Safaricom PLC (SCOM) Earnings Call Transcript

Good morning, good afternoon, and good evening from wherever you're joining us from, and welcome to the Safaricom PLC Analyst Call. Post our results released this morning in Nairobi, Kenya. My name is Caroline Wambugu. I'm the Head of Investor Relations and Finance Planning Analysis and I'll be moderating the discussion. We have our CEO, Peter Ndegwa, who will make introductory remarks. Thereafter, our CFO Dilip Pal, who will give a high-level performance overview before we open up the session to fill your questions to the leadership team. Before we kick off the session, I would like to speak through a few housekeeping rules. Please ensure you have joined the session with your full names for ease of identification when you post your questions or comments. And if you haven't, you can take a moment now to rename yourself by hovering the cursor over your name and clicking the rename tab on the dropdown. Throughout this session, any questions you have will be shared via the Q&A tab and at the end of your question, kindly remember to include your organizations name. And in staying committed to our promise on diversity and inclusion, a live transcript has been made available for the comfort of anyone with hearing difficulties, who has joined the call. You can access this by clicking the view transcript tab at the bottom of your Zoom application under the [show of options]. This will allow you to keep up with the conversation in a more comfortable manner. Finally, and in case you require any other form of assistance from us that is not related to the discussion. You can write to us via the chat platform and the Investor Relations team will be on hand to assist you from the back end. And with that, I now welcome our CEO, Peter Ndegwa to kick off the session. Thank you, Peter. And Peter, over to you.

Thank you. Thank you, Caroline. Please confirm that you can hear me well. I need to increase my volume in any way.

We can hear you Peter. You may proceed.

Okay. Yes. So good afternoon, and good morning, everyone, depending on where you are. And as Caroline has said, delighted that we're able to release our results this morning. And Dilip, our CFO, will be going through a summary of those results. But I just wanted to say a couple of words. One is some big milestones. One is the fact that we've now received formal confirmation of the award of the Mobile Financial Services[indiscernible] in Ethiopia, which was also confirmed by the National Bank of Ethiopia this morning. That's a great milestone. We've been waiting for it. It would allow us to now complete the preparatory work that we've been doing in order for us to start rolling out financial services business in the coming weeks and months. We will be able to give you an indication or what it will take to deliver that. The second is another big highlight is Kenya, as you know, has gone through just like any country, major issues with respect to impact on macro currency, the drought in the Horn of Africa and so on and also an election here. And as we announced our first year results, we saw subdued performance in the second quarter which affected the half. That continued in the third quarter, but I'm happy to say that from Q3 -- sorry, from Q4 -- from actually around December, we saw clear momentum and therefore, second half is a recovery compared to our first half. We also got the return to charging by M-PESA so which is also an important milestone because of -- not just because of the revenue considerations, but because it also allows us to build a market that is less distorted than we are seeing before. So we are happy with the solid results in Kenya, We are satisfied with the progress that we are making in Ethiopia. There's a lot of execution that we need them to focus on, and we'll be speaking to that. I'm sure that there will be lots of questions on a few, but certainly delighted that we can also now start to operate mobile money in the same way that we are doing GSM. So that's what I wanted to say Caroline. I hand over to Dilip to give us a bit of a summary of where since then we open it up for questions.

Thank you, Peter. Over to you, Dilip.

Thank you, Caroline. Confirm, you can hear me well.

Yes, we can hear you. You may proceed.

