the EBIT line? And then what trends are you seeing in the last 3 months? And finally, how should we be thinking about service revenue growth rates?

Thanks, Sunil, for the question. So the one-offs, the nature of provisions that are taken in one period bid that maybe then get released in another period, I'll give you an example. In last year, we took a provision against possible liability with the KRA relating to [ AYE ]. We successfully closed the issue with them so we released that provision we've created last year this year. I think there will always be kind of ups and downs. It was more to call out or caution investors that we didn't want you seeing that 10.6% OpEx reduction and expecting the same in the second half of the year, when we knew that part of that was being driven by one-offs that wouldn't recur. I think the other way to look at it is that there are additional one-off impacts in the period, both in the zero-rating of our past transactions, the increase we've seen in the bad debt provision then, so the kind of the way we looked at that were just ones we were trying to find a way to cover the impact of increasing our bad debt provision. One of the ways that we did that was to try and close debt on any provisions that were sitting on the balance sheet that we thought maybe could be closed to release back into the P&L, so one could offset the other. I think there was 2 other questions. What trends are you seeing in the last few months? I'm not entirely sure what you're referring to. If it is service revenue, so we've got like -- the results we're looking at are up to the end of September. So we really only have October and a week of November to go on. October is looking good as in we are continuing to see the momentum that we saw in quarter 2 as carrying return into half 2, which is we're pleased about. I think I'll be cautioned to predict kind of service revenue growth rates, to your last point. I mean at the moment, things are going quite well. But as you see across Europe, in the U.S., the number of cases spiking, countries across Europe going into second-round lockdowns, if that was to happen in Kenya, it would impact our service revenue performance. So it's very hard to predict at this point. I think all else being equal, the kind of performance we saw in quarter 2 should continue, but it would be difficult to say with surety with all -- I mean, with a lot of unknowns going on with COVID around the world.

Probably, Ilanna, let me add a couple of points to what Ilanna has spoken to. In terms of the data -- on the data business, as we said in our results announcement, we have seen momentum. So we do expect that all the key drivers of penetration will continue. Our 4G coverage is improving. We are putting more 4G funds out there. And also, on the fiber side, both in terms of Fibre to Home and Fibre to Business, we are seeing some momentum. So on the data side, all the indications, both in terms of days of use, the amount, the MBs used or GBs used, is going in the right direction. Now on the voice side, we had a tough Q1. We saw a recovery in Q2. We've started going after one-to-one marketing, and Sylvia can speak a bit briefly on that. We're giving slightly more value. We've seen improvement in terms of number of minutes used, days of use, but also -- so you've seen the right trajectory in Q2. So voice is also looking reasonably stable. You know voice has been affected in the past, had been under pressure. We expect that to continue to be the case, and therefore we are looking to see how we can give value -- more value to customers in the end, but still retain -- but still do well on the ARPU. On M-PESA, we have seen very good underlying health of M-PESA. So customer numbers are up, transactions are up. Wallet size is up. Our execution is much better. We've improved the number of products out there. We are focusing on micro SME and SMEs. So once we start charging, and we do not know how volume will respond to charging, we would expect to go back to normal in terms of the growth profile of M-PESA. I wouldn't want to say what that normality is because, as Ilanna has said, no one knows how the second wave on COVID will affect the economy. And the people -- there are still very many people who are out of jobs, SMEs that are affected. So we are cautiously optimistic in terms of the underlying health of our business, but we just need to continue to manage and improve execution over the period and see where we end up. We have, of course, now given guidance for EBIT and CapEx, and that should give you an indication of where our confidence levels are, although there's 2 assumptions out there that are related to the economy.

Thank you. Thank you, Peter. The next question is from Dilya. The presentation shows a decline in disposable income through September. What is the relationship between the disposable income and Fuliza values? There appears to be no relationship between income levels and repayments, which have improved Q2 versus Q1.

