FSDH Initial Reaction: MTN Nigeria 1Q24 results 
Kindly click here to download the report.

April 30, 2024/FSDH Research

Key Performance Highlights:

• MTN Nigeria’s 1Q24 results were adversely affected by rising inflation and continued Naira depreciation off an already low base. Despite this, MTNN posted a revenue growth of 32.5% YoY to N753.0 billion in 1Q24. Mobile subscribers moderately increased 1.3% YoY to 77.7 million. Voice revenues increased 14.9% YoY to N318.9 billion due to increased customer usage. This growth was attributable to successful CVM initiatives by the Company and revamped voice propositions. Further, Data revenues remarkably increased 53.4% YoY, surpassing Voice revenues and reaching N349.5 billion. This solid growth in data was led by improved data bundle offerings, wide network coverage, enhanced capacity and an 8.0% YoY increase in data subscribers to 44.5 million. Digital revenue jumped 88.6% YoY to N13.6 billion as the adoption of digital products continues to grow with user journey optimization, revamped digital offers and the growth of the active base, up 43.0% to 16.7 million YoY. The instant messaging platform Ayoba recorded a 27.3% YoY increase in subscribers to 8.5 million in 1Q24. However, the Fintech revenues remained almost flat at N22.8 billion in 1Q24 due to the NIN requirement for KYC validation, impacting approximately a million active wallets. Nevertheless, Fintech Subscribers increased 48.8% YoY to 4.8 million. Note that this count was significantly down compared to 14.5 million in 4Q23 due to the KYC requirement and the delays in CBN approvals for some of the commercial initiatives that impacted the growth of active wallets.
   
• The combined effects of naira depreciation, higher consumer price index (CPI) energy costs on lease rental, and the introduction of the VAT on tower leases mainly resulted in higher operating expenses. Consequently, the Company’s Operating Profit declined 15.7% YoY to N174.1 billion, while its Operating margin contracted to 23.1% in 1Q24 from 36.4% in 1Q23. EBITDA moderately fell by 1.9% YoY to N297.0 billion Vs. 302.6 billion in 1Q23, while the EBITDA margin declined by 1383 bps YoY to 39.4% from 53.3% in 1Q23. (Adjusting for the effects of naira depreciation (11.6pp), the EBITDA margin for FY 2023 would have been 51.0%).
   
• MTNN’s Finance Income decreased 19.5% YoY to N5.3 billion, while Finance Costs more than doubled (115.4% YoY) to N98.7 billion in 1Q24, reflecting the higher finance costs on leases, borrowings, and other derivative liabilities. Moreover, the Net foreign exchange loss steeply increased to N656.4 billion, compared to just N4.5 billion in 1Q23, mainly due to the significant naira depreciation from N461/$ in March 2023 to N1,309/US$ at the end of March 2024. Furthermore, MTNN reported a Tax credit in 1Q24 of N183.0 billion, compared to a Tax expense of N54.5 billion in 1Q23. Consequently, the Company reported a Net loss for the period of N392.7 billion in 1Q24, compared to a Profit of N107.6 billion in 1Q23. Adjusting for the net forex loss, PAT would have been N47.1 billion (down by 57.8%). Further adjusting for the impact of the naira devaluation in opex, PAT would have been down by just 5.3% to N105.6 billion. The Company reported a Loss Per Share of N18.63 in 1Q24 versus an Earnings Per Share of N5.13 in the prior year quarter.
   
• Capex increased by 49.1% to N179.7 billion, with a capex intensity of 23.9%. The increase in capex reflected the impact of the significant devaluation of the naira amidst forex supply challenges. As a result, free cash flow declined by 35.6% to N117.2 billion during the quarter. MTNN’s interim dividend for 2024 is Nil, whereas 2023 was N5.60 kobo per share.
   
• Sequentially, the total subscriber count declined by 2 million VS 4Q23 due to the implementation of the NIN-SIM directive. Further, data subscribers also decreased by 78k Vs. 4Q23. Revenues were up just 8.2% on a QoQ basis to N753.0 billion, while the Operating Profit increased by 5.4% on a QoQ basis to N174.1 billion. Note that EBITDA remained somewhat flat on a QoQ basis. However, the Loss for the period increased to N392.7 billion in 1Q24 from N284.4 billion in 4Q23.
   
• In December 2023, the NCC issued an industry-wide directive requiring full barring of subscriber lines not linked to their NIN. As of 29 March, MTNN had effectively barred the affected subscribers in the first two batches, and most of these subscribers have since been successfully reinstated. The net effect was a 2 million reduction in the total subscribers in Q1 despite barring 8.6 million affected subscribers. This was supported by the aggressive drive for gross connections. The NCC has extended the 15 April deadline for barring subscribers with less than five lines linked to an unverified NIN to 31 July 2024. This provides more time for ~8.9 million affected subscribers to complete the necessary verification exercise.

 
Market Reaction: Investor reaction to the 1Q24 results was positive as the stock increased 3.96% to N210.00 versus a 0.35% gain for the All-Share Index on 30/4.

MTN Nigeria Earnings Highlights 1Q24

Source: Company Financials, FSDH