Amanda Bbosa Rabwoni: Good day to you all, and thank you so much for taking the time to attend our investor call. My name is Amanda Bbosa Rabwoni, in charge of Investor Relations at MTN Uganda. Joining us for the call today is Ms. Sylvia Mulinge, our Chief Executive Officer, Mr. Phrase Lubega, our Managing Director for our Mobile Money business, and Mr. Andrew Bugembe, our Chief Financial Officer. The call is scheduled for an hour, and we encourage you to submit your questions during the course of the presentation. We have a question link, a question tab just on the screen. We will start off with Sylvia giving us an overview of the operating environment for the past nine months, particularly each quarter, and operational performance.
Amanda Bbosa Rabwoni: We will then have Mr. Phrase Lubega discuss the fintech performance for the period, and then Mr. Andrew Bugembe giving us a position on our financials. Sylvia, hand over to you. Thank you.
Sylvia Mulinge: All right. Thank you, Amanda, and good morning, good afternoon, or good evening to you all, depending on where you are joining us from today. To all our investors and shareholders, thank you so much for making the time to be with us today. You are most welcome, and I hope you have kept well since our last engagement in August. This morning, we released our results for the nine months ended 30 September 2026, and I do hope that you have had the opportunity to be able to go through them in detail. As always, what we like to do with these calls is to give you a little bit more color around the numbers, around the context within which we are operating, and also what shaped our performance during the period and how we are seeing the business going forward.
Sylvia Mulinge: In terms of the key messages that we are sharing with you today and also that were captured in the SENS, I think it is fair to say upfront that 2026 has been a challenging year for us. If you recall, we started the year with disruptions around the general elections and the trade formalization reforms, and as we came through Q3, we then have had to navigate a different set of pressures, including a weaker shilling, higher fuel and logistic costs, pressure on data monetization from unauthorized public Wi-Fi activity, and on the voice side, we have continued to navigate a change in the mobile termination rates. So there has been quite a bit for us to navigate as a leadership team, but I think it is also important that we separate the challenges we are dealing with today from the underlying health and opportunity of this business.
Sylvia Mulinge: When we look underneath the headline numbers, we still see a business where the fundamentals remain strong. We are connecting more customers, as has been evidenced by the strong customer growth we have had. These customers are consuming more data and using more digital financial services, and we continue to invest in our network to support this demand and growth opportunity that we see. While we recognize that the operating environment has become a bit more challenging, our conviction in Uganda and in the long-term opportunity for MTN in this market has not changed. What has changed is the environment in which we are executing, and therefore some of the assumptions underpinning the pace of growth and the returns that we see over the medium term.
Sylvia Mulinge: Against the near-term pressure on the business, the board recommended a lower dividend per share for the quarter, but maintained a nine-month payout ratio of 83.3% above the existing 75% payout ratio dividend policy. When we go through the financials that Andrew will take us through, he will paint more color on this in the detailed financial section. Reflecting on the operating conditions we now see, we expect to exit the year below our guidance, which I will cover in the outlook. First, let me get into the context and the detail of the environment in which we have operated. Now, if you look at the slide and the graphs in front of you, from a macro perspective, I think what we can say is that we have two things that are happening at the same time.
Sylvia Mulinge: On the one hand, the economy continues to demonstrate resilience, private sector activity continues to expand, investment remains supportive, and the medium-term outlook for Uganda remains constructive. On the other hand, the environment has also become noticeably more difficult for customers and businesses in this quarter that has just ended. Headline inflation averaged 4.2% compared with 3.9% in the prior year period. With the most recent release for the month of October, the Uganda Bureau of Statistics indicated that our headline inflation is now at 5.8%, an increase of 1.2 percentage points from 4.6% in September. More important than just the headline numbers is where that inflation is coming from. We are seeing increasing pressure across food, transport, and energy, with fuel inflation rising to 30.2%. For our customers, higher food, fuel, and transport costs ultimately means pressure on disposable income.
Sylvia Mulinge: For us in here in MTN, considering the fact that we run a large national network and distribution footprint, it therefore means that we are operating with higher costs for running sites, moving people and equipment around the country, and ultimately higher costs across parts of our supplier base. The second important development from a macro perspective has been the currency. The Ugandan shilling depreciated by 7% quarter on quarter and 8.3% year to date as at the end of Q3. This further weakened in the month of October. Again, because of this, there is a direct effect through some elements of our cost base, which flows through some elements of our cost base, but also there is an indirect effect through imported goods and the broader pressure this creates across the economy. We are watching both inflation and foreign exchange very closely.
Sylvia Mulinge: Notwithstanding all that, the challenges that are happening at macro level, I think the key thing is we do not want to lose sight of the bigger picture, and that is also what I would like to paint in terms of what is happening in Uganda. Uganda continues to grow. It is still underpinned by the tenfold growth strategy that has been envisaged by the government. They still continue the investment and expanding private sector activity with strong underlying demand for connectivity and digital financial services. Now, if you then look at our performance, you can see on this slide that our business has continued to grow and to demonstrate resilience. We added approximately 2.9 million customers over the last 12 months, taking our active mobile subscriber base to 26.4 million, an increase of 12.5%. Active data subscribers increased by 14.3% to 12.6 million, while active fintech subscribers grew by 8.6% to 15.5 million.
