GREENPOWER MOTOR Co INC. Q1 FY2021 Earnings Call

Thank you for joining us today. My name is Naureen. I'm the Head of Investor Relations for Grameenphone, and I would like to welcome you to our earnings disclosure for the first quarter of 2021. Our presentation, financial statements, and additional documents are available on our investor relations website. You can start posting your questions in the comment box. We will address them at the end of our presentation. In case you are unable to post your question, please send me an email or text. I would now like to welcome our CEO, Mr. Yasir Azman, to start our presentation.

Thank you, Naureen. And good morning, everyone. Thank you for joining us this morning. I would like to wish you all a happy Bengali New Year and Ramadan Kareem. Talking about highlights for the first quarter, we had a stronger start compared to the first quarter of last year. Last year was very challenging for Grameenphone, as we could not import our equipment and faced a scarcity of numbers, resulting in negative net adds. We were unable to roll out towers as the TowerCo regime was not functional. This quarter marked several milestones for both Bangladesh and Grameenphone. As the country marked its 50th year of independence, GP marks its 24-year journey in the country as a partner and enabler to growth and digitalization. In early March, the telecom regulator held a spectrum auction, where Grameenphone participated and secured 10.4 megahertz spectrum. The auction had a very positive outcome, contributing to the good of the country and its people. We acquired a positive net add of 1.7 million subscribers in the first quarter, reaching the milestone of 80 million subscribers in February this year. On the 50th independence day of the country, we also enabled 100% of Grameenphone's towers to support 4G. With a year-over-year growth of 50.7%, we now have 21.5 million 4G users. We are committed to delivering value to our customers. With the newly acquired 10.4 megahertz spectrum, Grameenphone now holds the largest spectrum allocation of 47.4 megahertz in the country. During the quarter, we converted nearly 1,510 new sites to 4G, resulting in a total of 15,590 towers enabled with 4G. Overall, Grameenphone now boasts the widest 4G network, which positions us to boost customer experience and quality of service further. We will continue to contribute to the digitalization of Bangladesh, meeting the growing demand for high-speed internet in rural areas. We saw a strong growth in data users this quarter compared to last year, along with a 37% growth in 4G handset users on our network, presenting opportunities for future growth. Despite our momentum, we are experiencing increasing volatility and lingering uncertainties due to the COVID-19 pandemic. However, we have focused on delivering our strategic ambitions despite a difficult 2020. With strong market execution, we drove new acquisitions and raised benefits for existing GP prepaid users through MyGP, our digital channel. We focused on bundles this quarter, which gained significant traction and contributed positively to our revenue. We revamped our overall portfolio with significant adjustments such as flattening data propositions and removing distinctions between 3G and 4G data offers for customer convenience. Through cashback campaigns on MFS channels, we increased customer engagement with our network. We continue to implement a granular approach to ensure the right products reach the right customers, which maintains healthy subscriber base growth and revenue growth. Our lucrative offers drove gross additions, resulting in over 9 million monthly active users and over 10 million app downloads. Digital adoption has surged through MyGP via exclusive download campaigns, leading to a return to growth in digital recharge, marked by a 35% year-over-year growth in digital revenues. We achieved significant B2B vertical subscriber growth, acquiring 80,000 subscribers through product innovation and device bundling. Business customers trust GP for our strong network and industry-specific solutions. We remain focused on digital inclusion and have connected a subscriber base of 80.7 million at the end of Q1 2021, with 41.7 million customers accessing the internet and 21.5 million empowered with 4G. We facilitate digital enablement for our businesses by catering to the touch-free economy concept accelerated by COVID. We've signed agreements enabling education institution identification for 10,000 institutions for advanced communication services. Additionally, we focus on online safety and youth upskilling. Grameenphone has partnered with UNDP and the Bangladesh Investment Development Authority in a program called FutureNation to create economic opportunities for the youth through skill development. We work with Telenor and UNICEF on the child online safety program Be Smart Use Heart, promoting meaningful digital participation during the pandemic. Concerning COVID-19 in Bangladesh, vaccination commenced in February, with over 7 million people vaccinated so far. However, the second wave has led to over 723,000 reported cases and over 10,000 cumulative deaths. The government has declared strict lockdowns. Telecommunications are categorized as essential services, which allows us to continue operations. We are implementing our business continuity plan, focusing on health and safety while delivering value to customers and shareholders. We will continuously monitor the situation and adapt by working closely with our stakeholders and our team at Grameenphone. Now, I will welcome our Chief Financial Officer, Jens Becker, to share our financial performance for the quarter.

