Growth in MTN’s Nigerian mobile money business — billed to be a major piece in its plan to dominate Africa’s fintech industry — was held back in the third quarter by the temporary suspension of a central bank system in that country, the company said on Monday.
Like rival Vodacom, MTN has staked a large part of its current and future growth on new areas beyond the declining voice business, led by financial services. Taking advantage of its dominant position in Africa’s most populous nation is expected to help attract even more customers — well past the present 61-million — onto its platform.
Nigerian regulators gave MTN the final green light earlier in April to scale up its fintech services in the continent’s biggest market. The licence enables it to offer payment services and receive deposits — an opportunity it had been awaiting for years — as it looks to provide services for many Africans who lack traditional bank accounts. MTN has 11.2-million active MoMo (mobile money) users in Nigeria and expects to launch its new financial services offering in the second quarter.
However, the quarter to end-September showed 1.8-million active mobile money wallets for MTN Nigeria, down 29.4%.
During the quarter, “we moderated commercial activities and prioritised the enhancement of our control systems. This has resulted in short-term pressure on our active base in Q3 [third quarter] as the Nigerian Interbank Settlement System interface has been temporarily suspended,” said MTN Nigeria CEO Karl Toriola.
Nigeria, which has been trying to shake off its image as a risky frontier market, is the most profitable for Africa’s biggest mobile operator, accounting for about 40% of its core profit in 2021.
The Nigerian Interbank Settlement System, owned by the Central Bank of Nigeria, operates systems and infrastructure for handling interbank payments. One of its main tasks is reducing potential bottlenecks or delays commonly associated with interbank transfers and settlements.
MTN expects the system to be reopened in the fourth quarter. “We expect a more sustainable growth of active wallets once we reopen [Interbank Settlement] and drive initiatives to grow our base,” said Toriola.
This comes as MTN Nigeria reported service revenue growth of 20.6% to 1.452-trillion naira (about R60.45bn) for the nine months to September, with mobile subscribers increasing 9.7% to 74.1-million.
Drop in traffic
MTN Nigeria had experienced a drop in traffic after communications regulator the Nigerian Communications Commission (NCC) said in early April it will not extend its new SIM-card registration rules. This meant operators had to restrict outgoing calls of subscribers whose SIMs are not linked with national identity numbers, similar to SA’s ID system.
However, the mobile operator has seen a “strong recovery in Q3 as we continue to manage the impact of the NCC’s directive on NIN-SIM registration on our base. Growth was broad-based across our key revenue lines, such as voice, data, fintech and digital services,” said Toriola.
Earnings before interest, tax, depreciation, and amortisation (Ebitda) grew 23% to 780.6-billion Naira, while profit after tax grew 22.1% to 269-billion Naira.
Market players appear to be positive about the Nigerian unit’s performance.
Shaun Murison, a senior analyst at IG Markets, said MTN Nigeria’s results were ahead of expectations and “well received by markets”.
“Nigeria accounts for about 45% of group Ebitda so its good to see a robust performance there. The improved performance finds place in a challenging economic environment and pressured consumer which applauds the growth in revenue earnings and client base further,” Murison said.
MTN’s share price was up 1.04% at R129.84. Peers, Vodacom and Telkom, were down 0.88% and 0.19%.
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