FSDH Initial Reaction: MTN Nigeria 2Q22 results 
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August 2, 2022/FSDH Research

Key Performance Highlights:

• MTN Nigeria maintained its robust momentum from the last quarter, posting double-digit growth in 2Q22. The company recorded an 18.0% YoY revenue growth to N479.1 billion in 2Q22. The Service revenue recorded a solid 18.0% YoY to N478.0 billion, primarily driven by a 50.5% YoY spurt in data revenue to N185.8 billion in 2Q22 (38.9% of service revenue) compared to N123.4 billion in 2Q21, supported by a 36.4% YoY rise in other service revenue to N24.5 billion (5.1% of service revenue) in 2Q22. The active data subscribers soared 10.5% YoY to 35.9 million, and the mobile subscribers increased by 7.5% YoY to 74.1 million in 2Q22, following the initial impact of the restriction of outgoing calls placed on subscribers who had not submitted their National Identity Number (NIN) as at 4 April 2022. The active fintech subscribers rose by 5.4 million YoY to 11.5 million in 2Q22.                                                                                                                                                     
• Voice revenue (50.9% of 2Q22 service revenue) was impacted by the restriction of outgoing calls. As a result, voice revenue remained steady at N243.1 billion in 2Q22, as more customers were reactivated and gross connections continued to ramp up. Data revenue (38.9% of 2Q22 service revenue) spurted 50.5% 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. As a result, data traffic grew by 79.3% YoY, with 4G accounting for 77.9% of overall traffic, while data usage (MB per user) rose by 61.8%. The number of smartphones on the network continues to rise with the addition of about 3.4 million in 1H22, bringing smartphone penetration to 50.6%.
   
• Fintech revenue (4.1% of 2Q22 service revenue) rose 12.5% YoY, and growth was broad-based across Xtratime, an airtime lending product, and mobile financial services. Xtratime accounted for 93.8% of the revenue from fintech services. The volume of transactions processed was over 124.3 million in H1 and an active base of 11.5 million subscribers, up 88.5% YoY. The digital business (1.1% of 2Q22 service revenue) vaulted 53.9% YoY as the penetration of digital products continues to deepen, driven by increased usage from the active base. Revenue from the enterprise business rose by 44.6%, underpinned by onboarding new customers across segments and the uptake of enhanced services.
   
• MTNN recorded an operating profit of N173.0 billion, a 23.0% YoY growth from N140.6 billion last year. The total expenses rose by an average of 61.9%, mainly driven by direct network operating expenses (+10.1% YoY), costs of starter packs, handsets, and accessories (+414.7% YoY), and other operating expenses (+28.8% YoY). Nevertheless, EBITDA rose by 18.6% YoY, supported by revenue growth and efficient cost management, with the EBITDA margin expanding 25 bps to 52.6% in 2Q22. Capital expenditure in the quarter was N149.2 billion, up 54.4% due to accelerated coverage expansion. Consequently, the free cash flow decreased by 11.3% YoY to N103.0 billion. The finance income dropped 44.3% to N2.7 billion, while the cost soared 52.2% YoY to N50.6 billion due to a higher net foreign exchange loss of N11.7 billion in 2Q22. Overall, MTNN recorded a PBT growth of 11.5% YoY, while PAT soared by 24.6%, enhanced by a lower effective tax rate of 32.2% in 2Q22. The earnings per share stood at N4.17 per share versus N3.35 per share in 2Q21. In line with the dividend policy, the board has approved an interim dividend of N5.60 kobo per share to be paid subject to appropriate withholding tax to all shareholders registered in the company’s books at the close of business on 18 August 2022, compared toN4.55 kobo per share paid in H1 2021.
   
• On 19 May 2022, MTNN announced that its fintech subsidiary, MoMo PSB Limited, has formally commenced commercial operations. This follows a successful pilot initiated on 16 May 2022 and is a key milestone in delivering the company’s ‘Ambition 2025’ strategic priorities.
   
• On 26 May 2022, MTN Nigeria announced the appointment of Mr. Mazen Mroue as a non-executive director of the company, effective 1 June 2022.
   
• On 19 July 2022, the company announced that GCR Ratings affirmed MTN Nigeria’s national scale long-term and short-term Issuer ratings of AAA(NG) and A1+(NG), respectively, with a stable outlook. Furthermore, the company also announced that Agusto and Co. upgraded MTN Nigeria’s credit rating to Aa+. Separately, MTNN also announced that it has applied to the Securities & Exchange Commission in respect of the registration of a new N200 billion Bond Issuance Programme (Second Bond Issuance Programme), a follow-on to the successful $200 billion debut Bond Issuance Programme in 2021. The proceeds of the bond issuance will be used for capital expenditure (network expansion), working capital management, and general corporate purpose.

Market Reaction: Investor reaction to the solid 2Q22 results was muted as the stock remained unchanged at N200.10 versus a 0.83% fall in the All-Share Index on Monday (1/8). 

MTN Nigeria Earnings Highlights 2Q22

Source: Company Financials, FSDH