April 27, 2023/Cordros Report
MTN Nigeria Communications Plc (MTNN) released its Q1-23 unaudited results this morning, showing a 3.8% y/y increase in EPS to NGN4.94. The growth in earnings was driven mainly by the robust expansion in the top line (+20.6% y/y) amid a 133bps decline in EBITDA margin.
Revenue grew by 20.6% y/y in Q1-23, primarily driven by the growth in data (+39.4% y/y) revenue. Management revealed that the growth in data revenue, which contributed 40.1% (Q1-22: 34.7%) to revenue was delivered through a combination of increased subscribers (Q1 net additions: +1.70 million), increased usage and traffic across the 4G & 5G networks (+50.3% y/y) and a roll out of an additional 170 5G sites.
The growth in MTNN’s subscriber base (Q1 net additions: +1.10 million) provided support for voice revenue (+7.4% y/y) which accounted for 41.3% of total revenue in Q1-23. Pertinently, MTNN’s subscriber base grew to its highest level (76.70 million subscribers) since commencement of operations in 2001. According to management, the key drivers for this were increased usage supported by a revamped voice proposition, customer value management initiatives and improved rural coverage.
During the quarter, total expenses grew by 24.2% y/y, owing to the (1) continued impact of FX illiquidity; (2) naira devaluation and higher consumer price index (CPI) adjustments on lease rental costs; (3) new site rollouts; and (4) rising energy costs.
EBITDA (+17.7% y/y) grew slower than revenue, with EBITDA margin printing 53.3%, 133bps lower than the previous quarter, owing to the increased costs.
Net finance costs (+42.2% y/y) rose in Q1-23, following a 44.0% increase in finance costs – total debt grew 57.6% y/y (+24.1% y/y incl. lease liabilities) to NGN1.56 trillion as the company issued a NGN150.00 billion commercial paper in March 2023. Finance income increased by 57.3% y/y.
Overall, pre-tax profit grew 8.5% y/y to NGN155.78 billion in Q1-23. Following an effective tax rate of 35.0% (Q1-22: 32.6%) profit after tax printed NGN101.30 billion (+4.6% y/y).
Management call on Wednesday, May 3rd at 3.00 pm Nigerian time. Click here to register.
Comment: Beyond the solid topline growth, we like that MTNN maintained the growth in its subscriber base in the quarter. For 2023E, we maintain our view of sustained growth in the telco’s overall revenue, driven by the firm’s continuous ramp-up of active connections (voice and data) which we believe will be accretive to subscriber base growth. Also, we believe that the reopening of the NIBSS interface for outbound transfer will support MTNN’s fintech business. Our estimates are under review.
