GREENPOWER MOTOR Co INC. Q4 FY2021 Earnings Call

Good morning, everyone. My name is Naureen, and I am Grameenphone's Head of Investor Relations. I want to thank you for joining our earnings disclosure for the fourth quarter of 2021. With me today are our CEO, Yasir Azman, and CFO, Jens Becker. Before we begin, please note that our presentation, financial statements, and additional documents can be found on our Investor Relations website. Now, I would like to turn it over to our CEO, Mr. Yasir Azman, to start our presentation.

Thank you, Naureen, and good morning, everyone. Thank you for joining us for our fourth quarter results announcement. I'm Yasir Azman, Chief Executive Officer of Grameenphone. I would like to begin with some industry facts on our mobile subscribers in the country, and that is, we have until November 2021 as the latest report by the telecom regulator. As of November 2021, the subscriber base reached 181.53 million. It has increased by almost 7 million subscribers, registering a 7% growth from the end of 2020. GP stood at 84.04 million in November, which is 46.3% of the total mobile subscribers in the country, which means GP had a higher share of the growth until November. In the same period, mobile data users have increased by over 14 million, reaching 116.53 million Internet users in the country, a 14% increase from the end of 2020. Let me start with a short overview of some of the key highlights of the year. 2021 has been full of uncertainties as we continue to face challenges from the COVID-19 pandemic and related restrictions, which impacted our operational and financial performance to an extent. Despite the many challenges, we reaffirmed our commitment to empowering the nation by continuing our planned investment in network and spectrum. The extensive effort we made towards expanding coverage and improving customers' experience along with modernization initiatives led to improved growth momentum as the year progressed. I'm happy to share that in collaboration with our authorities and stakeholders, we were able to resolve 22 out of 30 financial disputes with LTU-VAT through alternative dispute resolution and bilateral discussions, even receiving recognition from LTU-VAT for our resolution-oriented efforts. We will continue on these paths to amicably solve the remaining disputes with us and in between NBR and Grameenphone. Growth improvement continued in the fourth quarter. We know in 2021, Bangladesh faced the highest rates of COVID-19 infections and deaths. In attempts to curb the infection rates, the authorities have imposed several lockdowns throughout the year. We continue to see prolonged macroeconomic impacts from the pandemic. However, the situation significantly improved in the fourth quarter as the infection rate lowered to nearly zero during the quarter, economic activities resumed, and educational institutions reopened among ongoing vaccination programs. Throughout the year, we have prioritized our efforts towards enhancing our network. In partnership with TowerCo vendors, we were able to achieve our goal of planned site rollouts for the year 2021. We also deployed 10.4 megahertz spectrum that we had acquired in March 2021, which led to a significant enhancement of our customer experience in our network. As a result, coupled with a revamped product portfolio, we saw a 10% growth in data usage in the fourth quarter compared to the previous quarter. As customer consumption and engagement patterns continued to evolve during this period, we rapidly updated our portfolio of services and the ways in which we engage our customers, leading to a 40% growth in our full-year data user base. Additionally, as digitalization continues to evolve, we focused on the adoption of our digital channels, leading to a full-year growth of 27% in reloads from our digital channels and 12.3 million users on our self-service app MyGP. We continued our ongoing journey towards becoming a future-fit company that can cater to the rapidly evolving needs of our customers. We have been focusing on driving customer simplification across all our platforms. As a result, at the end of the year, 98% of our customer-facing interactions have been digitized and made available on our MyGP flagship app. To cater to the needs of our customers who are yet to be part of the digital world, we continue to expand our flagship physical stores across