2020 Annual Report and Notice of AGM

RNS Number : 4288O

Airtel Africa PLC

29 May 2020

 

29 May 2020

Airtel Africa plc ("the Company")

The 2020 Annual Report and Notice of Annual General Meeting

Airtel Africa plc (the "Company") announces that its Annual Report and financial statements for the year ended 31 March 2020 (the "Annual Report"), Notice of Annual General Meeting (the "AGM"), and Form of Proxy for the AGM have each been sent to shareholders, under the cover of a letter from our Chairman, Mr Sunil Bharti Mittal.

The Annual Report, Notice of AGM and Chairman's Letter are available to view or download from the Company's website at https://airtel.africa/investors

The Company's AGM will be held at 11.00 am on 24 June 2020 at First Floor, 53/54 Grosvenor Street, London, W1K 3HU.

PLEASE NOTE THAT IN LINE WITH UK GOVERNMENT GUIDANCE AT THE TIME OF PUBLICATION OF THE NOTICE OF AGM, which preclude public gatherings and restrict non-essential travel, shareholders must not attend the AGM venue in person. We are grateful to shareholders for their understanding in these challenging times and are pleased to have made arrangements for shareholders to attend and vote at the AGM electronically through the Lumi app. Further information on how to join the meeting electronically can be found on page 8 of the Notice of Meeting .

The Company's full year results announcement on 13 May 2020 highlighted a strong set of results which delivered against the Company's IPO aspirations with performance sequentially improving during the year. 

The appendix to this announcement sets out the required disclosures with regard to the principal risks as contained in the Annual Report. This information is provided in accordance with Disclosure & Transparency Rule 6.3.5(2). This information is not a substitute for reading the full Annual Report for the year ended 31 March 2020.

The Company confirms that, in compliance with Listing Rule 9.6.1, an electronic copy of each of the Company's Annual Report for the year ended 31 March 2020, Notice of AGM and Form of Proxy for the AGM have been submitted to the National Storage Mechanism, appointed by the Financial Conduct Authority, and will be available shortly for inspection at 

https://www.fca.org.uk/markets/primary-markets/regulatory-disclosures/national-storage-mechanism .

Enquiries

Airtel Africa plc 

· Simon O'Hara  [phone] 

APPENDIX

How we classify our risks

We classify our risks in four categories, described in this table. This allows a consistent approach to risk identification across Airtel Africa.

Strategic risks

External risks such as changes in market dynamics or risks to strategic partnerships

Financial risks

Risks impacting our liquidity or solvency, financial reporting or capital structure

Operational risks

Risks affecting our ability to effectively operate our business model across a variety of functional areas

Governance and compliance risks

Risks affecting our ability to comply with our legal, regulatory and governance obligations

Our principal risks, and how we mitigate them

Our principal risks are those with the most significant potential impact on the achievement of our overall strategic objectives. This list of 14 principal risks is drawn from our consolidated risk register, based on how likely each is to occur and its potential business impact.

strategic RISKS

Adverse competition and market disruption

Link to strategy

Win with customers • Win with data • Win with mobile money

Risk owner

Chief marketing officer

Description

We operate in an increasingly competitive environment across our markets and segments, particularly with respect to pricing and market share. Aggressive competition by existing players or the entry of a new player could put a downward pressure on prices, adversely affecting our revenue and margins, as well as our profitability and long-term survival. The nature and level of the competition we face varies for each of our markets, products and services. Likelihood = likely. Impact = significant.

Mitigation

1. Ongoing monitoring of competitive landscape and competitor activities

2. Driving penetration of bundle offerings to lock in customers, increase affordability and reduce churn

3. Growing Airtel Money penetration as a tool for customer stickiness

4. Simplifying customer experience through self-care and other customer touchpoints

Vendor governance

Link to strategy

Win with network • Win with cost

Risk owner

Chief supply chain officer

Description

We operate an outsourced business model, and our ability to deliver value for our stakeholders could be impacted by factors such as over-reliance on certain vendors, poor governance processes, non-adherence to service level agreements, or a general lack of accountability by our partners. Our business model relies on third-party suppliers and technology providers to manage, maintain and operate our network and IT infrastructure.