Ilanna, do you want to take that one, or Sitoyo?

Yes. Hi, Dilya. So I think that the nature of Fuliza and the type of product it is, I suppose that, in some ways, it ensures that the amount of outstanding debt's repaid because if you have Fuliza outstanding, once money comes back into the wallet, the loan gets repaid. And maybe Sitoyo might be able to speak to this in a little bit more detail. I think Fuliza's performance has been strong, which I suppose, in some ways, is a reflection of the disposable income situation and that more people have been taking Fuliza. But I think it's just testament that the setup of the product construct is such that even the repayment rate has remained high. And yes, so it kind of facilitates convenience with the customers, especially in times of need like COVID, and from our side, it's a less risky kind of answer. Sitoyo, I don't know if you can speak to this in a little bit more detail?

Thanks, thanks, Ilanna. And you're right, it's how Fuliza was constructed. It's contextual in nature, and this is something that customers would normally have. It helps complete a transaction. The customer will normally have completed it in 2 or 3 days later. So the way it was designed, it does have low NPL. The growth is also pushed by the growth in customer numbers. It's also pushed by the growth in values and volumes. And given the scenario of COVID, which, in Kenya, cash has been seen as a means of transmission and the government has been pushing cashless -- going cashless, we're seeing more volumes coming in, and this has helped also Fuliza in terms of repayment, but also in terms of more money coming into M-PESA, as Ilanna had mentioned in terms of cash-ins as well as money coming in from the bank. So that acceleration of M-PESA from volume, values, customers is helping the growth of Fuliza and also maintaining the NPLs.

Thank you, Ilanna. Thank you, Sitoyo. Next question is from Alastair, and I will also loop in [ Elizabeth's ] questions because they are very closely related. So Alastair from New Street asked that could you talk about pricing for both voice and data services. For data year-on-year, revenue growth slowed from half '20 to half '21, but we have seen an acceleration in traffic. Has competition intensified? Or were there any factors at play? How should we think about data revenue trends going forward? In voice, it looks as if pricing pressure has also intensified. What is driving that? And what should we think about it going forward? Elizabeth is also asking about the outlook for mobile data and peak service for half 2.

Ilanna, do you want to start the question and then hand over to Sylvia?

Sure. Yes. So I think for data, yes, comparing to half 2 last year and half 1 this year, it does look like a slowdown in the growth rate. There has been consecutive quarter-on-quarter growth. Some of that growth rate into vis-à-vis year-on-year is a function of the fact that in half 2 last year, we were lapping the effects of what we've done in the previous year. So the high kind of 20% growth that we would have seen in half 2 last year is a function of what happened in the previous year. And that being said, I think competition, I'll let Sylvia speak to more in terms of the intensification of competition, et cetera. And data trends, I think we'll maybe be able to speak directionally more than the specifics at this stage. We will continue to see the price per MB or the effective rate per MB come down and the effective rate per minute come down. And usage will continue to grow and data, so that we could fully unlock the opportunity that's there and for voice, I suppose, to keep it relevant and to keep the -- both offering attractive. But I'll let Sylvia chip in here, maybe more on the competition market.