Sylvia Mulinge: Despite the pressures that I have spoken about, more Ugandans continue to choose our network, more are using data, and more are using MoMo in their everyday lives. We continue to support this growth with further investment. Our network footprint increased to 4,183 sites, of which 872 are 5G sites, while our national fiber footprint exceeds 40,000 kilometers. All of this is important because the continued growth we are seeing with our customer base and traffic has to be supported by the network. On the financial side, service revenue increased by 8.5%, while our EBITDA margin remained strong at 51.1%, notwithstanding the cost pressures that we have experienced during the period. Looking specifically at our connectivity from the graphs, the underlying demand for data customers grew by 14.3%, while average usage per subscriber increased by 15.4%.
Sylvia Mulinge: As a result, our overall data traffic, being the strong demand that we continue to see, has to be supported by the investments that we are making and also the attractive propositions that we are giving to our customers to continue network. This and the work that we continue barriers to greater data consumption and adaptation, and we are also seeing to buy and consume data that we have spoken to you in the past around driving device affordability and smartphone adoption had increased by 1.5 percentage points to 43% of our base. Our smartphone penetration broadening to give customers greater content and also creating a lot more relevant everyday uses for data. MTN TV, for those of you who may not know, has been created through local content providers, and the whole news, sports, and media to all.
Sylvia Mulinge: Our continued investment, 4G population now has now grown 4%, while home broadband customer registrations have increased by 58.9% as we continue to improve the availability, affordability, and reliability of connectivity for our customers. We are also leveraging our partnership with Starlink as a complementary technology to our terrestrial network to support our broadband for all ambition, and also to enable us to be able to expand broadband connectivity into areas where conventional infrastructure may be more difficult to access or less economical for us to deploy. On voice, our business has remained resilient. Our active mobile subscriber base increased by 12.5%, although minutes of use moderated by 4.5%, reflecting the gradual shift towards data-led communication.
Sylvia Mulinge: Voice remains relevant to a significant proportion of our customers, especially driven by the fact that we do not have above 50%, 60% penetration levels like the rest of the regions, which we also see as an opportunity for us to be able to grow our data. We will continue to support voice through personalized propositions while progressively transitioning more customers into the broader digital ecosystem. While these underlying connectivity indicators remain encouraging, I think the strong growth in data consumption has also brought into focus some challenges about how that demand is being served and monetized across the market. One of these developments is the growing unauthorized resale of public Wi-Fi. On the one hand, which is a positive side, I think reinforces something that we have always believed about this market, that there is a significant demand from Ugandans for affordable, high-volume, and reliable internet access.
Sylvia Mulinge: There is clearly a customer need, and we should not lose sight of that. On the other hand, the current model creates challenges for licensed operators that are making underlying investment in the network on which much of that connectivity ultimately depends. Our regulator, the Uganda Communications Commission, has identified approximately 4,000 unlicensed public Wi-Fi operators that have mushroomed in the last nine months, and cited at an industry level around UGX 148 billion in annual tax revenue that is arising from this activity. Please note that this is not an MTN issue. This is a market issue that we are all facing as MNOs in this sector, and therefore, the approach and the perspective that we have is joint and agreed, and the execution jointly being driven by both operators working together with government and the regulator.
Sylvia Mulinge: The reason why this is important and why it matters is because the price differential is also significant, with the indicative retail pricing of approximately ranging between UGX 500 and UGX 1,000 that provides you with unlimited connectivity in a single day among resellers, compared with approximately UGX 2,000 per GB for licensed operators. The economics are quite different. The price at which these resellers are selling in the market is even below the cost of production that has been provided in the market by the regulator. Basically, what happens is we see a reseller takes a home broadband or fixed wireless connection and shares it across multiple users, for those of you who are asking, "How does this work?" They do that without carrying the same network investment and licensing requirements that the licensed operators therefore have to carry.
Sylvia Mulinge: For context, if you think about it, we have invested about UGX 397 billion in CapEx, excluding leases, in the first nine months of this year alone, which has been deployed to improving coverage, providing better capacity, and overall improving the network experience of our customers. The immediate impact, therefore, is substitution around these low-cost hotspots, and this therefore puts pressure on pricing and monetization, even while the overall data volume that is being consumed in this market continues to grow. Our position here is not that this demand should be constrained, because we celebrate. That is what we have been working towards in terms of improving digital literacy, driving reasons for people to consume data. We find the demand encouraging, and we obviously also know that once customers have tasted this abundance, they would definitely want to continue to enjoy the benefits that data brings their way.
