Airtel Africa Plc (AAFRF)

How it makes money

Most revenue comes from usage-based charges: airtime, data bundles and mobile money transaction fees paid mainly through prepaid top-ups, so revenue tracks the number of active customers and how much data and money they move. Reporting in US dollars while collecting revenue in naira, shillings and francs means currency devaluation in any of its 14 markets — Nigeria above all — can shrink reported results even when local usage keeps growing.

Revenue by segment

Airtel Money's value grows as more customers and agents join it: a larger agent network makes cash-in and cash-out easier, which attracts more users and in turn more agents and merchants. That advantage applies mainly to the payments business; the underlying mobile network competes directly with other operators such as MTN and Safaricom on price and coverage.

Underlying demand for mobile connectivity and payments keeps growing steadily as more Africans get smartphones and formal financial access, which behaves more like a defensive trend than an economic cycle. But reported revenue and profit swing sharply with currency devaluations in markets such as Nigeria, so the numbers investors see can move for reasons unrelated to how many people are actually using the service.

Key risks

• Exchange rate fluctuations and foreign currency shortage — The group reports in US dollars while collecting revenue mostly in local African currencies. Adverse currency movements and limited foreign currency supply in its markets can hurt liquidity and reported financial results even when local operations are performing well.
• Uncertainty in policy and regulatory environment — Unanticipated changes in policy, tax and telecom regulation across the 14 countries where Airtel Africa operates could cause financial and reputational harm, and the company states this remains one of its principal risks.
• Adverse competition and market disruption — Aggressive competition from other operators can put downward pressure on prices, which the company says adversely affects its revenue and margins.
• Cyber and information security threats — Cyberattacks or system vulnerabilities could lead to customer data breaches or service downtime, a particular concern for a business that now also moves customers' money.