MTN Nigeria’s H1 2023 UNAUDITED results released last week, showed the company sustained the momentum in its Revenue growth, reporting a 22% y/y growth in Revenue to N1.1tn from N950bn in H1 2022. On a q/q basis, Total Revenue increased by 4% to N590.6bn in Q2 2023 from N568.1bn in Q1 2023. The growth in Service Revenue (up 21.6% y/y) remained the major driver of the rise in Total Revenue.  

Data Revenue remained strong in H1 2023, increasing by 34.9% y/y to N470bn from N348.4bn in H1 2022. The growth in Data Revenue could be attributed to increased usage supported by the enhanced capacity through network expansion and smartphone penetration. We note that Data revenue was impacted by the harmonization of telecommunication codes in Q2. The company reported that its 4G network now covers 80% of the population, up from 79.1% in December 2022, and data usage (GB per user) grew by 28.2% to 8.1GB in the period under review. The number of smartphones on the company’s network also increased by 1.8 million, bringing smartphone penetration to 53.0%. The company reported that active data users increased by 11.5% to 41.0 million as it added 1.5 million active users in H1 2023.  

Voice Revenue also grew at a double-digit rate of 12.1% y/y to N562.6bn in H1 2023. We attribute the growth in Voice Revenue to its rural expansion program and the increase in voice subscribers which was supported by the company’s revamped voice proposition and increased customer value management. The firm recorded a 4% y/y increase in its subscriber base, adding 1.5m subscribers to increase the mobile subscribers to 77.1m in H1 2023. Likewise, we note a significant improvement in Fintech Revenue, up 7.8% y/y to N43.6bn, and Digital Revenue, up 49.9% y/y to N15.3bn in H1 2023.  

Growth in Direct Network Operating Costs surpassed Revenue growth, climbing by 28.3% y/y to N276.9bn in H1 2023 from N215.8bn in H1 2022. Operating Expenses rose by 18.8% y/y to N267.3bn in H1 2023 from N224.9 in H1 2022. The growth in Opex reflects the impact of the Naira depreciation, elevated inflation and unavailability of FX leading to increased costs of lease rentals and additional site rollout costs. Despite that, EBITDA increased by 20.6% y/y to N614.4bn in H1 2023 from N509.3bn in H1 2022. In addition, EBITDA margin shrunk, by 58bps y/y to 53.3% in H1 2023. Operating Profit grew by 19.7% y/y to N421.5bn in H1 2023 from N352.3bn in H1 2022 despite an increase in Depreciation & Amortisation to N192.8bn in H1 2023.  

Net Finance Cost increased, up 164.3% y/y to N221.1bn in H1 2023 from N83.6bn in H1 2022. The elevated Net Finance Cost mirrors the 161.8% y/y increase in Finance Cost despite a 132% y/y rise in Finance Income. The increase in Finance Income was driven by higher interest earned on amortized investments (up 208.4% to N12.95bn). On the other hand, Finance Costs rose mainly due to the company’s exposure to the foreign exchange crisis given the recent devaluation of the Naira resulting in net FX loss increasing by 864.5% to N131.4bn from N13.6bn in H1 2022.