the nation, reaching 211 Grameenphone centers, penetrating deeper areas of the country. I’m also pleased to share that our GP Online Shop has expanded to reach the whole country, bringing 64 districts under our services. Through the GP Online Shop, we accept all orders for any of our products or services, including new SIM acquisition, and deliver them to our customers' doorsteps anywhere in the country. Our digitalization efforts have also expanded to our sales and distribution channels. In the physical world, the mass retail base in 2019, we launched our retailer app, which we call Cockpit. Over the last few years, we have been continuously working together with our value chain to digitize our interaction with our physical retail touch points, resulting in rapid progress and leading to 70% retailer adoption at the end of 2021. This makes interactions with our retailers much faster, allowing us to respond to the market much quicker. We are also driving modernization within our organization with the transformation of our operating models, implementation of robotics and automation, as well as continuously upskilling our talent with future-fit capabilities. We believe the right mix of competency, capabilities, and tools would elevate our growth ambitions, reinforce our position as a connectivity partner, and act as key enablers for sustainable growth. We have seen dialogues in our business environment regarding the spectrum, new spectrum auctions, and the quality of services. Regarding the spectrum auction, the government is considering a potential spectrum auction in the 2,300 and 2,600 megahertz bands linked with specific licenses for 2G, 3G, 4G, and 5G, which may take place anytime from March 2022 onwards. This guideline creates obligations for 5G rollout; however, the spectrum can also be used for other existing technologies and potentially for 4G. BTRC has initiated consultations, and the industry has provided its collective feedback while GP has also provided its individual feedback on the guidelines. More clarity will come during the process of this ongoing consultation. I would also like to highlight the dialogue around quality of service happening. We have seen concerns regarding the quality of service from mobile network operators at the policymakers and regulators' level. The COVID-19 pandemic has changed customer behavior, as well as users' patterns, especially for data. Working from home and online schooling have resulted in new demands for our mobile services, which is a positive side, but at the same time, there are regulators and policymakers placing considerable emphasis on the quality of mobile network operators, especially in metropolitan and rural areas, initiating different dialogues and imposing requirements on the MNOs, which we are actively addressing. This area will remain extremely important for us to improve upon and to provide a better experience for our customers while being a leading telecom service provider in the country. To highlight our activities around empowering societies and social impact projects, digitalized inclusion and environment, as of December 31, 2021, Grameenphone connects a subscriber base of 83.3 million people out of home, 44.6 million customers access the Internet, and 27.6 million are empowered with 4G connectivity. While expanding our 4G network and increasing the number of 4G users, our online safety program remains a key priority in how we impact our societies. We started training and sensitization sessions on safe Internet use among adolescents in partnership with UNICEF. Our ambition is to reach 120,000 adolescents and create awareness among 1 million children, parents, and teachers by March 2022. We signed an agreement with UNDP to implement a future national project in alliance with the private, public, and development sectors to accelerate future economic growth by enhancing the skills and potential of Bangladeshi youth. For many years, GP Accelerator has played a pivotal role in supporting entrepreneurship and the startup ecosystem in Bangladesh. As recognition for our efforts and contributions to the ICT sector, we recently received the prestigious National Digital Bangladesh Award 2021 in the institutional category from our honorable Prime Minister in Bangladesh. I will now welcome our CFO, Jens Becker, to take you through our financial performance for the fourth quarter. Jens?