Effective governance of our key equipment and technology providers is important to prevent any adverse effect on our business operations. Likelihood = possible. Impact = significant.

Mitigation

1.Continuous monitoring of partner performance and strengthening of partner governance capabilities

2. Ongoing review of our strategic vendor landscape across markets and critical business processes to mitigate any long-term continuity risks arising from possible over-dependence on particular vendors

Digitisation and innovation

Link to strategy

Win with customers • Win with data • Win with mobile money

Risk owner

Chief information officer

Description

Our industry is continually facing pressure from non-conventional and over-the-top (OTT) players (internet-based alternatives to traditional telephony services) which provide similar services for our customers. We need to innovate to simplify our user experience, make our business processes more agile, and develop more digital touchpoints to reach our customers and meet their changing needs. These innovations are necessary to avoid the risk of losing customers. Likelihood = likely. Impact = significant.

Mitigation

1. Setting up the Airtel development centre as a hub for our digitisation initiatives

2. Simplifying our core IT systems and integration capabilities to allow for faster deployment of new products and services and integration with third-party applications

3. Rolling out various digital apps in some of our key markets

COVID-19

Risk owner

Chief executive officer

Description

The novel COVID-19 pandemic has paralysed the global economy, causing massive disruptions in the movement of people and the global supply chain, and adversely impacted the cash flow and liquidity of businesses. Despite the adverse effects of the pandemic, demand for telecommunications services, especially fixed and mobile internet, has increased as more people work from home and require the internet to connect to their work network. Telecommunication services are considered an essential service. However, the disruption caused by the COVID-19 pandemic may impact the Group's ability to operate its business effectively and achieve its objectives. Likelihood = likely. Impact = significant.

Mitigation

1. Implementation of business continuity plans for all functions and operating subsidiaries within the Group to ensure minimal disruption of our abilities to provide critical telecom services during this period

2. Set-up of a crisis management centre for the Group with daily and weekly reviews at three layers: crisis management teams at the OpCo level, crisis management team at the Group office providing oversight over the OpCo crisis management teams, and the Executive Committee providing overall oversight

3. Ongoing engagement with relevant regulatory bodies inour operating markets to designate telecom companiesas providers of essential services. This has allowed us to continue to operate our retail stores, and maintain our telecoms infrastructure and the movement of essential employees during lockdowns in some markets

4. To protect the health and safety of our employees, the Group has activated its work from home policy irrespective of local governments' lockdown restrictions, and instituted various measures.

The company has partnered with relevant health agencies in our operating markets to support the governments' response to the pandemic

operational RISKs

Technology obsolescence

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with cost

Risk owners

Chief technical officer

Chief information officer

Description

An inability to effectively and efficiently invest and upgrade our network and IT infrastructure would affect our ability to compete effectively in the market. While we continually invest in improving and maintaining our networks and IT systems to address current levels of volume and capacity growth, we need to continue to commit substantial capital to keep pace with rapid changes in technology and the competitive landscape. Likelihood = possible. Impact = significant.

Mitigation

1. Refreshing our IT infrastructure with focus on cloud technology

2. Network modernisation project involving upgrades to our core (mobile switching) and packet (mobile data) networks

3. Reducing the cost of network operations by adopting radio agnostic technology, 'single RAN', which allows easy switching of network resources and spectrum between 2G, 3G and 4G networks at minimal marginal costs

Cyber and information security threats

Link to strategy

Win with customers • Win with data • Win with network • Win with mobile money

Risk owner

Chief information officer

Description

Cybersecurity threats through internal or external sabotage or system vulnerabilities could potentially result in customer data breaches and/or service downtimes. Like any other business, we are increasingly exposed to the risk that third parties or malicious insiders may attempt to use cyber-crime techniques, including distributed denial of service attacks, to disrupt the availability, confidentiality and integrity of our IT systems. This could disrupt our key operations, make it difficult to recover critical services and damage our assets. Likelihood = likely. Impact = significant.