Thank you. So good morning, good afternoon and good evening from wherever you have joined. It's a pleasure to talk to you today. As you have seen, we have released our results this morning, and some of you may have been through the numbers or you have participated in the update for. For me to say that it's been a very challenging year, as Peter alluded. We had quite a few headwinds coming from macros like inflation, high inflation, our depreciating [indicernible]. But beyond that, we also had sever drought and then increase in energy cost driven by tariff reviews as well as subsidy removal. We also had communication authority driven subscriber registration process that led to approximately 1.6 million customers leaving us who couldn't complete the process. I think the most important part was the mobile termination rate review, which resulted into a reduction of 40% from 0.99 to 0.58 that impacted our top line in last financial year by 2 billion. On an annualized basis, that impact leads to a 3 billion impact on our top line. [That sale], as Peter mentioned, we also had return to charging for wallet to bank and Bank to wallet, which was a good news, and that has also boosted our M-PESA performance in quarter 4. Starting with Kenya, I'll just give you a very high-level overview, starting with Kenya and that customers, our overall customers grew by 3% to 44 million, and our 1-month active customers are closing at 33 million. 1 month active customers on M-PESA grew by close to 2 million, closing at 32 million as of the end of March 2023. From a revenue perspective, we have seen improvement in second half compared to first half. Adjusting to MTR, our second half service revenue grew by 6.5% compared to a growth of 5% in H1. And for the full year, adjusting with NPR, revenue grew by 5.7%, on a reported basis growth of 5%. M-PESA mobile data and fixed are the key revenue drivers. M-PESA overall reported growth of 8.8%, driven by ARPU uplift coming from an increased number of transactions per customer per month which is increased to over 24%, which is 16% growth from last year. And with return to charging coming in, M-PESA also grew by 12.2% in quarter 4. Mobile data was a good story, double-digit growth continued, driven by an ARPU uplift of 16% and also usage growth of 54% closing at 3.6 GB per customer per month. Overall, fixed revenue grew by about 20%, driven by customers and a stable ARPU. The traditional revenue like voice and messaging has been under pressure, but I'm happy to note before that messaging revenue actually grew by close to 5%, and we have seen improved performance in H2 invoice declining only by 1.7%, finally closing at 2.8% for the year. In terms of costs, direct costs came in more or less flat or a slight decline. Driven by reduction in interconnect costs and also reduced handset sales resulting in lower handset costs. Operating expenses overall went up by 7%, driven by energy cost depreciation in shilling and also increase in payroll costs. With all of this, it's a solid performance in a very challenging macro environment. Adjusted with NPR, the headline numbers are -- service revenue grew by 5.7%. Net income on a reported basis, adjusting to MTR view by 4%. And if we normalize Ethiopia financing costs grew by 6.4%. And group performance overall came within the guidance both for EBIT as well as CapEx. Now moving to Ethiopia. As Peter mentioned, we are very excited about the news of finally getting the MFS license and we are hopeful to launch our services as soon as possible. Now other than that, in 7 months, we have acquired close to 3 million customers and we have seen very good momentum on our mobile data and the customers are happy about using the -- our network. And that is also reflected on uses -- the mobile data uses per customer per month closed at 1.5 GB per customer per month. Our rollout is now picking up speed. We have closed close to 1,300 sites by year-end, and we are on course to close 3,000 sites by end of FY '24 by March 2023 -- by March 2024. Now I'm sure you have gone through the numbers in the morning update and also later on. But let me pause here. And now I hand over back to Caroline for Q&A. Back to you Caroline.

Thank you very much, Dilip, for that. And I can see lots of questions have started streaming in which gives us great pleasure now to get into it so that we can tackle each and everyone within the time allocated and we trust that we shall do the best that we can, but keep them coming. So let me start off with a question here from Modi, Modi of Citi please, and this is to you, Dilip. Please, could you quantify the benefit from reinstating mobile money charges? And what proportion of the 12% of the mobile money revenue growth comes from this? Also do we expect similar kind of growth trajectory, what you've seen in Q4 into the business next year which is this current FY? Dilip over to you.

Thank you. Thank you Caroline. So return to charging. I remember we have -- what we have done is also rationalized the pricing. So over 40% price rationalization has happened because you wanted to drive affordability and also to make sure that we can retain the volumes and the values that was coming through this channel. The average monthly uplift is anything between 350 million to 400 million. That's what has come in, in the quarter 4. Now from a growth perspective, we have always been messaging around our ambition to grow this -- the M-PESA revenue, which is now contributing 40% of our service revenue. And we said that a minimum of double-digit growth is what you are expecting on a medium-term basis. So I think it just reconfirms the kind of growth that we have seen in quarter 4 that emphasize back to where it should be. And you have seen the numbers you have given 4 quarters numbers, actually started the quarter with more than 11% growth. So Q1 was 11%. And then as the election was approaching and also because of the macroeconomic factors, you have seen a slowdown. So Q1 was very good. Q2, Q3 subdued, and then we are back to where we normally see in our M-PESA revenue growth.

