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April 29, 2022/FSDH Research

Key Performance Highlights:

• MTN Nigeria maintained its robust momentum from last year, posting double-digit growth in 1Q22. The company recorded a 22.2% YoY revenue growth to N471.0 billion in 1Q22. The Service revenue recorded a solid 22.0% YoY to N469.8 billion, primarily driven by a 54.0% YoY spurt in data revenue to N162.7 billion in 1Q22 (34.6% of service revenue) compared to N105.7 billion in 1Q21, supported by a 5.8% YoY rise in Voice revenue to N258.8 billion (55.1% of service revenue) in 1Q22. The active data subscribers increased by 3.4 million YoY to 35.9 million, while mobile subscribers declined by 1.3 million to 70.2 million in 1Q22, impacted by the regulatory restrictions on new SIM sales and activations. The active fintech subscribers rose by 6.2 million YoY to 10.7 million in 1Q22.
• Voice revenue (55.1% of 1Q22 service revenue) grew a steady 5.8% YoY, led by increased gross connections and higher usage from the company’s active SIM base. Data revenue (34.6% of 1Q22 service revenue) spurted 54.0% YoY, maintaining the accelerated growth trajectory through growth in subscriber base and data usage. This was sustained by an aggressive 4G network expansion and enhanced quality and capacity of the network to support rising data traffic. Data traffic grew by 84.8% YoY and usage (MB per user) by 69.8%. The 4G network now covers 71.7% of the population, up from 70.3% in December 2021. The company added approximately 1.2 million new smartphones to the network, bringing smartphone penetration to 50.0% in 1Q22.
• Fintech revenue (4.4% of 1Q22 service revenue) rose 46.5% YoY on the back of the growing adoption of the company’s fintech services and expanded user base. The volume of transactions processed was over 56.1 million in the quarter, up 132.7% YoY. The digital business (1.1% of 1Q22 service revenue) vaulted 35.3% YoY as it continued to gain traction as the penetration of the digital products continued to deepen, driven by increased usage from the active base. Revenue from the enterprise business rose by 34.3%, underpinned by the onboarding of new customers across segments and the uptake of enhanced services.
• MTNN recorded an operating profit of N179.3 billion, a 34.7% YoY growth in 1Q22. The total expenses rose by 18.3%, mainly due to a 19.2% increase in operating expenses arising from an accelerated site rollout and the effects of Naira depreciation on lease rental costs. EBITDA jumped by 25.7% YoY, mainly powered by revenue growth, with the EBITDA margin expanding by 150 bps to 54.6% in 1Q22. Capital expenditure in the quarter was N162.4 billion compared to N90.0 billion in 1Q21, up 80.8% mainly due to site rollouts, while free cash flow sank by 17.4% YoY to N94.7 billion in 1Q22. The finance income shot up 273.8% YoY to N4.6 billion in 1Q22, driven by N3.9 billion of interest income on bank deposits, partially offset by a significant 28.6% YoY rise in finance costs due to a 119.2% YoY jump in interest expense on borrowings to N14.7 billion in 1Q22 from N6.7 billion. The company recorded a profit before taxation of N143.6 billion, a 39.3% YoY jump in 1Q22. The profit after tax stood at N96.8 billion in 1Q22 compared to N73.8 billion in 1Q21, while the earnings per share stood at N4.76 per share versus N3.63 per share in 1Q21.
• In April 2022, MTNN raised N127 billion through commercial paper issuance, which enabled the company to diversify funding sources, extend the maturity profile of the company’s debt portfolio and optimize funding costs. Separately, on 11 April, MTNN announced the receipt of the final approval from the Central Bank of Nigeria for Momo Service Bank Limited (Momo PSB) to commence operations.
• On the regulatory front, on 4 April 2022, the Nigerian Communications Commission (NCC) announced its decision not to extend the deadline for NINSIM linkage further, requiring all operators to restrict outgoing calls for subscribers whose SIMs were not associated with National Identity Numbers (NINs). As of 25 April 2022, approximately 60 million subscribers have submitted their NINs, representing about 85% of the subscriber base. However, the outgoing voice revenue from the subscribers who are yet to be reactivated contributed approximately 7.8% of total service revenue based on FY 2021.

Market Reaction: Investor reaction to the solid 1Q22 results was lacklustre as the stock closed 0.23% higher at N214.50 versus a 1.64% gain for the All-Share Index on Friday (29/4). 

MTN Nigeria Earnings Highlights 1Q22

Source: Company Financials, FSDH