Sylvia Mulinge: The question that we are now working on as an industry, together with the relevant government agency, is to make sure that this demand is served in a way that supports a sustainable industry and also ensures continued investment in network quality and coverage. We are therefore really encouraged by the regulator and their engagement on this matter that we have had for the last 3 to 4 months, including enforcement campaigns that have started across the country last month, and also a regularization process towards a potential formalization framework that is being discussed with the industry, with the ISPs, as well as the hotspot operators. Equally also, I think what we are alive to is that our response cannot only be regulatory. We also have to ensure that we are able to serve the need that these customers have demonstrated they have.
Sylvia Mulinge: That therefore means that we have to work harder in terms of strengthening our own propositions across mobile and fixed access, and delivering a combination of affordability, quality, reliability, and customer experience that give our customers a compelling reason to keep choosing us every day. Therefore, we not only see this as challenge, but also as an opportunity. That paints the broad connectivity picture. I am sure there will probably be some questions that will arise which will provide more context. But for now, I would like to invite Phrase to take us through our fintech performance, where we also saw some quite encouraging improvements during the Q3, despite the challenges that we had faced earlier on in the year. Phrase, you can quickly give us an update on the action that we are taking around liquidity, agents, merchants, and also, more importantly, the continued expansion of our advanced services.
Phrase Lubega: Thank you so much, Sylvia. Good afternoon, everyone. The momentum that we saw starting end of Q2 has sustained and strengthened through this quarter, mainly supported by growth in active subscribers and increased activity from the subscribers on the ecosystem. As a result, subscribers have grown at 8.6%, and transaction volume has grown ahead of subscriber growth at 10.7%, talking to the increased activity by subscribers that are on the ecosystem. Transaction value has continued to grow way ahead of the subscriber growth. This talks to increased usage of high-ticket transactions that customers engage in advanced services, which has resulted into an 18.3% growth in transaction value. Now, we have continued focusing on scaling the ecosystem, with agents growing at 20.9%, while merchants, which we consider core part of our business feature, grew at 128.8%, talking to the increased focus that we put on that part of the business.
Phrase Lubega: We have implemented a number of market interventions that have propelled our growth, most important of which is solving for liquidity, float distribution issues, or reforms that we have implemented that have led to the acceleration in basic services growth. Among the market interventions that we have implemented during the quarter, I will call out the continued amplification of our subscribers and enhancing our application by increasing number of features available for customers to use and satisfactory use of services within the app. We have introduced Travel by MoMo, a service that enables customers without leaving our app to initiate, search for, and book air travel tickets to any destination in this world through our partnership with Next Travel. Now, we have enhanced it further to ensure that we include hotel bookings as well, and booking for vehicles or transport where the destination the person is actually destined to
Phrase Lubega: At the same time, we have also introduced toll gate collections, digitizing collections at toll gates within Uganda, and talking to enhancements in that area. As a result of all these, advanced services have grown ahead of subscribers at 26.2%, now contributing 33.2% of our overall fintech revenue. This is mainly supported by payments and the BankTech propositions that we continue to enhance. I thank you, and I will hand over back to Sylvia.
Sylvia Mulinge: Okay. Thank you, Phrase. I will now invite Andrew to walk us through the financial performance of the business during the period. Andrew, over to you.
Andrew Bugembe: Okay. Hello to you all. Pleasure to be here with you again. When you look at our nine months, I think we explained previously what happened regarding the election. What you find in Q3 is the acceleration of the unauthorized public Wi-Fi. Just in context, when you look at our data growth now at almost 13 versus last year at 30, you can see that despite the investment in both modernization capacity and extra sites. When you look at voice growth, I must say we are happy with the voice growth. If you compare it, we did have a drop in MTR within the same period, but part of that growth has been offset by growth in volume for the off-net calls, as we keep reviewing our value propositions to ensure that we can capture or compete favorably against our competitors upcountry.
Andrew Bugembe: Fintech, as Phrase has just explained, we are happy at least that when you see, in Q3, we are growing above 13%. When you look at our service revenue growth at 8.5, we do have an EBITDA of 3. Just for context, what we did, as we explained in the previous two calls, is we have accelerated our CapEx investment on site. With hindsight today, when you look at where the currency is, the currency has depreciated over 17% year-on-year today in October. Trying to capitalize where early in the year, obviously, we had a variable currency at that point in time, which would have affected our CapEx. What we really did are two things. As we modernized and expanded our network, we invested in devices and obviously subscriber acquisition cost.
Andrew Bugembe: If you note, our overall network has expanded, but also if you look at our subs and ADS, the data subscribers have also increased, comes with quite a lot of investment in subscriber acquisition cost. The overall, I would say, revenue gain is over the period. Then also, if you look at the sites, we brought all the sites upfront to try and take advantage of the revenue uplift, and we have upgraded. The impact of the Wi-Fi is what has muted the real benefit of this. I think it is important to note that this strong subscriber growth also demands more capacity. So, there are areas where there is demand, and we cannot wait until we choke, where we are adding more capacity, and other areas, you are looking at its expansion in areas we
Andrew Bugembe: What that means, obviously, when you bring in more sites from a PAT perspective, you have your IFRS 16 financing costs and also the amortization of the sites that you brought forward all pulling through. Again, you also need to look at the diesel cost that increased. So, that did affect the PAT. So, this PAT that you see, obviously, when you adjust it for the UGX 110 prior year, one-off TP, you will find that our PAT obviously dropped by about 1.9%. Again, driven by what Sylvia Mulinge and Phrase Lubega have explained, but more importantly for us is the accelerated investment, both CapEx and in OpEx. So when you look at CapEx, so that will speak to the 327, I mean, 397, but the impact in percentage-wise over 30.