Thank you, Dilip for that. Let's take a question here, and this is to you, Peter from [indiscernible]. And the question is you reported having a coverage of 22% in Ethiopia end of March. And this is under the 25% regulatory requirement. Are there any implications of not meeting the target? And when do you expect to be compliant?

Yes. So thank you. It's a great question. So yes, the license requirements are that we should be hitting 25% coverage -- population coverage by end of March 2023. We were aware throughout the period that this was a requirement we reported to the regulator that based on the fact that we launched commercially a bit late for various reasons, including some of the initial political instability where we had to take the team out of market and so on and so forth. But that there was always an expectation that there will be some flexibility in terms of our ability to do that. And our commitment is that we would meet that by the end of June and which we will meet that commitment. And and hit the 25%. And based on the target that we have set for the year, for calendar or financial year '24, we should do well with the original milestones that were required by the regulators. So it is not an issue. The regulators are aware and also it is primarily because there were some challenges at the beginning that meant that we were not able to deliver on our rollout within the time frame that we expected.

Thank you very much, Peter, for that. The next question is from [indiscernible] HSBC. And I think this I'll share out between the two of you. But the first one is, can you please elaborate on the hyperinflation impact in Ethiopia especially going forward. Can you please give some scenarios e.g., if nothing changes, inflation goes higher or lower by certain points. So that's to you Dilip. Second question is on what's the drivers behind lower EBIT growth expectations in Kenya and the split between telco M-PESA? And what levels of revenue expectations are built into the EBIT guidance. I think Dilip can first take those two, then I'll speak to the other two.

Thank you. So let me first start with the hyperinflation. So hyperinflation in this continent is not new. There are a few other countries, which has been through this. But for Ethiopia it is new, as I have alluded in my presentation, when the cumulative inflation for 3 years exceeds 100%, which is what happened in case of Ethiopia, the IAS 29 is required to be applied. And because your IFRS compliant grew we have to apply that. Now you would have seen the impact coming through income statement and net impact of 3.5 billion is in summary, in simple terms, Basically, the monetary assets and monetary liabilities are restated because of we have more monetary liabilities driven by vendor financing benefit that we have, we -- this resulted into a gain. And to your question on how do you see this going forward? Of course, as you go along, as you start paying off [for better] financing liabilities, the monetary liabilities will go down. And therefore, [indeed] it will unwind. And also, there are possibilities of -- it coming out of hyperinflation environment, and therefore, we move back to a historical basis of reporting. I think one additional point I wanted to highlight here is these are accounting adjustments and in no way impacts shareholder return simply because we have decided to even exclude this, the net gain in the income statement of 3.5 billion from calculation of dividend so that the numbers reflect the underlying performance of the business. Now on the guidance this is the management view about what we think of the Kenyan Ethiopia business will be, I think you're referring to probably the Kenya business. The way to look at is -- the macro challenges still continue. And I think the estimate for the growth and the economic growth is also anything between 5% to 5.5%. So I think recovery, macro recovery is going to take time. And that's the sentiment that goes into the overall number. And to your point, that on the revenue or which is what kind of revenue growth is factored in. Normally, we guide only on EBIT, we don't guide on revenue. But I think this is a fair reflection of what you are expecting in the coming year in terms of guidance for Kenya. And for Ethiopia, we have also highlighted FY '24 will be the peak EBITDA losses or EBIT losses because that's when we are expanding our network. We mentioned about going up to 3,000 sites by end of financial year, which means the cost is going to be coming in faster than the revenue pickup. The revenue will start coming in, but the losses will peak in FY '24 for. And you have seen CapEx guidance pretty much similar profile. [Ethiopia] will be spending almost similar to what Kenya will be sending in the next financial year. Thank you. Caroline.

Thank you, Dilip, for that. To Peter, can you elaborate on M-PESA license in Ethiopia, what activities you can take? what's not allowed, what's allowed and what price you paid for the license? That's from [ Mandy ] of HSBC, Peter.

