FSDH Initial Reaction: MTN Nigeria FY21 results 
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February 1, 2022/FSDH Research

Key Performance Highlights:

• MTN Nigeria reported robust FY21 results over the weekend. The Company recorded a 22.9% YoY revenue growth to N1654.3 billion in FY21. This solid performance was on the back of a stellar 23.6% YoY revenue growth in 9M21. The Service revenue vaulted 23.3% YoY to N1651.3 billion, primarily driven by a 55.3% YoY spurt in data revenue to N516.1 billion (31.3% of FY21 revenue), supported by an 8.4% YoY rise in Voice revenue to N971.4 billion (58.8% of FY21 revenue) in FY21. The data revenue maintained an accelerated growth trajectory in FY21 as the Company continues to accelerate the expansion of the 4G coverage, enhance the quality and capacity of its network to support increasing data traffic, and grow active data users. The rise in voice revenue was due to higher usage in the active SIM base, resulting in a 7.9% growth in minutes of use. Fintech revenue (4.3% of FY21 revenue) rose by 57.3% YoY due to sustained growth in the use of the Xtratime product and broader fintech services by the customers. Digital adoption continues to accelerate as customers use more digital products and services, a trend accelerated by COVID-19. As a result, digital revenue (1.1% of FY21 revenue) grew by 61.2% as the active user base grew and penetration of the Company’s digital products deepened.
   
• The continued effects of Naira depreciation on lease rental costs, acceleration in the site rollout, and the ongoing COVID-19 related expenditure resulted in operating expenses increasing by 21.9% YoY. The costs of the Company spurted during the financial year with a double-digit increase in almost all costs except costs of starter packs, handsets and accessories, which declined 79.4% YoY to N4.2 billion in FY21. Incidentally, the costs of starter packs, handsets and accessories had risen the most in the last year when it grew 61.0 % YoY to N20.6 billion in FY20. In FY21, the largest increase was in Value-added services (+51.3% YoY), Advertisements (+41.7% YoY), Transmission costs (+41.7% YoY), and roaming costs (+40.2% YoY). Other Operating Expenses rose 12.2% YoY, while employee costs increased 6.7% YoY in FY21. The largest contributor to costs, direct network operating expenses, increased 25.9% YoY to N390.5 billion in FY21. Consequently, the Company’s EBITDA rose by 27.9% YoY, resulting in a 209 bps YoY expansion in EBITDA margin to 53.0% in FY21. This was driven by solid revenue growth on the back of accelerated investments in the network, supported by cost management initiatives through its expense efficiency programme.
   
• MTNN recorded an operating profit of N584.7 billion, a 37.0% YoY growth from N426.7 billion last year. The finance income fell by 24.7% YoY to N11.9 billion in FY21. Furthermore, the finance costs rose 11.4% YoY due to higher borrowing, although the average cost of borrowing declined by 2.1pp. The Company raised N200 billion in bonds that enabled it to diversify funding sources, extend the maturity profile of the Company’s debt portfolio and optimise funding costs. Nevertheless, the profit before tax was reported at N436.7 billion compared to N298.9 billion in 2020. With a slightly higher tax rate of 31.6% in FY21 (FY20: 31.3%), the net profit came in at N298.7 billion (+45.5% YoY), while the earning per share stood at N14.67 per share versus N10.08 per share in FY20. The board proposed a final dividend of N8.57 per share, thereby bringing the total dividend for the year to N13.12 per share, representing an increase of 39.6% YoY.
   
• MTN’s performance demonstrated the underlying strength and momentum of the business, and it has guided service revenue growth of “at least 20%” over the medium term. Looking at the subscribers, mobile subscribers decreased by 8 million to 68.5 million, impacted by the regulatory restrictions on new SIM sales and activations. However, it returned to positive net additions in 4Q21 (+1.0 million). Active data users increased by 1.7 million to 34.3 million, while Active fintech subscribers rose by 4.8 million to 9.4 million.

Market Reaction: Investor reaction to the solid FY21 results was buoyant as the stock closed 3.95% higher at N197.5, versus a 0.91% gain for the All-Share Index (31/1).

MTN Nigeria Earnings Highlights FY21

Source: Company Financials, FSDH