Andrew Bugembe: Intensity still within guidance, I must say, mid-teens, and as we go to Q4, obviously that will drop because of the front loading. When you look at our net debt, we are low geared, so we still have a strong balance sheet and capacity to take on more debts to fund the expansion. Obviously, as we look at closing the future coverage obligation, we will definitely look at the balance sheet and see how to refinance the CapEx investments that we need to make over time. We did have to adjust our dividend, and I will talk to that shortly in the next few slides. When we move to the next slide, you can look at our revenue outlay. Obviously, we do expect our voice to drop, and the substitution is obviously always fintech and data.
Andrew Bugembe: We still serve quite, I would say, an available subscriber base for voice, so we continue offering various CVMs. Most of you, I would say, first customers you get definitely have MoMo and voice, so that becomes quite key. Then we have quite spent a lot of money, I would say, from devices, if you look at the expense composition. So from cost of sale, in accelerating our investment in all the sites and bringing the sites forward, we also accelerated to ensure we have the right inventory within our ecosystem, and that has partly supported the growth in our ADS, which is over 14%. What does that come with? Obviously, you are playing around between subsidy and then also supporting the open market.
Andrew Bugembe: You are doing a bit of both because it does not make sense investing a lot in the network and you are not supporting the smartphone growth, which now is at least over 43%. The value and timing and benefit of that, as mentioned, will come much later. That is pretty much the key driver for cost of sale, purely volume-driven and partly foreign exchange. Also, increase in the devices. If you see the impact of the geopolitics has had an impact for us and everyone else, as you might imagine, on increased device prices. Then towards the end, you are getting a bit of impact on the forex too. For OpEx, again, the biggest element here, I would say, two, three items is pretty much rent and utilities.
Andrew Bugembe: If you look at our diesel prices today versus last year, you are over 40%, 30% if you are looking at diesel and energy. So an increment of 40%, 30% and you front-loaded a lot of your sites upfront. When you are comparing the two periods, it is not exactly like for like, because last year this time, we did not front-load our CapEx. When you look at it like the revenue you are earning and the expenses, and then you add the current macro challenges, yes, that is why you would find that our operating costs right now are growing higher than revenue. As we mentioned before, we do have once-off costs for the voluntary departure program, the staff issue that we did in H1, which was around UGX 12.7 billion, and then also increased transmission costs.
Andrew Bugembe: There was an impact on this Wi-Fi issue, and one of the reasons or areas when we discovered something was not adding up is you have increased transmission costs, but you are not seeing full impact of that in your mobile data traffic. Obviously, it meant that part of our home fiber offering is being used for Wi-Fi. That is what we started to address, and it is kind of normalized. Before, it was growing quite exponentially until we started implementing certain FUPs, as mentioned by Sylvia Mulinge. That translates to the dip in our EBITDA margin, which I would say is expected given what I have just explained, and the muted EBITDA growth of about 3%. Obviously, if we go to the next slide to speak through this, what we have done is, we have been doing EEP, the Expense Efficiency Program, over the years. We continue to do so.
Andrew Bugembe: I must say, even now, we are doing quite well. Of course, what happens is the geopolitical impact, the inflation, the fuel, I mean, does take away some of the, I would say, would have been savings. What we are doing is renegotiating key contracts. We have renegotiated, and I must say, gotten some very good discounts on maintenance, but continue to renegotiate a lot of key contracts, especially like on fiber maintenance, given that we are scaling our fiber rollout, not just for home, but also reconnecting many of our sites to be running on fiber. We are also looking at fuel, rent, and utilities, various areas, and that means investing, modernizing, not just solar, but in areas where they are pretty much running on generator and they are not so far away from power lines, meaning you are connecting them to energy, which is still cheaper than diesel. That continues.
Andrew Bugembe: And yeah, we are starting to see early signs in our, I would say, Q4 of some of these investments. The full impact of some of these savings will come through a lot more in Q1. Now, when you look at our debt management, and I think, overall, end of September, our total debt, excluding IFRS 16, was about UGX 327 billion. And if you look, our total CapEx spend this year is about UGX 397 billion. So pretty much, if we are operating or running our balance sheet more appropriately, you will be funding most of this through long-term debt. But obviously, if you look at our current structure, the telco still receives dividends from MoMo. So, we have not taken on as much debt as one would have if you were to compare us with other operators.
Andrew Bugembe: So we are low geared, but we still have a strong balance sheet to still support the expansion and CapEx. And it is important and needed because, despite the authorized Wi-Fi disruption, the areas and expansion in areas we have gone through and the various CVMs we are doing, you can see your network still needs capacity upgrades. They still need to modernize. And also, they still need to invest in other areas like fiber. And what does that mean? So when you have a muted Q3, it was important for us to review our dividend. And while we are not very sure of the geopolitical impact, I must say some of us or many of us might be happy with the elections that just took place. What does that mean? We will find out later on.