Yes. Okay. So that's a great question. Dilip has been telling me that the fact that we have acquired a license means she doesn't have to answer that question. But I won't deem that it will come with many other questions about what we do from here which is true. So of course, we are delighted that the license has come in. We've paid USD 150 million, which then has been paid by the subsidiary of [Safari Pub Ethiopia]. So the law requires that we set up a subsidiary of [indicernible] to operate mobile financial services license as a telco operator as an international telco operator in Ethiopia. So that is the first thing in terms of setup of the actual construct of the shareholding structure. So we'll have a subsidiary, 100% owned by Safaricom in Ethiopia plc. The second thing, of course, is now to see what the law allowed -- what the regulations allows us to do a not do. The National Bank of Ethiopia has generally borrowed from what is happening in the rest of the region in terms of what they will allow for an operator to conduct in terms of types of services to operate and so on and so forth. There are small differences here and there, but those will come over time and we'll be able to inform investors. But by and large, we will be able to operate normal basic services, withdraw and deposits, P2P, all the normal payments services that we operate. It doesn't rule out any services such as credit, merchant work that we do here in Kenya. So it is really up to us to sequence the way we want to launch the services. In terms of readiness, we have the technology already set up. We have the platforms in place. We will have 1 app, 1 super app that will hold both the GSM, but also the mobile financial services business and then we are now starting to set up the distribution infrastructure. As you know, mobile financial services, the biggest asset that we need is wide distribution across the country that allows customers to withdraw and deposit money. And therefore, so that it [indiscernible] the persons to persons transfer, then later on condemn globally the merchant type services. So the landscape is very similar. I can ask Anwar to say here some specific issues that we need to deal with. But certainly, the landscape is very similar. And in terms of the way we expect this to mature, we expect to set up the foundations fast before we now start to sophisticate the product. Clearly, it will depend on the how fast our GSM business grows and my intention is to create a 10 million customer base by the end of this financial year in terms of active customers, and we hope that a large proportion of that would be used in mobile financial services. But the faster we rollout the GSM business, the faster the mobile financial services will grow. The other aspect is we believe that mobile financial services will be an attraction point to our network but also a retention point for our customers. So I ask Anwar, if you can add to the answer to that question.

Thank you, Peter. There's not much to go beyond what you said. The only addition I'd probably says is for me would be that the in Ethiopia mobile financial services while a good portion of the society uses them. It's not as big just as it is in Kenya. So there will be a large component of educating the public to our services, and that's going to be a little bit of a drag. However, we do expect significant uptake. There the branch network for banks is significant there, and we intend to use them as well as part of our ecosystem in terms of a rollout. So that should make things a little bit easier to, but very largely in line with what Peter said.

Okay. Thank you very much, Peter. Thank you, Anwar. And to you Dilip the last question from [indiscernible] of HSBC, is your EBIT guidance for Ethiopia inclusive of M-PESA rollout costs and we can combine that together with a question from James [indiscernible] of [indiscernible]. How does the Ethiopian EBIT develop after 2024? What is the pathway to breakeven in 2026, given an extremely low ARPU for voice and messaging in that market, what needs to be done to get there? Dilip?

Okay. EBIT guidance, the first question, EBIT guidance, whether it includes cost rating to mobile financial services launch. The answer is yes. All costs have been factored, including CapEx. And for the second question on EBIT breakeven. So what we have given an outlook is year for breakeven for EBIT. Now of course, we have done that based on our assessment of the market reality. Yes, you are correct. The ARPU levels are low. In general, ARPU levels are low in Ethiopia. But for us, I mentioned in my call, in our update call this morning that these are very, very early days. So initially, when we started the lot of introductory will come off and they are in generally trying attract customers through freebies. So we also -- therefore, I said that let's not take this information as is for a modeling purpose . As you have seen that the usage is important, acquisition of new customers is important. We have seen great uses in mobile data and the acquisition trajectory is also in the right level. As we are ramping up our network from the current level of tracking [indiscernible] sites, 2,000 sites, which, by the way, it -- from a scale point of view, it's substantial. It's almost half of the size of Kenya. So it's going to be a substantial business from all point of view all perspective. So yes, we have factored in all those elements, including the ARPU level and the market dynamics to come to a point because this is what we have been reinstating I think in every question we have in queue that [year] we probably can break even.