Thank you, Azman, and good morning to everyone. Let me start with a brief overview before diving into the details. In Q1 2021, Grameenphone continued its solid operational performance, marked by strong subscriber acquisition and investment momentum, along with a robust EBITDA margin. The overall economy remains affected by COVID-19, with average daily new cases reaching around 5,000 by the end of March, while educational institutions remain closed. Despite this volatility, Grameenphone remained active in the market, achieving strong gross additions and continuing our 4G network expansion. In summary, Grameenphone experienced a -2.2% year-on-year decline in daily subscription and traffic revenue in Q1, after a -2.8% in Q4 2020. However, quarter-on-quarter, daily subscriber and traffic revenue grew by 2%. Through efficient OpEx management, we maintained a strong EBITDA margin of 62.7%. Our CapEx-to-sales ratio, excluding license and lease, stood at 9.6% for the quarter compared to 7.2% in the last quarter. Earnings per share stood at BDT 6.6, reflecting a 16.7% year-on-year decline primarily due to higher finance costs and favorable one-off adjustments in Q1 of the previous year. In terms of subscriber development, Grameenphone's acquisition efforts resulted in 1.7 million net adds in Q1 2021, surpassing the milestone of 80 million subscribers by the end of the quarter. Our subscriber base stood at 80.7 million, with a 2.2% growth from the previous quarter and a 7.2% growth year-on-year. As of February 2021, GP had a subscription market share of 46.4% according to BTRC published information. Our 4G population coverage reached 95.8%, an increase of 4.7 percentage points from last quarter. Now, regarding revenue development, economic uncertainty and a reduction in the local call termination rate from mid-July 2020 impacted overall revenue. Year-on-year daily subscription and traffic revenue growth for the quarter was -2.2%, and total revenue declined by -3.7%. The decrease in subscription and traffic revenue by 1.1 billion, or -3.2%, was primarily driven by lower voice revenue. Our data users for the quarter stood at 41.7 million, with 21.5 million being 4G data users, indicating an increase of 1.7 million 4G data users in Q1 2021. The growth in 4G data users was positively impacted by the expansion of our 4G network and our continued focus on driving 4G conversion. Despite a -4.4% year-on-year decline in data revenue in Q1 2021, partly offset by a 3.4% increase in data users, our bundle revenue from GP's combo packs increased significantly. Year-on-year revenue from bundles grew by 0.7 billion, over 150%. However, GP's data revenue growth was -1.1%, remaining basically flat on a daily basis. GP focused on providing customers better value through attractive market offers, including new packs that eliminated 3G and 4G barriers, as well as celebration packs for Bangladesh’s 50th independence anniversary and the 80 million subscriber milestone. The average megabytes per user grew by 32.4%. The service ARPU growth was affected by lower service average minutes per user and the dilution in service average price per minute. Regarding costs, our efficient OpEx management enabled a 4.2% year-on-year decline in OpEx, outpacing the 3.7% decline in total revenue, with OpEx for the quarter standing at BDT 10.7 billion. The lower OpEx was attributed to reduced commissions, market spending, and operational efficiency. However, EBITDA fell by 4.5% year-on-year due to lower revenue and increased direct costs, partly offset by lower OpEx, while EBITDA margin remained robust at 62.7%. On the investment front, GP's investment momentum persisted with BDT 3.6 billion CapEx, excluding license and lease, primarily focusing on accelerating 4G network expansion. We rolled out 1,510 new 4G sites this quarter, achieving 100% coverage with 4G towers, with 15,590 4G sites at the end of Q1. Additionally, the year-on-year 16.7% decline in net profit was mainly driven by increased financing costs of 0.7 billion due to lower foreign exchange gains and higher tax expenses resulting from one-off adjustments last year. Net profit for the quarter was BDT 8.9 billion, with a 25.6% margin, and the net profit after-tax margin decreased by 4 percentage points from the previous year. The year-on-year BDT 4.3 billion decline in operating cash flow (EBITDA minus CapEx) was attributed to a BDT 3.2 billion increase in CapEx and BDT 1 billion lower EBITDA. Our net debt stood at -BDT 5.5 billion with a BDT 6 billion increase in net debt stemming from a BDT 1.2 billion lower liability and a BDT 4.8 billion higher cash balance, excluding restricted cash. Finally, Grameenphone contributed BDT 27.3 billion to the national exchequer in Q1, equating to around 78.5% of our revenue. With this, I would like to hand back to Azman.