I think, for us, as an organization, the key thing we focus on, first of all, is customers. I mean competition are free to do what it is that they want to do. But for us, the most important thing is what is happening with our customers and what are they currently going through in their lives. As Peter shared during the investor -- during the presentation in the morning, you saw the impact on the consumer disposable income due to COVID. And traditionally, we have had a premium in this market, which is a strategy that we'll continue to maintain. But because we must drive affordability for our customers, because they don't have as much money as they previously had due to impacts of COVID, high levels of unemployment, we've seen a lot of businesses also closing in this market, and there's now a gradual reopening, but that impact is definitely there. And therefore, we made a deliberate choice to drive a lot more affordability for customers. You had Peter and Ilanna in the morning speak about what we have now done with our one-on-one personalized offering, that we are driving through CVM, and that has paid back for us in terms of traffic. So that's going to be a strategy that we're going to continue to deploy going into the future as we drive affordability. For data, we did take some decisions during the COVID period in terms of supporting our students with mobile data bundles that were highly subsidized from what we had before as well as small and medium enterprises. We also took a decision on fixed data, to get a lot more customers onto the service, but give them double speeds for the amount of money that they were normally paying for a number of fixed bundles. So those things, obviously, did have a short-term impact. But I think we are very happy to see what it's generating for us in terms of customer activity KPIs. Usage is up, if you look at it for mobile data. We are now carrying significantly higher, our voice traffic, which is good. FTTH paid off for us, Fibre to the Home, in terms of increased connections with customers coming on board. And overall, even in terms of NPS levels, we have actually seen our net promoter score go up over the period. So it's the right decisions that cost us in the short term, but they have paid off for our customers. So for us, the plan is people and focusing on our customers, what is important for them, how do we help them navigate through this period because we believe if we earn their trust and loyalty during this season, they will remain with us for the long term. So directionally, that's why we are going with our pricing strategy.

Thank you, Ilanna. Thank you, Sylvia. Our next question comes from [ SW ]. His question is what services do you plan to offer under wealth management? What is the progress on Mali? Will you be seeking a license from CMA? Then there is a follow-up question on Fuliza. What is the growth rates? And how much has been lent out? What's the average default rate?

Okay. So I'll start with a question on wealth management and the Mali product. And Sitoyo, feel free to build onto this. We would not go into too much detail here. I wanted to say that we are exploring this area. We have developed a couple of products. We are working with the regulators to seek approval. And until that approval is given or actually obtained, we would not want to announce our intention, including the specific product on Mali because of regulatory sensitivities before approval of our product is made. Sitoyo, you may want to add to that, given the broad agenda you have in terms of broadening our service offering in the financial services area subject to regulatory approval.

Thanks. Thanks, Peter. I think one of the things that M-PESA has been successful on is in driving financial inclusion. So when we started in 2007, financial inclusion was at 23%. That moved to about 84% as supported last year by Central Bank of Kenya. While the health -- financial health of customers in Kenya stagnated around 20%, so this is a key component of our transforming lives. So we've managed to drive financial inclusion, but financial health has remained fairly stagnant. And this is why we're looking at wealth, insurance, and providing deeper products and services that relates to savings is key in driving financial health and so that customers are able to avoid the shocks that are there, as an example of COVID as one of them. So the reason why we're looking to wealth management, insurance and broadening that is to deepen the savings culture and drive the financial health. So what you're looking at in wealth management is part of it. And -- but there are certain things that we are still discussing with the regulators, both the CMA and Central Bank, which, at this point, we cannot really discuss. But that is part of our intention, is to drive more products and services and drive savings. I think on Fuliza, I think Ilanna had mentioned that the NPLs are -- the NPL is about 0.4%. So -- and we continue to see double-digit growth in Fuliza volumes that goes through the threshold.

Thank you, Sitoyo. Just on Fuliza, there is a follow-up question on that from Tracy. And her question is, I see that KCB and I'm sure your disbursements have come down despite Fuliza going up. Is it a function of cannibalization or simply the banks being more stringent on lending requirements? And also, any update on Visa partnership?

Go ahead. Go ahead, Sitoyo.

So for just a bit of context, when COVID started, the Central Bank of Kenya stopped the listing of nonperforming loans in the market for both digital as well as banking products. And this meant that KCB and CBA, basically KCB M-PESA and M-Shwari, the discussion of the bank was to be more prudent during this period of time. Fuliza, given the contextual nature that have been discussed, was not so affected. So because of them, we are not listing customers, then we decided to tighten a little bit of that but that has since now reversed, and we are seeing great repayments on both M-Shwari and KCB M-PESA. So we'll be seeing a bit of growth in that aspect.