Thank you very much, Dilip. And to you, Peter, a question here from [indiscernible]. Can you comment on whether or not the management team is considering separating M-PESA activity with the telco business? In that process, releasing value on the M-PESA side and focusing attention on the telco side as well. A service agreement between the 2 can obviously be established your comments, Peter?

Yes. Before I go to comment on the -- I'm sure our favourite topic of one of the call. About separating M-PESA from the GSM business in Kenya. Just to add what Dilip also spoke about in terms of ARPU on voice. I think it's also important to realize that a very -- when you have low customer base, the on-net component of the business is not really viable until you reach a certain level of scale. So there is a lot of net calling at the beginning. That, of course, reduces the ability of the business to make significant amounts at this stage. And that's why getting scale on customers is important, getting scale on sites and continuous coverage is very important. The second aspect is that from an MTR perspective, what is currently being used in Ethiopia is a preliminary assessment before a formal review is done by the regulator because this is a new regulator. It's the first time that you have 2 players in the market and certainly -- currently, a note on update on that, is they are going to add a study that eventually will plant the MTR [indiscernible] now is that you have 2 players rather than -- rather than 1. So the scale of sites, the kind of customer base, the mix between on-net and off-net and also MTR would influence kind of how the voice business evolves over time, but we are really satisfied with the data business because regardless of where -- I mean, the actual quality is experienced by customers from day 1 which is really fantastic because it's the 4G network quiet ready and clearly are built to be able to deliver fantastic data experience. So Anwar before I go into the Kenya question, you want to add on the status of the regulatory review?

The cost study should be finalized by July which will then give us a more -- well, let's say, more permanent MTR, which will then cause or potentially cause some repricing in the market. But July is the data we've been given.

Yes. I do need to [indiscernible] analysts and investors that July doesn't mean the repayment from August. July means they get cost added on, the regulator will decide at their own time when they actually conclude this. But certainly, in the foreseeable future in the next year also, we should be able to see a pathway to an MTR that reflects and the operating environment where you have 2 players, versus 1 player, which was the initial determination. In terms of the Kenya piece, I've always been very consistent. I've been asked this question many times, are you going to separate M-PESA from the core connectivity business, and you could start [realizing] values from the M-PESA business. I've already said, we are not in hurry to do it, we actually don't see the benefits at this stage, not in the distant future to do it. And therefore, we will keep the businesses together. We will come up with a group holding company that allows us to set up companies such as Tower company and others that allow our business to start to monitor some of the assets we have, especially on the Tower side. But at the moment, the connection between our Financial Services business in Kenya and our connectivity business is solid enough. And we benefit from them remaining the way they are. They are run in a way in an independent way because they are separate teams. And now because we are agile, we don't notice a difference. But from a structural perspective, there is no intention in the near term to separate the two.

Thank you very much, Peter. And now moving back to you, Dilip. There's a question here from -- just a second. From Samuel of Njihia. There was a slowdown in the revenues from the lending. So what is causing this slowdown, especially on KCB M-PESA? And then a second follow-up question on Fuliza. The question is what's the impact, if any, did the restructured Fuliza tariffs have on repayment periods and transaction activity. And is Fuliza slowing down because the repayment rates have also gone down. So are you seeing an uptick in nonperforming facilities on Fuliza?