Mitigation

1. Rolling out a security and cyber awareness training programme using various channels

2. Ongoing reviews and updates to our information security policy

3. Continuing to identify risk and assess vulnerability

Increase in cost structure

Link to strategy

Win with cost

Risk owner

Chief supply chain officer

Description

To maintain our profitability, we need to keep our cost structure in check. Increases in costs relative to the growth in revenues are a threat to our profitability. Our operating costs are subject to fluctuations, including in response to changes in global commodity prices, market uncertainty, energy costs (such as diesel and electricity), and the cost of obtaining and maintaining licences, spectrum and other regulatory requirements. Prevailing macroeconomic conditions and a variety of other factors beyond our control also contribute to this risk. We need to continually re-evaluate our operating model and cost structure to identify innovative ways to optimise our costs. Likelihood = likely. Impact = moderate.

Mitigation

1. Continuing to review opportunities to refine our operating model to further optimise costs

2. Rolling out various initiatives to optimise our operating structure to improve business performance

Leadership succession planning

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with people • Win with cost

Risk owner

Chief human resources officer

Description

We need to continually identify and develop successors for key leadership positions across our organisation to ensure minimal disruption to the execution of our corporate strategy. Our ability to execute our business strategies depends in large part on the efforts of our key people. In some of the countries in which we operate, there's a shortage of skilled telecommunications professionals. Any failure to successfully recruit, train, integrate, retain and motivate key skilled employees could have a material adverse effect on our business, the results of our operations, financial condition and prospects. = possible. Impact = significant.

Mitigation

1. Defined functional and leadership development plans for the leadership and critical roles within Airtel Africa

2. Put talent management processes in place to identity high potential people for development

3. The operation of long-term incentive arrangements structured to encourage employee retention and to align with  the long-term objectives of the company

Internal controls and compliance

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with people • Win with cost

Risk owner

Chief financial officer

Description

Gaps in our internal control and compliance environment could affect our reputation and lead to financial losses. Our financial reporting is subject to the risk that controls may become inadequate due to changes in internal or external conditions, new accounting requirements, or delays or inaccuracies in reporting. We continue to implement internal risk management and reporting procedures at Group and OpCo levels to protect against risks of internal control weaknesses and inadequate control over financial reporting. Likelihood = possible. Impact = significant.

Mitigation

1. Strengthening the Group's internal controls over financial reporting and compliance processes

2. Implementing a rigorous review process for addressing findings from internal audit, with oversight from the Audit and Risk Committee

3. Continually identifying and mitigating risks

Network resilience and business continuity

Link to strategy

Win with data • Win with network

Risk owners

Chief information officer

Description

Our ability to provide unparalleled quality of service to our customers and meet quality of service (QoS) requirements depends on the robustness and resilience of our network and IT infrastructure and our ability to respond appropriately to any disruptions. Our telecommunications networks are subject to risks of technical failures, aging infrastructure, human error, wilful acts of destruction or natural disasters. This can include equipment failures, energy or fuel shortages, software errors, damage to fibres, lack of redundancy plans and inadequate disaster recovery plans. Likelihood = likely. Impact = significant.

Mitigation

1. Implementing geographically redundant disaster recovery sites for our networks and IT infrastructure across our OpCos

2. Establishing a governance process for the regular testing of fallback plans for all network and IT systems

FINANCIAL RISK

Exchange rate fluctuation

Link to strategy

Win with cost

Risk owner

Chief financial officer

Description

Our multinational footprint means we're constantly exposed to the risk of adverse currency fluctuations and the macroeconomic conditions in the markets where we operate. Currency depreciation puts pressure on our liquidity and overall profitability. We derive revenue and incur costs in local currencies where we operate, but we also incur costs in foreign currencies, mainly from buying equipment and services from manufacturers and technology service providers. That means adverse movements in exchange rates between the currencies in our OpCos and the US dollar could have a negative effect on our liquidity and financial condition. Likelihood = likely. Impact = significant.