And also, on Visa, if you can update.

So on Visa, we -- when we announced the partnership in February to become -- so we have developed some products and services that we are looking to launch. So we just waited for regulatory approvals for those ones. And then in the next half, when we get that, then we'll be able to launch those products and services. Okay.

Thank you, Sitoyo. We have a follow-up question from Dilya. Peter, this is still on the CBK and free fees. Could you give perhaps some indication of the options that are being discussed with CBK?

Dilya, I am not in a position to give those options just because of the confidentiality involved in this matter. And generally, we do not discuss compositions with the regulator, especially on a matter like this, in the public until they are resolved because they could go either away. However, I would say that those compositions are going well. That's the one thing I would -- that's the way that I would put it at this stage.

Thank you, Peter. So our next question is from [ Rohan ]. And also, someone else in the group has a question closely related. I'll just call down and check who. Can you give us a sense of your assumptions for the guidance on EBIT, for example, what do you assume regarding the reintroduction of M-PESA fees, if at all, in H2? And yes, I think I'll go down and see who else had asked a similar question. Thank you.

Yes. In giving the guidance, and this might let -- probably relate to some of the previous questions, is that we've assumed that, at the very least, to start charging sometime in Q4.

Thank you. I think the other question was from [ Donatas ]. And I think [ Donatas ], your question has been responded to by Peter. So we'll move on to Henry Kabue, who is asking, kindly provide details on what year-over-year service revenue growth in H1 would have been, excluding M-PESA revenue. Secondly, could you explain the decline in FTTH ARPU despite a strong growth in new connections?

Yes. Thanks, Cyndia. Peter, I can take this. So excluding M-PESA revenue, service revenue grew marginally, 0.2% for the period. However, I did mention at the start of the call, voice was under pressure in quarter 1 as was fixed enterprise. So if I look at on a quarter-by-quarter basis in quarter 1, the business, excluding M-PESA, declined 0.7%, where it grew 0.7% in quarter 2. So similar enough to that 1% or so growth we saw that the business, excluding telco, performed at for full year last year. On the Fibre to the Home ARPU growth connections. So this is just a function of mix, Henry. So as more customers took up the offering that it didn't previously have, obviously, when we started rolling out Fibre to the Home, we started with the demographic areas we thought would give us the best return. Once those areas were serviced to continue to gain more and more customers, the takeoff seems to be largely the kind of lower-value packages, the bronze packages, and example, the silver package, which is giving a mix impact to the ARPU, which is causing the ARPU decline.

Ilanna, just one more addition, Cyndia, to Ilanna's answer. We did also, as part of the COVID response in Q -- in quarter 1, we did give significantly more bandwidth to Fibre to Home for free to support the working-from-home. And so we have a clear reference to some of the aspects around supporting education.

Thank you, Peter. Thank you, Ilanna. So we have a follow-up question from Dilya. During the strategy update this morning, Peter mentioned that partnerships and M&A would be strategic enablers. May I please ask the types of M&A you have in mind, size, lines of business?

I knew that question would come. I think that -- I would answer it in a broader sense. Safaricom has been extremely successful in the past 20 years, and we believe that, going forward, we will need to leverage more partnerships and M&As rather than do a lot of the things ourselves. So as we go into new areas, whether that's agriculture, in health, in education, but also, more broadly, even as we think about content, as we think about going into Internet of Things and other aspects of our business, we do need to leverage partnerships and M&A. So where it makes sense for us to acquire an entity to give us either speed to market or capacity, we will do that rather than which to build. So I don't want to go into specific areas. But certainly, one of the areas that you could think as an opportunity is the whole financial services area or whether when we go into the sort of digital ecosystems. So -- and also the content area because we don't want to build everything from scratch or take a very long time to build the assets we need to be able to win. So it is more generic, I know. But as soon as we start forming some themes in terms of the areas of interest for us, we will keep you informed.