Thank you, [ indiscernible ], and thanks, Samuel. Let me start with Fuliza. If you have seen our reserves booklet where you give breakdown of revenue and the customers you will see that the customers actually agree. The pricing of the tariff review that we have done was to make sure that the product becomes more affordable and more and more customers can take it. We had about 6 million customers last year now. It went up to 8 million. And and the value is disbursed through the platform -- Fuliza platform has also gone up. So in terms of engagement, in terms of customers' acceptance in terms of all of those are positive. However, it does take time to come back to the revenue level that what we have seen before because we did a substantial price correction. And that was needed given that the full tariff has not been reviewed for quite some time. And the customer expectation is always providing more values. We believe this was something which is going to help us in the long run to expand the coverage of customers who are able to take Fuliza facility. Now I think on the lending revenue, as you have seen, the overall lending revenue did come down because of Fuliza and I think KCB and also Fuliza the KCB credits also have gone down. In general, the -- there is a bit of evidence in terms of allowing more credit by the banks because of some of the issues that the banks have faced. But I think if you have seen the numbers before, it's more or less I mean, over the years, this revenue line was stable. I think the growth was happening -- overall growth was happening through Fuliza, KCB and then [surely] was more or less a stable revenue. I think Fuliza overall revenue reduction is what is probably causing what you see that the overall lending revenue coming down year-over-year. But as I said, Fuliza is a great product, it's a significant part of the credit portfolio. We have now recently launched Merchant credit, a merchant [overdraft] facility already recruited in a very short period of time, 73,000 -- 73,000 margins base is still quite high. As you know, we have already -- we have 600,000 merchants as on the end of March '23. So it's a huge opportunity. So that will also enable credit growth, which we have been waiting for quite some time.

Thank you very much, Dilip. So I'll combine 3 questions here on EBIT and this will be to you, Dilip. But let me first allow Peter to answer the question on MTR. So Rohit Modi of Citi is asking, could you please share some color around your discussion with regulator on MTR. So that is to you, Peter. But let me read the 3 questions on EBIT so that Dilip can follow through once you're done. So is there any risk to EBIT guidance if Kenya will be -- if there will be another cut on MTR? And then still on EBIT, given the good momentum in Kenya, H2 being better than H1 and the reintroduction of charges in M-Pesa, why is the guidance for FY '24 EBIT basically flat? That is from [indiscernible] of [indiscernible]. And still a follow-up on EBIT so that we can clarify the EBIT questions from [ Mishra ] of HSBC. Why is Kenya EBIT guidance so low? What's the built-in revenue growth assumption for this guidance? So Peter on MTR discussions. And Dilip, you can pick up the EBIT clarification.

Yes, no problem. So on MTR, mobile termination rates. So the question is, what competitions are we having with the regulators? I think when you are an operator and you have regulators who want to do certain things with respect to MTR, you can make your test in a very robust way, but the regulator makes a judgment about how to deal with it. I think the way we resolved to the previous issue was actually very good. We learned that at a place that we felt was sensible. When you benchmark the MTR loans 0.58 compared to other markets, we are generally in the lower quartile of most of the African markets. And our response to the regulator is, any further reduction is going to start to disincentivize investment in a country where investment still needs to be accelerated. And you can see our level of investment. The government has talked about ICT being the primary driver of social and economic development, expanding fiber, expanding penetration of 4G devices and Internet connectivity in a way. So and it attracted significant reduction in MTR we've been making the point it's not progressive and it's also not going to lead to lower prices for customers and to just reallocate revenue between operators, and it doesn't also help with respect to investment. We invest 10x more than the nearest competitor. We are willing to share assets like towers and so on and so forth, [indiscernible] not an issue. So we've been fairly fact-based in saying let MTR being based around cost of operating, it came out much later than the region, especially because of power cost. And then secondly, that we should make sure that as a minimum, we also benchmark where the rest of the countries in Africa. We believe that the regulator has listened to us, we're also engaging various stakeholders like treasury and other stakeholders who are interested because at the end of the day, we need to do what is in the best interest of the country. How that evolves, I think we cannot only just keep you informed. I don't think anyone can predict how that evolves. Whichever the case, if there's a different MTR that was there determined. I'm sure there will be a [indiscernible] process of getting to the ultimate -- the ultimate number. But at the moment, those are the conversations we've had with various stakeholders.