Andrew Bugembe: So we found it prudent to review our dividend payout, still above our guidance and our policy of 75%, to effectively at 83%, as we monitor the headwinds to try and balance our capital allocation between investing for the future, managing the current geopolitical scenarios, and also ensuring that the day-to-day are taken care of. So that is why we did adjust our dividend to UGX 4 per share. Lastly, when you look at our CapEx, you can see the significant difference year-on-year in investment. Intensity pretty much where we have guided. The slight change you can see in CapEx is also the mix. So some of the CapEx is not in what you would call directly revenue generating in a sense when you are investing in platforms like IT. We have also increased investment in resilience.
Andrew Bugembe: So there are investments you do in CapEx to ensure nothing wrong happens, and if it does, you are cushioned, that does not have that immediate uplift, but still within our medium-term guidance. And as I mentioned about the net debt, where it is low geared, we have capacity, and we will look at this next year as we assess to fund the expansion. And that we still need to fulfill. So it is important that as we expand, we do not keep back to over-optimize and we are not complacent to ensure that both from coverage, customer quality, and all that is taken care of. So with that, I would like to thank you and hand back to Sylvia.
Sylvia Mulinge: Okay. Thank you, Andrew. As we look to close out the year, our priorities remain very clear, as you can see on the screen. We will continue to navigate the macroeconomic environment as we have painted it out to you, especially the pressures from foreign exchange, inflation, and fuel costs, while maintaining strong cost and capital discipline. Our focus is also on ensuring that we continue to drive a strong commercial momentum in connectivity, address the challenge as well as the opportunity that currently exists on data as we drive our data adoption, and also make sure that we are able to translate the demand that we have been able to see into stronger growth across data, home, and enterprise, supported by continued smartphone adoption and a better customer experience. For fintech, as has been illustrated by Phrase, we will continue building on the improved momentum we saw in Q3.
Sylvia Mulinge: The focus remains on strengthening the ecosystem and our partner propositions while accelerating advanced services, digital payments, and MoMo app adoption. For the network, we will continue to invest selectively in quality, capacity, and resilience while increasingly sweating the investments that we have already made and driving greater utilization. Finally, we remain very, very, very focused on financial discipline. This means that we will prioritize investment towards the areas of greatest return while executing our Expense Efficiency Program initiatives and preserving the flexibility of our balance sheet. With that in mind, our outlook, therefore, reflects these priorities. As I called out, 2026 has been a challenging year. The operating environment has evolved from when we initially set our medium-term guidance.
Sylvia Mulinge: Therefore, taking into account the macroeconomic pressures that Uganda is currently facing and some of the operational challenges that have spoken today, which are facing us as an industry, we believe that it is only prudent that we reset the expectations for 2026. We therefore expect that our service revenue growth may fall below our H1 guidance of mid-teens and will remain in line with our current performance. We believe that with prudent cost management and some of the initiatives that Andrew has spoken to, we should be able to remain on target with regards to our guidance on EBITDA margins above 50%, and also keep our CapEx intensity in the mid-teen levels. We remain confident in the business, the underlying structure of the organization, the opportunity that is in this market.
Sylvia Mulinge: We just need to recalibrate ourselves to be able to deal with the challenges, and I am confident that we will come out of this stronger. Thank you to everyone for joining. I will now hand over to Amanda for the Q&A. Amanda, over to you. Thank you very much.
Amanda Bbosa Rabwoni: Thank you very much, and thank you so much for the questions that are coming through. Sylvia, we will jump straight in. When will the regulatory interventions kick in regarding the public Wi-Fi, and how do we expect the data play to unfold in the course of the year going forward?
Sylvia Mulinge: So, as I said, this is something that has really scaled in the last nine months. It is something that we took note of towards the end of last year. But I think the challenge for this community Wi-Fi became amplified when it became what I would probably call industrialized, where we had people coming up with building software, easy-to-access customer kind of interfaces that made it easier for this Wi-Fi to be discovered. Also, the reason why it mattered is because it was not being deployed, and like in other markets, I mean, community Wi-Fi is not something that is unique in our market.
Sylvia Mulinge: But I think the key difference is that if you look within the region, and even in West Africa, what has happened there with the regulation is that it has been deployed in areas that are traditionally underserved to be able to provide and drive digital inclusion. But here, what has happened is that where majority of our data revenues are concentrated, which is in Kampala and Greater Central, is where the most massive deployment has happened. This is something that we have picked up. We picked up with the regulator towards, I think, May this year. We amplified it and began to have engagements.
Sylvia Mulinge: Right now, the conversations with our parent ministry, the Ministry of ICT, the regulator, are really happening, and it has also become, I think those of you who are in the Ugandan context are aware that it has also become very much a political issue. But the good thing is that the government realizes the massive impact that this is having on organizations such as ourselves, and they have now begun to take remedial measures. Enforcement began in earnest in the month of October, and we are beginning to see the impact in terms of the containment that this is driving. But also, at the same time, even as this is being done, and remember, the contain, if I may call it, element of this is to first of all make sure that we bring this into some form of regularization.
