Recently, MTN Nigeria (MTNN) published its Q1-19 earnings scorecard and held an Analyst conference ahead of its planned listing by introduction on the Nigerian Stock Exchange (NSE) before the end of H1-19. The company is ahead of the competition with 60.3 million subscribers (c.25% of the total number of subscribers for the Group), 20.4 million active data users and fibre network coverage of over 25,800km.
These are some of the key takeaways from the financial result and analyst presentation.
MTNN is the undisputed market leader in the Nigerian telecommunication market. According to Nigerian Communications Commission (NCC), the firm has the largest market share by subscriber base, with of c.38.9% market share as at Dec-18 while Globacom (26.2%), Airtel (25.6%) and 9mobile (9.2%) follows in that order.
By revenue, MTNN accounts c.50% to the total revenue generated in the Nigerian telecommunication industry, majorly by Voice which contributes c. 75.4% to the top line in 2018 while Data (14.9%), Digital (2.6%), Fintech (2.8%) and Other (4.2%) accounts for the rest.
Share of Data & Voice:
In Q1-19, Revenue increased 13.2%y/y driven by a 32.4% increase in Data revenue (thanks to an expansion in smartphone penetration, improved network quality and increasing number of subscribers) – and 12.7% uptick in Voice revenue (though affected by the general slowdown in economic activities during the election period).
Financials (PBT, PAT & EBITDA):
PBT and PAT surged, up 44.1% and 50.4% to settle at N70.1bn and N48.4bn respectively despite the uptick recorded in finance cost (up 53.8% to N23.8bn). The EBITDA margin for the company improved to 53.3% for the period buoyed by revenue growth and effective cost management. MTN Nigeria has historically maintained moderate leverage as Net Debt/ EBITDA ratio currently stands at 0.40x and Interest Coverage of 15.4x implying that the headroom for debt finance is high. As such, the Telco is currently in the process of arranging LCY financing to fund CAPEX.
MTNN’s ongoing CAPEX plan is focused on the network, specifically 4G rollout in major cities (current 4G coverage is 24% covering Lagos, Abuja, Kano, and P/Harcourt) across the country to improve network quality and 3G densification and expansion countrywide to improve availability, reliability, data speed, and overall user experience.
Also, it has historically aimed to maximize dividends. In the medium term, MTNN targets a dividend payout ratio of at least 80% of its distributable net income subject to board discretion.
Strong position in the right market
As touted in its Q1-19 investor presentation, MTNN has a “strong position in the right market”. The demographics of the Nigerian market – in terms of huge potential for population growth, mobile phone penetration, and financial inclusion rates – portends opportunities for MTNN to continue to expand in its biggest market. The company’s strategic intent is hinged on consolidating on its voice leadership and expanding its data, digital and FinTech (leveraging PSB license) footprints.
United Capital Plc Research (UCR)