FSDH Initial Reaction: MTN Nigeria 3Q22 results 
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October 31, 2022/FSDH Research

Key Performance Highlights:

• MTN Nigeria maintained its robust momentum from the last quarter, posting double-digit growth in 3Q22. The company reported a solid 21.9% YoY revenue growth to N506.0 billion in 3Q22. The Service revenue vaulted 21.9% YoY to N504.8 billion, primarily driven by a 45.0% YoY spurt in data revenue to N201.2 billion in 3Q22 (39.8% of service revenue) compared to N138.7 billion in 3Q21, supported by a 7.5% YoY rise in voice revenue to N251.9 billion (49.9% of service revenue) in 3Q22. This increase was on the back of a strong recovery in 3Q22 as MTNN continues to manage the impact of the NCC’s directive on NIN-SIM registration. The active data subscribers soared 14.6% YoY to 38.0 million from 33.2 million a year ago, adding 3.7 million active data subscribers YTD, with 4G population coverage at 77.1% (up 7.9pp YoY). The mobile subscribers increased 9.7% YoY to 74.1 million, and the active fintech subscribers jumped 68.7% YoY to 11.2 million in 3Q22.
   
• Voice revenue (49.9% of 3Q22 service revenue) maintained its steady recovery as more customers were reactivated, and gross connections continued to ramp up. Voice revenue increased 7.5% YoY to N251.9 billion in 3Q22, supported by its customer value management initiatives. Data revenue (39.8% of 3Q22 service revenue) spurted 45.0% YoY to N201.2 billion in 3Q22, driven by increased subscribers and data usage. The increase was sustained by an aggressive 4G network expansion and enhanced quality and capacity of the network to support rising data traffic as MTNN continued to drive the conversion of existing subscribers to 4G and drive smartphone penetration. As a result, data traffic grew by 70.6% YoY, with 4G accounting for 78.6% of overall traffic, while data usage (MB per user) increased by 52.2%. The number of smartphones on the network continues to rise, adding about 4.4 million in 9M22, bringing smartphone penetration to 52.0%. In terms of fixed broadband penetration, MTNN added over 430k users, bringing its user base to 1.1 million.
   
• Fintech revenue (4.1% of 3Q22 service revenue) vaulted 11.8% YoY, and growth was broad-based across Xtratime and core fintech services. The fintech active users rose 68.7% YoY to 11.2 million, and registered MoMo wallets spurted more than two times to 9.9 million in 3Q22. Resultantly, the volume of transactions processed was up 112.2% YoY. The digital business (1.1% of 3Q22 service revenue) shot up 83.9% YoY as the penetration of digital products continues to deepen, driven by increased usage from the active base. Revenue from the enterprise business soared by 49.5%, underpinned by onboarding new customers across segments and the uptake of enhanced services.
   
• MTNN recorded an operating profit of N185.4 billion, a 28.2% YoY growth from N144.6 billion a year ago. The total expenses soared by an average of 18.8%, primarily driven by direct network operating expenses (+14.1% YoY), discounts and commissions (+30.9% YoY), and other operating expenses (+45.4% YoY). Moreover, EBITDA spurted by 24.8% YoY, with the EBITDA margin expanding 124 bps to 53.6% in 3Q22, supported by improved operating leverage. Capital expenditure in the quarter stood at N67.4 billion, down 9.7% YoY from N74.6 billion in 3Q21, due to accelerated coverage expansion focusing on the 4G and 5G networks and its rural telephony programme. Furthermore, free cash flow increased by 42.9% YoY to N203.9 billion in 3Q22. The finance income declined 18.1% to N2.4 billion, driven by a 65.2% YoY drop in the interest income on amortised cost investments to N972 million. In comparison, the finance cost soared 34.8% YoY to N55.7 billion, driven by a higher net foreign exchange loss of N14.9 billion in 3Q22. MTNN recorded a PBT growth of 24.3% YoY, while PAT soared by 11.4%, diminished by a higher effective tax rate of 33.8% in 3Q22. The earnings per share stood at N4.35/share versus N3.35/ share in 3Q21.
   
• On 24 August 2022, MTNN launched its open 5G pilot in the lead-up to its anticipated commercial launch. The company intends to launch 5G services in Lagos, Abuja, Port Harcourt, Ibadan, Kano, Owerri, and Maiduguri. The technology is anticipated to extend the reach and capacity of MTNN’s data network in Nigeria and enable much faster speeds and lower latency
   
• On 6 September 2022, MTN Nigeria announced its proposed issuance of up to N23 billion Series 3 commercial paper under its N150 billion CP issuance program. The issuance is a part of MTNN’s strategy to diversify its financing options, with the proceeds deployed towards working capital and general corporate purposes.
   
• On 30 September 2022, the company announced the successful completion of its N115 billion Series 1 fixed-rate bond issuance. The Series 1 Tranche A and Tranche B bonds were issued at a coupon of 13.5% and 14.5%, respectively. Of the total qualifying bids, MTNN opted to issue a combined value of N115 billion across both tranches – N10.09 billion in the 4-year Tranche A and N104.91 billion in the 10-year Tranche B. MTNN intends to use the net proceeds to finance its network expansion, optimize working capital and for general corporate purposes.
   
• On 26 October 2022, European Investment Bank agreed to a EUR100 million financing agreement with MTNN to support its network expansion programme. The investment will support the acceleration of 4G coverage in Nigeria and expand broadband access to accommodate the rising data traffic in line with MTNN’s Ambition 2025 strategy.

Market Reaction: Investor reaction to the solid 3Q22 results was subdued as the stock closed 0.05% lower to N196.10 versus a 0.17% fall in the All-Share Index on Monday (31/10).

MTN Nigeria Earnings Highlights 3Q22

Source: Company Financials, FSDH