FSDH Initial Reaction: MTN Nigeria FY22 results
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February 1, 2023/FSDH Research
Key Performance Highlights:
- MTN Nigeria reported solid FY22 results on January 31, 2023. The company recorded a 21.6% YoY revenue growth to N2,012.3 billion in FY22. This solid performance was a continuation of the stellar 20.7% YoY revenue growth reported in 9M22. The Service revenue soared 21.5% YoY to N2,006.2 billion, primarily driven by a 46.9% YoY spurt in data revenue to N764.8 billion (38.1% of FY22 revenue), supported by a 6.8% YoY rise in Voice revenue to N1,036.9 billion (51.7% of FY22 revenue) in FY22. The data revenue maintained an accelerated growth trajectory in FY22 as the company continues to expand the 4G coverage, commercial launch of the 5G network, enhance the quality and capacity of its network to support increasing data traffic, and grow active data users. Voice revenue maintained a steady recovery as more customers were reactivated and gross connections ramped up. Moreover, MTN Nigeria continued to manage the impact of the Nigerian Communications Commission’s (NCC) directive on NIN-SIM registration while actively growing the subscriber base. Fintech revenue (4.2% of FY22 revenue) rose by 19.6% 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. Consequently, digital revenue (1.1% of FY22 revenue) grew by 64.1% as the active user base grew and penetration of the company’s digital products deepened.
- In FY22, the continued effects of Naira depreciation on lease rental costs, acceleration in the site rollout, and rising energy costs resulted in operating expenses increasing by 18.8% YoY. The costs of the company spurted during the financial year with a double-digit increase in almost all costs except Transmission costs (-7.9% YoY) and Employee costs (-6.8% YoY). On the other hand, the costs of starter packs, handsets and accessories soared 245.2% YoY to N22.8 billion in FY22. Moreover, roaming costs (+70.1% YoY), Advertisements (+49.0% YoY), Other Operating Expenses (+43.7% YoY), Discounts and commissions (+22.8% YoY), Interconnect costs (+14.6% YoY), and Value-added services (+8.2% YoY) increased in FY22. The largest contributor to costs, direct network operating expenses, increased 18.1% YoY to N459.0 billion in FY22. Consequently, the Company’s EBITDA rose by 22.0% YoY, resulting in a 17 bps YoY expansion in EBITDA margin to 53.2% in FY22. This was driven by solid revenue growth on the back of accelerated investments in the network, supported by cost management initiatives.
- MTNN recorded an operating profit of N733.3 billion in FY22, a 25.4% YoY growth from N584.7 billion a year ago. The finance income grew by 15.3% YoY to N13.8 billion in FY22, mainly due to higher interest income on bank deposits. However, the finance costs also rose 33.2% YoY due to higher borrowing and net foreign exchange losses. Nevertheless, the profit before tax was reported at N534.0 billion compared to N436.7 billion in 2021. With a slightly higher tax rate of 32.8% in FY22 (FY21: 31.6%), the net profit came in at N358.9 billion (+20.2% YoY), while the earning per share stood at N17.79 per share versus N14.67 per share in FY21. Capital expenditure in the year stood at N504.3 billion, up 23.5% YoY from N408.3 billion in FY21, due to accelerated coverage expansion focusing on the 4G and 5G networks and its rural telephony programme. Furthermore, free cash flow increased by 20.7% YoY to N566.0 billion in FY22. The board proposed a final dividend of N10.00 per share, thereby bringing the total dividend for the year to N15.60 per share, representing an increase of 18.9% YoY. The dividend will be paid on April 20, 2023, electronically to the shareholders of the record on March 27, 2023.
- Looking at the subscriber base, the company’s mobile subscribers increased by 10.5% YoY to 75.6 million as it added 7.2 million subscribers in 2022. The active data users jumped 15.3% YoY to 39.5 million (5.2 million active users added in 2022), while the active fintech subscribers soared 57.5% YoY to 14.9 million as the company added 2.0 million active mobile money (MoMo) wallets since the launch of PSB.
- On 20 January 2023, MTNN announced that it was concluding arrangements to allot incentive shares to shareholders who bought into its public offer and held on to at least 20 ordinary shares between January 31, 2022, and January 31, 2023. The arrangement included an innovative incentive structure of one free share for every 20 purchased, subject to a maximum of 250 free shares per investor in its December 2021 public offer for sale.
Market Reaction: Investor reaction to the solid FY22 results was subdued as the stock remained unchanged at N225.00 versus a 0.49% gain in the All-Share Index on Tuesday (1/2).
MTN Nigeria Earnings Highlights FY22
Source: Company Financials, FSDH