Thank you, Jens. To recap, we have very strong momentum at the beginning of 2021 due to well-managed operational challenges and strong market execution. Volatility related to COVID-19 is on the rise, but with our solid business continuity plan and collaborative efforts with our stakeholders, we are committed to supporting our communities in pandemic recovery while ensuring the health and safety of our employees and partners, and raising similar awareness among our customers. Moving forward, we will continue to capitalize on our leadership in technology and innovation while increasing the number of subscribers, 4G users, and data users, all of which are key to delivering future growth. Thank you all, and stay safe and healthy. I will hand back to Naureen for the Q&A session.

Thank you, Azmanbhai. We have already started receiving some questions. Let us start with the first one. Jens, the first question is about why NSEF is high in this quarter.

As you might recall, in Q1 last year, we had a deposit of BDT 10 billion to BTRC that was made pursuant to the order of the Honorable Appellate Division of the Supreme Court of Bangladesh referring to the dispute on the BTRC audit. So that's a last year's effect.

Okay, we have a set of questions from IDLC. Let's start one by one. How do you assess the 3.5% year-over-year decline in data revenue in quarter 1?

GP's investment and data subscriber acquisition were adversely impacted from mid-2019 to mid-2020, which had a continuing negative impact. So data revenue, including allocation from bundles, adjusted over the number of days, remained flat.

What is your outlook about data price competition in the industry? And where do you see the inflection point?

Unfortunately, we cannot provide any forward-looking statements or any outlook due to the rules from the Bangladesh Securities and Exchange Commission. But if I may, I can answer it backwards: you will see that the average data price has significantly decreased year-on-year, reflecting an extremely competitive market for data.

At this point of time, we do not have any further questions. We'll wait a few more minutes to see if something else comes up. Jens, I have one more question for you. Can you elaborate on the local call termination rate? How does it affect total revenue?

Yes. As you see from our financials, in comparing subscriber and traffic revenue development versus total revenue, there's a negative impact from that due to the SMP regulations last year, around BDT 0.3 billion per quarter.

Azmanbhai, I have a question for you. What percentage of your customer base has 4G handset access?

I think Azman is muted. Let me then answer that; I think there is a question on price elasticity.

Yes. Can you elaborate?

The price elasticity on the data front saw an uptick in average usage by roughly 32%, ending up with around 3 gigabytes, accompanied by around a 30% average price reduction.

On the 4G question, we currently have 21.5 million 4G users on our network, which constitutes 29% of GP's total subscriber base in Q1 2021.

Azmanbhai, can you answer one more question about your strategy?

Yes. We aim to be a leading technology service provider, helping the nation unleash its potential, especially the youth of Bangladesh. We have prioritize several strategic areas to continue creating value for both our shareholders and customers, focusing on data experience, network growth, modernization of our organization and operations, and constructive collaboration with regulators. These areas are key to driving growth and efficiency.

Azmanbhai, how do you overcome COVID-19?

At this moment, we are implementing a strong business continuity plan to keep our customers connected and provide new products and services, allowing them to work from home or continue their education. To overcome COVID-19, we must learn from this experience. Many new ways of working are emerging, and we must incorporate those into our practices. We are strengthening our data network. With our new 10.4 megahertz spectrum acquisition, we rolled out 4G across Bangladesh in March, converting all our towers to 4G. Our data network will be much stronger, supporting the nation and the company’s recovery from COVID-19, as we believe the future will rely on digital connectivity and solutions.

What are your thoughts on migrating your customer base from 3G to 4G?

This migration is connected to the point that customers can now access 4G services nationwide. We have converted 100% of our towers to 4G. The responsibility now lies with device manufacturers and importers, as well as the government and regulators, to ensure that new devices are affordable. As a key player, we are working closely with all stakeholders to make affordable 4G devices available. We began this process before the 4G launch in Bangladesh, and we continue this journey toward affordable innovations.

Jens, why is usage down for voice despite mobility recovering?

While we see recovery in mobility, at least for Q1, the economy is not fully recovered. The closure of educational institutions is still a factor affecting usage.

We do not see any further questions. Let's wait a few more minutes.

There is a question regarding revenue cannibalization. How do you perceive the risk of revenue cannibalization from migration to data?

Yes, how do you see the revenue cannibalization risk?

It is a risk we've observed in markets all over. While OTT services are gaining strength, voice remains a major part of our revenue.

There haven't been any new questions in a few minutes, so I think we can conclude here. Thank you, everyone. If you have any questions, please get in touch with me. We will try to respond today. Additionally, if you have any requests for meetings with management, please contact me. We will be available. Thank you, and stay safe.

Thank you. Goodbye.

Thank you.