October 30, 2023/CSL Research

MTN Nigeria’s 9M 2023 UNAUDITED results, showed the company sustained the momentum in its Revenue growth, reporting a 21.8% y/y growth in Revenue to N1.77tn from N1.46tn in 9M 2022. On a q/q basis, Total Revenue increased by 4% to N614.2bn in Q3 2023 from N590.6bn in Q2 2023. The growth in Service Revenue (up 21.4% y/y) remained the major driver of the rise in Total Revenue.

Data Revenue remained strong in 9M 2023, increasing by 36.4% y/y to N749.53bn from N549.66bn in 9M 2022. The growth in Data Revenue could be attributed to increased usage. The growth was also supported by the revamp of the company’s data bundle offerings, an increase in the penetration of smartphones, and investments in its network to expand coverage and capacity and enhance customer experience. The company noted that its active data users increased by 13.3% y/y to 43.1 million, adding 3.6 million active users in 9M 2023.

According to Management, the company’s 4G network now covers 80.5% of the population, up from 79.1% in December 2022. Data usage (GB per user) grew by 29.1% y/y to 8.6GB, and the number of smartphones on the MTN network increased by 7.6%, bringing smartphone penetration to 53.4%, up 1.4ppt y/y. Consequently, the company recorded a 46.3% y/y growth in data traffic, with the 4G network accounting for 83.7% of the total traffic (up 5.2pp y/y). The company’s 5G network now covers 7.5% of the population.

Voice Revenue also grew at a double-digit rate of 10.6% y/y to N834bn in 9M 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 4.8% y/y increase in its subscriber base, adding 2m subscribers to increase the mobile subscribers to 77.8m in 9M 2023. Likewise, we note a significant improvement in Fintech Revenue, up 5.6% y/y to N64.69bn, and Digital Revenue, up 55.4% y/y to N24.71bn in 9M 2023.

Growth in Direct Network Operating Costs Surpassed Revenue growth, climbing by 34% y/y to N447.60bn in 9M 2023 from N333.93bn in 9M 2022. Operating Expenses rose by 22.2% y/y to N417.42bn in 9M 2023 from N341.64 in 9M 2022. The growth in Opex was driven mainly by higher lease rental costs impacted by the naira devaluation, higher consumer price index (CPI) and energy costs, and the 2023 Finance Act which introduced VAT on tower leases effective September 2023. Despite that, EBITDA increased by 16.3% y/y to N907.93bn in 9M 2023 from N780.57bn in 9M 2022. However, EBITDA margin shrunk by 240bps y/y to 51.2% in 9M 2023. Operating Profit grew by 13.2% y/y to N608.43bn in 9M 2023 from N537.68bn in 9M 2022, despite an increase in Depreciation and amortization to N299.5bn in 9M 2023.

Net Finance Cost increased, up 174.41% y/y to N375.96bn in 9M 2023 from N137bn in 9M 2022. The elevated Net Finance Cost mirrors the 173.4% y/y increase in Finance Cost despite a 157.1% y/y rise in Finance Income. The increase in Finance Income was driven by higher interest earned on amortized investments. On the other hand, Finance Costs rose due to increased borrowings and a forex loss of N232.8 billion y/y on their company’s net foreign currency liabilities following the significant devaluation of the naira in June. To sustain revenue growth, the company used trade lines to fund credits used for its network capital expansions. This resulted in an additional unrealized forex loss of N87.5billion on outstanding matured trade obligations as of 30 September 2023.

Pre-tax Profit decreased by 42% y/y to N232.47bn in 9M 2023 from N400.67bn in 9M 2022. Consequently, Net Profit declined by 45.2% y/y to N147.36bn in 9M 2023 from N181.62bn in 9M 2022. EPS declined to N7.06/s in 9M 2023 from N12.89/s in 9M 2022.

We have a target price of N318.20/s with a BUY recommendation on the stock. Current price; N246.5/s.

MTNN 9M 2O23

Source: Company’s Financials, CSL Research

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