Sylvia Mulinge: The next step after that then is to ask how then do we address the demand that this has actually shown? Because if you actually look at the data and we see some of these customers on our network, you can actually see that with that unlimited access, there is so much more usage that is happening. The demand is there for customers. It is not a users problem. We do not have a users problem. Users are growing. We do not have a usage problem. There are reasons to use data, and that is why you can actually see that even our data traffic has gone up over the period. The challenge is how do we serve this at a price that makes sense for the customer and makes sense for us? This is what we are working towards.
Sylvia Mulinge: The conversations have been engaging, and as we see how this reshapes in the next two quarters, I think we should be able to see that translating back into a data recovery, which we will be able to report back to you when we engage in February. Thank you very much.
Amanda Bbosa Rabwoni: Thank you. Phrase, if you could just paint a picture of the current MoMo space, and also what strategies we have to maintain our position in the market.
Phrase Lubega: Thank you so much, Amanda. I will start with the fact that we all report to the central bank, and the last results that were released by the central bank at end of June this year, our market share was 54%, and we are confident that we have picked up market share since then, owing to the float distribution transformation, the reforms that we are putting in place, and the level of innovation and execution focus that we are having. I am confident that by the time we report back end of next quarter, you will see an improvement in that market share. Then two, we continue focusing on moving, migrating our subscribers from the default USSD interface they are used to into the app site. We will continue enhancing the features and aggressively migrating those customers into the digital app.
Phrase Lubega: Right now, the majority of our customers still prefer using USSD because of the ease, and it is north of 90% that still use USSD by default. Then, on advanced services, which I have spoken to already, we will continue innovating aggressively. If you have been watching the market, you would have seen that over the last several running months, we have enhanced our innovation muscle and are launching a number of new services in the market. We are positive that we will continue picking up market share against our competition. Thank you.
Amanda Bbosa Rabwoni: Okay. Andrew, the two main cost pressures were diesel prices and the currency performance. Could you guide on its impact on EBITDA? Also, in case those fuel prices did not change, what would the impact translate to in terms of EBITDA?
Andrew Bugembe: Okay. If you are looking at this year versus last year, there are two things. Apart from the increase in fuel prices, like we say, diesel over 42 and fuel over 30, you have timing. Last year, we did not front-load the sites. This year, we have. On top of doing that, then you have a change in fuel prices. It is not a straightforward just only fuel impact. You have a bit of a mismatch in timing of sites coming in and investment. Regarding EBITDA, both for Q1 where we are, we will still be within guidance, or if I can say, slightly above guidance. For this year or ending, we do not expect to be below our EBITDA guidance despite the fuel.
Andrew Bugembe: Part of the reasons are in Uganda, a lot of our fuel impact of the increase in fuel prices, like today, a lot of that impact comes through the next quarter. Beyond that, what we have with our various tower operators, they can only impact us with that charge if it is above a certain percentage. If it is below a certain percentage, then we have that locked in within our contract. When it goes beyond a certain threshold, that is when they can charge that to us. That has slightly, I would say, cushioned us. What you will see for Q4 now, remember, as I mentioned, that last year, a lot of the sites came through towards the end.
Andrew Bugembe: So it means when you compare Q4 this year and last year, you will not see a significant jump because of the reversing and timing of the sites as and when they came in, despite the increased fuel prices. It will be a little bit muted, even if we had had more sites coming on. But to the issue of margins, no, that will be within guidance.
Amanda Bbosa Rabwoni: Okay. Sylvia, this is a connectivity question, so it will be two-pronged. When will we lap the impact of the MTR cost cuts? Do we expect any further reductions, that is in voice? And then also in terms of data, how confident are you that data will continue to drive earnings over the next two to three years?
Sylvia Mulinge: So first of all, on the MTR, the regulator has provided a glide path for MTR reduction until 2031, with the average year-on-year reduction at around 3% to 5%. And obviously, we pass on the benefit of this reduction to our customers. So this is how we anticipate the MTR to evolve. With regards to data, I mean, there is a lot of conversation that is currently happening with us at an industry level, as I said earlier, with the government and the regulators, so that we can have an environment where there is an equal or a leveled playing field, and also making sure that everybody is carrying the same burden of the licensing obligations that we have.
Sylvia Mulinge: And I believe once that is regularized, the playing field becomes a lot more even, and therefore allows us as MNOs to compete with the ISPs as well as these Wi-Fi operators within the market. As I called out earlier, the demand for data is encouraging. Even when you look at the smartphone growth that we have had, there is need for customers, there is need for data, which we can see coming through from the market. The key thing is how do we serve it sustainably and how do we serve it profitably? So, this is a battle that we must win, and we are planning to win. Data remains the key anchor of our growth going into the future. So the conversations that we are currently having will shape how this consumption is served and how then it translates into returns for our business as well as yourselves.