Thank you, Peter. Let me pick up the questions, [indiscernible]. The first one is actually linked to the MTR whether there is a risk to EBIT guidance. Just remember, we -- first of all, the current MTR, which is at 0.58 be applicable up to 31st July 2023. Now as Peter mentioned, the currently we are engaging with the communication authority and to see what the conclusion on the cost side, which should reflect the real cost of providing this kind of the interconnection. If that concludes and if there is a change we would not know now. So therefore, you always say that our guidance reflects the current regulation. So we cannot project or predict what could change from August, and that's why we -- the guidance reflects current MTR rate and the current regulatory environment. For the second question is H2 improvement, M-PESA, charge coming to M-PESA return to charging, yes, those are very positive and very encouraged by the improvement that we have seen. The improvement actually with the H2 also you have seen coming from around December with return to charging coming in quarter 4 was pretty good from an M-PESA point of view. But beyond that, what you have to keep it in mind is the overall [indiscernible] economic recovery, that's still slow. The second part is the inflation and the cost, most importantly, and the energy, the full year impact of tariff revision is still hasn't come in, in FY '23. So we expect that also to come significantly impacting our cost side, operating cost because of energy next year. So all those things are factored in just on the top line and also the cost, most importantly from the energy side is what is driving the level of stability that we are projecting or guiding. I think the [indiscernible] question is also something similar. It's what management assessment at this point in time from a top line and also from the cost point of view, the EBITDA guidance reflects the current reality. Thank you. Back to you, Caroline.

Thank you, and Dilip. Thank you, Peter. So there's a question from [indiscernible] of [indiscernible]. And the question is, do you see any opportunities in providing satellite connectivity through the low earth orbit constellation model? Also, is this something you might consider in the long term? And then a follow-up question on please provide some color with regard to spectrum prices in Ethiopia vis-a-vis Kenya. I think I'll give that to you. Maybe Peter, you could start and I know Morten is also on the call, but happy for you to guide.

Yes. So I will ask Morten to this point. But certainly, we've learned and are testing a number of technologies from the work that we do together with Vodafone, and Morten can explain that. And those are relevant for both Kenya and also Ethiopia. With respect to spectrum, when we acquired the license to operate GSM and paid 150 million and included that's fairly sizable spectrum, 80 megahertz [indiscernible]. And so generally, we should be okay. 5G is not included in that spectrum. And Morten probably you can also comment or Dilip you can comment on our view about how that [indiscernible] going forward. But certainly, with respect to 2, 3 and 4G, we are largely covered for now. And also always included in the original license that we paid. Morten, do you want to talk about the other question?

Yes. So on the satellite, as Peter mentioned, we will be testing with AST or Space mobile this year, that technology will allow people with standard handsets to connect to satellite. So we can give a full population and geographical coverage. It will still take quite a while before all the satellites are [indiscernible] and testing will start this year. We also to Vodacom in dialogue with a number of other companies. So we also see opportunity to use satellite for as a fixed wireless technology for remote connections. Just on the spectrum in Ethiopia, as Peter mentioned, it's the traditional band we have now for 2G, 3G, 4G and the other mid-band spectrum we see around the world used for 5G hasn't been auctioned yet [indiscernible].

Thank you very much, Peter. Thank you very much, Morten. Moving on to a question here from [indiscernible] of all Africa partners. A number of questions from [indiscernible], and I'll start with what initiatives will drive M-PESA revenue growth back to double digits. Second one being on market share. So have we had any market share losses in data, voice, mobile money in FY -- in Kenya in 2022. So for this FY '23 performance I think we can start with those 2 and I'll direct this to Dilip, but happy to be supported. I know Fawzia is also on the call for the market share conversation. But Dilip, maybe if you could start on the M-PESA.

So if you -- on the MPSA top line growth, it is the slide that you have given as part of our update this morning because the return to charging came in quarter 4, we have provided quarterly breakdown of the growth. So from that charging, you will see clearly visible that we started well with close to 11% growth in quarter 1. Then growth slowed down to around 6% year-over-year. And with return to charging coming in quarter 4, we have seen revenue growth bouncing and facility revenue growth bouncing back to 12.2%. So we have always maintained our ambition to grow double digit. On M-PESA they are all supported by many initiatives that we have started with different product launch that we have done. I think in Peter's presentation, we've spoken about the ones which we have launched recently including the one I spoke about merchant credit, merchant [or credit] facility. There are quite a few other initiatives that you have already launched. So with all of this and our ambition to expand financial services horizon beyond what we are doing and also becoming the under of choice for in it comes to payment solution. I think we are very well poised to secure a double-digit growth in M-PESA. On market share, I don't know, Fawzia, if you're on the call, you can very quickly update while I'm happy to take that as well. Is Fawzia on the call?

