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Data revenue from Nigeria and Ghana up in the three months to March 31 while the company extends its 4G network in Africa’s most populous state
MTN operations in Nigeria and Ghana reported strong growth in earnings and subscriber numbers in the March quarter, lifted by demand in data.
In Nigeria, MTN’s biggest market, the company added 4.2-million subscribers taking the total to 68.5-million. In Ghana, MTN’s third-biggest market by revenue, the number of customers rose 6.2% to 23.9-million. Earnings before interest, tax, depreciation and amortisation were up 34.5% to GH¢768m.
MTN Nigeria gained market share in Nigeria, expanding its 4G coverage to almost half of the population. Nigeria is MTN’s most profitable market, accounting for about a third of its annual profit, but it has also been one of the most problematic for MTN which has clashed with authorities on taxes and regulatory breaches.
Peter Takaendesa, a portfolio manager at Mergence Investment Managers, said MTN Nigeria’s management appeared to be implementing its strategy well for the long-term sustainability of the business.
However, “the near-term outlook is obviously challenging and near-term share price movements are likely to be more a function of where the oil price and the Naira will go than the quarterly results to be reported by the company”, he said.
Shaun Murison, a market analyst at IG Markets, said MTN Nigeria’s results “weren’t too bad”, with strong growth in revenue from its data and fintech divisions as the “standouts”.
Graphic: DOROTHY KGOSI
The group said that Data revenue, making up 22.6% of service revenue, continued to accelerate, with the growth of 59.2% year on year.
Profit before tax rose 8.9% to 76.3-billion naira (R3.6bn) during the quarter year on year while service revenue rose 16.7%.
“We recorded a solid performance in the first quarter, building on the growth momentum we achieved in the fourth quarter of 2019,” said MTN Nigeria CEO Ferdi Moolman.
Higher costs had, however, translated to “softer than expected” earnings growth, said Murison.
He further said, “increased market penetration was expected to help continue the strong data revenue trend as usage increased over the lockdown period. However, one would expect the new active user numbers will be negatively affected in the short term.”
Takaendesa said that a key challenge was that it was likely to be more expensive for the company to grow its business, given the weakness of the Naira over the short term.
MTN Nigeria continued to expand its network to cater for the strong data traffic growth “while revenue fails to match that run rate due to weaker overall consumer spends during the lockdown and deliberate consumer relief measures such as no fees on mobile money transactions”, he said.
Most of these measures are the right things to do for long-term business sustainability, although may present near-term pressure to business profitability, said Takaendesa.
Fortunately, the business is now highly cash-generative after finishing paying the 2015 regulatory fine instalments and more than 90% of its debt was matched with revenue in the local currency, he said. “The strong customer growth should also limit the revenue pressure in quarters ahead.”
The group said it was too soon to quantify the effect of the Covid-19 outbreak, but there was a decrease in voice traffic and an increase in data traffic towards the end of March.
There was a high degree of uncertainty about the length of disruption to business activity from Covid-19 while exchange rates and the oil price remained volatile.
“Good results coming at the wrong time,” said Takaendesa. “The market hasn’t really rewarded them for this strong result at the current share price,” he said.
MTN’s share price is down about 40% so far in 2020.
Credit: BusinessDay
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