Amanda Bbosa Rabwoni: Okay. With Phrase, I will also just give you the same question on the fintech side. Do we still remain confident in fintech contributing to our strategy? I will just merge this with our performance on the MoMo app in terms of usage, and also if you could speak more into the float regulations that you mentioned earlier.
Phrase Lubega: Thank you so much, Amanda. Let me begin with the float reforms. They are internal. They are not regulations that were issued by the regulator, but internal float distribution framework has been reformed and improved, leading to the improvement that you are seeing in the performance on these services. So it is not change in regulation, it is an internal model. On the app, as I indicated, over 90% of our customers still use USSD, prefer USSD, but we are aggressively migrating them to the app. We see improvement in performance when a subscriber migrates from USSD to app because of intuitive, easy discovery of all the other services available that are very difficult to discover when you use the USSD interface. So that is why we are very aggressive in continuing to pivot customers from USSD into usage of the app.
Phrase Lubega: On performance, we are very confident that we will continue picking up on performance. As you have seen, end of Q2, or even end of Q1, we have continued improving and sustaining the momentum we have built. You will see, as you progress through the year, we will continue growing the contribution coming from fintech side, especially growth in advanced services. Lending contributes north of 6% of our revenue, and we believe that will also continue growing, because lending, expansion of lending options is one of the objectives that we are prosecuting and ensuring that credit that is demanded by the public is fulfilled on our side on our ecosystem. I am hoping that covers all the questions, Amanda. Thank you.
Amanda Bbosa Rabwoni: Thank you. Andrew, this question is on shareholder returns. Could you explain why is the interim dividend reduced from UGX 8.5 to UGX 4 per share despite the strong profit growth? Should shareholders expect this to continue? I also merge this with another question on if the current growth in profit and revenue is translating into strong free cash flow, or is higher CapEx putting pressure on future shareholder returns?
Andrew Bugembe: Okay, I will explain it this way. When you look at our PAT growth of about 21, you need to look at the underlying PAT if you exclude the one-off, the UGX 110. When you do that, your PAT is down at 1.9%. When you accelerate your investment and you have this data unauthorized disruption, and you are heading into, I would say, a macro. If you look at the Uganda shilling, it has been one of the best performing currency for many years, over five years. It is good. All our loans are completely localized, so we are not even exposed to what is happening today. Then you start seeing a depreciation of your shilling. You start seeing a depreciation of, I mean, like inflation going up this month. It is now 5.8%. We have not been there for quite some two, three years.
Andrew Bugembe: You look at the need to continue investing, and in the areas we are investing, it is not where your returns are immediate. It is over time. Then you have to continue investing in areas, I would say, even if it is devices apart from volume, still has the forex element. So we needed to review, okay, one would say recalibrate our dividend in a sense, one. We still meet our guidance. Like I said, we are above guidance, but it is pretty much on how are you allocating your resources, returning to shareholders, but not at the expense of investing and becoming uncompetitive. Like I mentioned, it is not an issue of coverage obligation, but you still have areas whereby, as you expand, there is demand to optimize because you are about to choke this capacity, which means there is demand. Your subscribers, I mentioned, are increasing.
Andrew Bugembe: Then you have other areas like fiber and home, where you also need to continue investing, and that return is not in the next two, three, four months. So what we are trying to do is balance the funds and cash generated between what we are able to do. I know we can borrow. Like I mentioned, we are well-leveraged. We have capacity to do that. But with the headwinds, it is like, it is, I will call temporary. It is not permanent. But in a way, we would say from a guidance perspective, still almost 10% above at 83. So it is just looking, and then we will see what does Q1 look like? How quickly are we recovering from the Wi-Fi? What is the impact of the macro? Does this straightover move really slow down? What is our inflation like? When does our oil come in and there is less pressure?
Andrew Bugembe: So it is pretty much looking at the geopolitics, the existing local scenarios from a regulation perspective, and the need or risk not to invest where we need to is why we have adjusted our dividend where it is, but at least still in line with what we promised and guidance. Not even in line, honestly, above.
Amanda Bbosa Rabwoni: Thank you, Andrew. Sylvia, still on the Wi-Fi issue. Can you detect and block illegal providers or put a fair usage policy in place? What would a formal framework for Wi-Fi resellers look like?
Sylvia Mulinge: Yes, we can detect, and we have detected them. All the ones that we have seen on our network, we have blocked. It was part of the enforcement that we have been doing. As I said earlier, we have seen a positive impact of this. I think the deceleration that we were seeing in data growth, I have to now say, has stopped and has been contained. Now, we are beginning now to see the recovery, even as we continue to work with the relevant government agencies to make sure that this enforcement continues. I think the other key thing that I have to say is that we are not the only players in this market. We are not the only providers of capacity.
Sylvia Mulinge: Resellers can also be serviced by ISPs, and that is by other ISPs, and that is why this is now an industry-wide action. It is not only MTN or the other MNOs that are in this market. Now it is a collaborative effort across all ISPs. We are addressing it as an industry, and also the regulator is managing it collectively, because all of us are impacted. What was the second question, Amanda?