Thank you, Azman, and good morning to everybody. Let me start with a short overview of the key KPIs. In Q4 2021, Grameenphone delivered a solid financial performance with improved growth momentum both in top line and EBITDA. The top line growth momentum was supported by deployment of new spectrum, site rollouts, and enhanced customer and market-focused activities. We recorded a 3.6% year-on-year growth in subscribers and traffic revenue in Q4 after a 1.9% growth in Q3. EBITDA grew by 2.6% with a margin of 62.4% in Q4 after a 1.3% growth in Q3. With the increased investment efforts, backed by the newly acquired spectrum at the end of Q1 2021, GP's CapEx to sales ratio for the quarter stood at 12.1% based on a four-quarter moving average, which was 18% on a stand-alone basis. EPS for the quarter stood at BDT 6.04 with a 21% decrease from last year on a reported basis. The decrease in EPS was mainly contributed by favorable one-off adjustments, gained finance costs, and tax expenses in the fourth quarter of last year, meaning 2020. Looking at our subscriber development, Grameenphone's total subscriber base reached 83.3 million in Q4, constituting a 5.3% growth from last year, while our data users reached 44.6 million with an 8% growth year-on-year. Compared to the previous quarter, which means Q3, the total subscriber base decreased by 0.3 million since Grameenphone focused more on driving usage from existing subscribers rather than new acquisition during the seasonal downturn from winter. As a result, substantial growth in data usage was observed from last year as well as from the previous quarter, contributing towards top line growth. On the superior 4G network experience, Grameenphone's 4G data users reached 27.6 million, which is a 39.7% growth from last year. According to BTRC published information as of November 2021, GP's subscription market share decreased to 46.3% from last quarter, which was 46.5% in Q3. Turning to the revenue: total revenue of Grameenphone grew by 4.2% in Q4, which was mainly driven by growth in subscription and traffic revenue. Year-on-year daily subscription and traffic revenue growth for the quarter was 3.6%, compared to 1.9% in the last quarter. The growth in subscription and traffic revenue was mainly driven by growth in bundles and data, supported by spectrum, site rollout, and enhanced market initiatives. Now getting into some more details, on the next page. In addition to the data and voice-only services, Grameenphone continued its enhanced focus on promoting bundled services in Q4 to provide better customer value and enhanced experience. By launching attractive bundled packs, alongside continued digital adoption efforts through both owned and third-party digital channels, bundle revenue grew by 7x compared to last year. With this substantial growth in bundles, the overall subscription and traffic revenue grew by 1.2 billion or 3.6%. In addition, data-only packs and Pay as you Go revenue increased by 5.2% from last year. Grameenphone continued its value proposition through attractive market offers supported by a superior network experience through the employment of newly acquired spectrum in more than 10,000 case sites and 4G network expansion. As a result, GP's average megabyte per user grew by 49% from last year and 9.6% from last quarter, reaching 4.3 gigabytes per user. The overall service ARPU decreased by 3.1% from last year, mainly due to lower contribution from the voice segment, partly offset by a higher contribution from bundles. In terms of EBITDA, GP had a year-on-year 2.6% growth with a solid margin of 62.4%. The growth in EBITDA was mainly driven by our growth in the top line. OpEx for the quarter stood at BDT 11.1 billion with a year-on-year 6.1% growth. The year-on-year growth in OpEx was mainly driven by higher market expenses and operation and maintenance costs. GP has invested BDT 6.5 billion CapEx in Q4, focusing mainly on 4G network and coverage expansion. We rolled out 3,000-plus new 4G sites and more than 1,700 new coverage sites in the last 12 months. Besides this, GP deployed new spectrum in over 10,000 sites within the last 9 months. At the end of Q4, the number of 4G sites reached 17,230. 4G population coverage reached 96.8%, which represents a 5.7 percentage points increase from last year. Coming to the profit picture, net profit for the quarter stood at BDT 8.2 billion with a 22.5% margin. On a reported basis, year-on-year net profit and EPS for the quarter decreased by 21%. The year-on-year decline in net profit was due to favorable one-off adjustments in finance costs and tax expenses in Q4 2020. However, excluding the one-off items in both periods, underlying net profit grew by 2.4%. GP's full-year EPS stood at BDT 25.28 with a solid profit margin of 23.9% on a reported basis. Operating cash flow decreased year-on-year by BDT 2 billion, driven by BDT 2.6 billion higher CapEx, partly offset by BDT 0.6 billion better EBITDA. Net debt stood at BDT 2.8 billion as of Q4, in conjunction with BDT 5.5 billion liability and BDT 2.7 billion cash balance, excluding restricted cash. Net debt position improved by BDT 7.1 billion from the previous quarter, mainly driven by a decrease in short-term liabilities. As a result, our net-debt-to-EBITDA ratio stood at 0.03. For the full year of 2021, Grameenphone has paid BDT 102.8 billion, equating to 71.8% of total revenues in the form of taxes, VAT duties, license and spectrum fees, and revenue share to the national exchequer. With this, our contribution since inception totals BDT 956.9 billion. Now turning to the dividend. I'm happy to announce that the Board of Directors of Grameenphone has recommended a BDT 25 dividend per share for the full year, including a BDT 12.5 interim dividend. With this, the total cash dividend stands at 250% of paid-up capital, which represents 98.9% of profit after tax for the year 2021, including the 125% interim cash dividend. This is subject to shareholders' approval at their 25th AGM to be held on April 26, 2022. I will now hand back to Azman to summarize and wrap up. Thank you.