Yes. All right. So I think on market share, we have continued to hold our share. So on the voice side, we've continued to hold our share at the 2/3 mark from a customer perspective and from a revenue perspective, above the 3/4 mark in terms of holding net share. We keep that as a very important part of our mission because we believe that by holding the voice share at the 2/3 mark for customers, it means that we continue to generate much fast in terms of the customer base to have the customer base that will be able to drive usage for other new use cases. And then secondly, it helps us to fuel the new growth areas. So in the area of voice, we've managed to hold share in the area of mobile data, especially 4G currently holding our share -- customer share above 80% from a 4G perspective, but from a data perspective, about the 67% mark. So we continue to hold our share across all our products.

Okay. Thank you very much, Fawzia, thank you very much, Dilip. So Dilip, 2 follow-up questions from [indiscernible], so any concerns on repatriation of funds from Ethiopia back to Kenya? And what about access to dollars to service the debt taken for Ethiopia? And the last one being any changes to the way you plan to fund the Ethiopia CapEx investment, given that interest rates are much higher today versus what we had at the planning stage for the new business? Dilip, over to you.

Okay. So the first question on Ethiopia repatriation. From a regulation point of view, there is no issue. But remember, we -- it's -- we are quite far away from that because we're talking about year for EBITDA breakeven. And for dividend repatriation, it will be even further. So from a regulation point of view, it is fine. But issue is more on the availability of the currency. So Ethiopia is going through quite a significant crunch in terms of the currency availability and also the rate difference between the gray market and the official market. So we are -- when we went to the market, we knew that it's going to be taking some time for us to expect dividend repatriation. And we were also hoping that by that time, some of the economic reforms, mostly in the currency [area] gets sorted out by that time. I think the government of Ethiopia is committed, but they're slightly behind because of the other challenges the country has faced. So I think the way to say is that, yes, regulation doesn't stop from repatriation, but availability of currencies in issue, which you have to watch out very closely. On servicing of debt that we have taken for Ethiopia license, if your question is how that's doing. If you remember, we took about $400 million equivalent of loan, 70% was in Kenyan Shillings and 30% was in dollar terms. And so Kenyan Shilling portion of that is we have moratorium. So repayment has not started yet, but the dollar loan that we have started repayment. In fact, we have started repayment -- fast tracking the repayment because of the dollar volatility. From a -- I think the third question is more around how do we do our capital structure for future for Ethiopia. I did mention about putting in more debt into Ethiopia balance sheet. Towards that, we have been in discussion with IFC over a long period of time and their intention to come in as an equity partner as well as providing debt facility. I think we did indicate about the quantum that they are willing to bring in as an equity partner up to $157 million. And as a debt funding of $100 million. So we are progressing quite well, and we are at the final stages of negotiation with Ethiopia. And that comes into positive outcome. We do believe that, that will ease up quite a bit of funding requirements that we will have it for Ethiopia. But beyond that $100 million commitment from IFC, they are also -- they will be able to bring in more DFIs or other institutions who are willing to lend as part of the facilities that we have discussed with them. And if that options for us are also -- if the IFC doesn't go through, then we also have other options that we have formalized, but we are now focusing mostly on IFC. But in any case, all the [indiscernible] members are committed towards providing funding for the business so far, the unity is well funded and well resourced. Thank you.

Can I add one item to what Dilip said in terms of repatriation or actually accessing currency. So there are 2 components. One is whether we'll get our dividends out when the time comes. And I think Dilip has covered it well. The second is, once we start to accumulate deals, local currency as our business grows, we need to combine that to be able to import items, CapEx and so on and so forth to refinance the business from internally generated funding. So at that time, I suspect that's where the test will come in. We have all the promises that telcoms will be prioritized but we know, obviously, the country is never able to meet the requirements that are needed for FX. But at the moment, the flow is one way. But certainly, when we start to accumulate enough local currency, we will need to really test whether we are able to get a [indiscernible] dollars. I think the other element, I think Dilip mentioned is that we are also making sure that we get local funding as soon and as much as possible the local currency expenses actually paid out of local debt rather than bringing in [FX].