Amanda Bbosa Rabwoni: Is there a formal framework in place? How would that look like?
Sylvia Mulinge: Yeah, so there are a couple of frameworks that are being discussed. The regulator has looked across the region to see what other markets have done. There is also, I think, a framework that is being discussed around an agency model, which would, I think, work well, and that has also been tabled. There have also been considerations of, is there additional, should this Wi-Fi hotspot be licensed? Will they be able, though, to carry the obligations that come with that licensing? Because obviously, the
Sylvia Mulinge: around customer authentication, which are currently not being done, must be addressed. Issues around customer support, data privacy, network interference. So, there are lots of obligations that come with licensing. Therefore, that is the reason why probably the regulator is leaning towards an agency model, which we also support, but it has not yet been finalized. But we know that in the next couple of weeks, probably by the end of this month, this will be closed. Once this is in play then, it allows us to have a lawful framework that does not exclude, but allows everybody to be able to participate.
Sylvia Mulinge: More importantly, which I think will be the big outcome of this whole exercise, is to help us to extend access to customers, to be able to sub the demand that has come through while protecting them, and also protecting the investment that we have made.
Amanda Bbosa Rabwoni: Thank you. Our time is fast spent, so I will just ask for your closing remarks. I will start with Andrew. if you could share your remarks, then Phrase will go on, and then Sylvia will close the call. Thank you.
Andrew Bugembe: Okay. Thank you all. I mean, we are heading into, from a, I would say, geopolitical, and even Uganda, I would say locally from a macro perspective, what I will call a bit uncertain. In times like this, obviously, you need to think and act differently. What we are doing is we have intensified our cost discipline, and I am clear on the word I use, discipline, not cut, because we still need to invest, but being very deliberate where. Output of this will be seen towards the end of Q4 next year, especially on the diesel prices. Today, if you look at the total sites we have, 30% of them are off-grid. Even the ones which are on-grid, still on an the grid availability is about 86%. Which means even grid when there is no grid, you are using diesel.
Andrew Bugembe: Obviously, the savings have to come from elsewhere, but again, being cautious that you are not cutting what you need to feed, as top-line growth also continues as is. From a capital allocation also, we are going to concentrate a lot on being very deliberate on which areas and sites do we go to. Of course, there is basic on capacity and modernization, but being deliberate about that. Also, a lot of emphasis is going to be spent on working capital, as we course through these uncertain times, and then we will review what happens after H1 next year. Otherwise, I would say thank you all. Pleasure again.
Phrase Lubega: Thank you, Andrew. On the fintech side, despite difficult macros, we believe there are still a lot of opportunities unfulfilled, and we will continue focusing on those. We expect to see sustained momentum, the momentum that we have already picked up, we expect it to sustain and into the next quarter. We have overcome the trade order distribution enforcement that earlier in Q1 negatively impacted us, so we have fully recovered from that. We continue focusing on ensuring that we grow our agent base to adequately serve our customers, hence with projects that we will continue growing our basic services, as well as advanced services, which we expect to sustain growing way ahead of the basic services. Finally, we will continue focusing on any suboptimal processes that we have, focusing on them to improve and optimize them to ensure that we deliver the projection that we are putting.
Phrase Lubega: Thank you so much. I hand you back to Sylvia.
Sylvia Mulinge: Thank you, Andrew. Thank you, Phrase. As my colleagues have called out and as we have spoken to today, there is no doubt that we have faced significant headwinds this year in MTN Uganda, starting from elections. This is also the year where we have had a lot of disruption coming from even Ebola, the disruption trade orders that we had. I think for us as a leadership team, the mindset that we have is that we may not necessarily always have the capacity or have the ability to be able to choose the obstacles that we face, but we can choose what we do about them. I think that is the mindset that allows us not to stand still and keep moving forward.
Sylvia Mulinge: The plan that we have as a team is, how do we then make the choices that allow us to be able to turn every challenge that we have faced? You can see the challenge of Wi-Fi. Initially, the response was, how do we contain? Also increasingly, we are realizing that it is an opportunity, especially when you look at the impact it has had in terms of unlocking latent customer demand. Therefore, the question for us is, how do we turn this challenge into an opportunity which will enable us to build a stronger brand, a more resilient brand, and one that is a lot more competitive in the market that we are in? For us, the key message is, while we have faced headwinds, it is I think just a chapter. Businesses in the story of MTN, businesses go through different seasons.
Sylvia Mulinge: We are grateful for the support that we are receiving from the regulator in terms of tackling the current challenges that we have. I am confident that we will come out of them very soon. For us, is to also thank you as our shareholders for your continued confidence and support in our business. You have seen that even in spite of the challenges that we have had, we have still been able to pay out a dividend to you that is above our payout ratio, which is a measure of the confidence that we have in terms of how we are exiting this season. Thank you very much for your continued support. As we say here in MTN Uganda, together we remain unstoppable. All the very best, and have a great evening, day, wherever it is that you are. Bye-bye.