Thank you, Jens. We have continued to deliver growth in our top line and EBITDA, mainly driven by growth in users and usage. Improving our customer experience through new site rollouts and spectrum deployment will continue to be key for us, thus fostering better trust with our customers and supporting growth. We'll continue to pursue our journey towards sustainable growth through modernization, evolving business models, competency development, creating partnerships, and being socially responsible through our various programs. With that, I hand over to Naureen for our Q&A session.

Thank you, Azman bhai. We will now switch to the Q&A. I have received one question already. This is from IDLC. What are the major reasons for subscriber decline in Q4 2021? Azman bhai, would you like to take this?

Yes. We have been focusing on existing subscriber base usage and ARPU growth. At the same time, we are currently working on the new numbers.

Okay. Additional question for Jens. GP's EPS has been plateauing in the 25% to 27% range for the past three years. What would be your key priorities in 2022 to bring growth?

Yes. I think, overall, the strategic priorities, which I discussed in all calls before, is that growth is one of the key priorities that we see coming from the market overall. So the driver for any net profit and EPS will come from top line growth.

Thank you, Jens. We will wait for some more questions. Azman bhai, I have a question for you. There was a guideline stating customers will keep unused data if they renew the same package. What is the implication and financial impact of this guideline?

I think we have been giving the unused data already for the same package not used. However, this is an extended version of a new guideline coming where probably at the same volume, a different pack will also carry forward unused data. We are working on it. It requires a new event product portfolio. At this point in time, it's not towards the financial aspect; in fact, our implication is more about customer convenience and how we can provide that. That's what we are working on.

Azman bhai, I have a question for you. Reportedly, the network quality of GP has been very poor recently around Dhaka City. Is there any specific reason?

As far as Dhaka City is concerned, we have significantly improved in terms of our network coverage by adding new sites. As we mentioned, the total sites have been increasing during 2021. We have also rolled out the 2,100 megahertz spectrum after the new acquisition and also refurbished the 1,800 megahertz. We believe that we are working on providing a better data network experience, even as the topography of Dhaka is constantly changing, and we need to continue adapting dynamically in this area.

Jens, I have a bit of a forward-looking question for you. What strategy do you have to trim down costs in 2022 since EBITDA margin slowed down in Q4?

Yes. As you can see, we observe that the EBITDA margin is relatively stable over the past months and quarters. As Azman has mentioned in his speech, we have significant issues that we are following up regarding the modernization agenda of our organization. Going forward and entering the data space, it is essential for us to keep a close eye on the cost base, as you mentioned in your question. Thus, the modernization initiative we have started this year will include investments in IT and network enhancements as well as organizational improvements. This includes, of course, digitalization as a main lever that we see moving forward.

Thank you, Jens. Azman bhai, I have a question for you, whether we can share any updates on tower sharing.

We don't have any specific updates on tower sharing at this time, but we are open to following the regulations in this area, and we are working with regulators and other operators.

Thank you, everyone. We will wait one more minute for any questions.

Yes, I think there's a question also what I see here on the data prices. How much have these decreased over the last few years? There's constant pressure on the data pricing that we have seen. I can't provide specific industry figures, but it is becoming increasingly complicated to track as the whole industry moves toward bundles, making isolated data pricing more challenging. However, from our own experience, the decline in pressure on data prices has remained constant. So, we do not see any acceleration in this regard; rather, it is stable, but of course, competitive price pressure persists. This is a highly competitive market, especially on the data side.

Thank you, Jens. We will wait just one more minute. If there are any last questions, please feel free to post them now. Okay. I do not see any other questions. So thank you, everyone, for joining in. If you have missed our Q&A session, feel free to reach out to me. We will get back to you as soon as possible. Thank you and take care.

Thank you.

Thank you, everyone.