Mitigation

1. Renegotiating Forex denominated contracts to local currency contracts

2. Hedging foreign currency denominated payables and loans, and matching assets and liabilities, where possible

Debt facilities and cross-guaranteed debt

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with people • Win with cost

Risk owner

Chief financial officer

Description

The Group has certain debt notes issued by Bharti Airtel International (Netherlands) B.V., a wholly owned subsidiary of the Group and guaranteed by the Group's majority shareholder. These debt notes contain covenants which could trigger an early repayment in the event of a default by the group's majority shareholder. The outstanding 2023 debt note of $505m contains a covenant that could restrict certain major subsidiaries from incurring indebtedness unless the majority shareholder meets a designated consolidated indebtedness to underlying EBITDA ratio. This covenant is suspended when the notes become designated as investment grade. These cross-guaranteed debt notes and covenants mean that the Group could be adversely impacted by any material uncertainty affecting its majority shareholder if the Group is unable to refinance these debt notes in a timely fashion or on acceptable terms. Likelihood = possible. Impact = significant.

Mitigation

1. Obtaining a standalone credit rating for Airtel Africa plc from global credit rating agencies to enable access to the capital market

2. Creating a Finance committee, a sub-committee of the Audit and Risk Committee, to oversee significant matters relating to treasury, tax and other financing decisions

3. Making committed and non-committed debt facilities available to address any short-term funding needs

4. Reviewing any material development potentially impacting our major shareholder's ability to comply with debt note covenants

GOVERNANCE AND COMPLIANCE RISKS

Compliance to legal requirements

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with people • Win with cost

Risk owner

Chief legal officer

Description

We operate in a diverse and dynamic legal and regulatory environment. Establishing and maintaining adequate procedures, systems and controls enables us to comply with our obligations in all the jurisdictions in which we operate. We are required to comply with data privacy, anti-money laundering, anti-bribery and corruption, sanctions, and other laws and regulations. A failure to comply could lead to unanticipated regulatory penalties and sanctions or tax levies, as well as damage to our reputation. Likelihood = likely. Impact = moderate.

Mitigation

1.Instituting various policies across the Group to comply with the legal requirements in the jurisdictions where we operate

2. Implementing an escalation process for reporting significant matters to the Group office

3. Communicating with and training employees on relevant company policies

Know your customer (KYC) and Quality of service (QoS) non-compliance

Link to strategy

Win with data • Win with mobile money • Win with network • Win with customers • Win with people • Win with cost

Risk owner

Chief regulatory officer

Description

As we operate in a large number of jurisdictions, we must comply with an extensive range of laws and regulations relating to the licensing, construction and operation of telecommunications networks and services. Focus on KYC and QoS regulations across our operating markets has increased in recent years. Regulators in several of the countries in which we operate have introduced stringent regulations and guidelines in relation to KYC and maintaining a certain quality of service. A failure to comply could lead to unanticipated regulatory penalties and sanctions and tax levies, and damage to our reputation. Likelihood = likely. Impact = significant.

Mitigation

1. Implementing a regular compliance tracking process against KYC requirements, identifying root causes for cases of non-compliance and taking corrective actions

2. Continuing to engage with regulators on quality parameters in certain markets

3. Periodic quality of service KPI monitoring

Monitoring other global or emerging risks

There are also a number of global risks which we keep under review. While we don't consider them principal risks, we monitor developments in these areas to determine if we need to elevate their risk rating. These include:

  Climate change - we continue to evaluate the potential impact of climate change on our business operations and on the economies in which we operate. It is clear that water scarcity, changing crop patterns, extreme weather events and other climate-related matters could have a range of impacts on the populations we serve, and therefore on our business, in the medium term. Our footprint also includes economies in which fossil fuel production makes an important contribution to GDP, and which could therefore be affected by the transition to a low-carbon economy. We combine monitoring of these developments with a focus on how we can operate a long-term environmentally sustainable business.

The UK's exit from the EU - while we do not have any operational business in the UK, we're continually reviewing how the post-Brexit business environment could affect our business directly or indirectly.

 

END

 

 

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