MTN Group delivered a strong operational performance in the March quarter, but has warned the potential effect of the conflict in the Middle East could continue well beyond any potential end of hostilities.
The group, Africa’s largest network provider, on Tuesday reported a 20% rise in service revenue to R56.86bn for the quarter to end-March, which represented an increase of 21.1% in constant currency.
The increase was led by sustained commercial execution at its Nigeria, Ghana, Cameroon and Ivory Coast subsidiaries, the group said.
Earnings before interest, tax, depreciation and amortisation (ebitda) was up 28.3% at R27.64bn.
“We continue to monitor the situation around the conflict in the Middle East and the impact on oil prices and availability, food prices and broader inflation, as well as foreign exchange rates for our markets,” said CEO Ralph Mupita.
“The potential impacts could continue well beyond any potential end of hostilities.”
Increased supply chain and currency volatility have elevated macroeconomic and execution risks, he said.
Group data revenue increased by 36.1% and fintech revenue grew by 22.4%.
The group reported total subscribers of 312.7-million, 5.4% higher than a year ago. Active data subscribers were up by 8.7% to 175.6-million and active Mobile Money (MoMo) monthly active users increased by 8.2% to 67.4-million.
Fintech transaction volumes increased by 15.8% to 6.3-billion, while the value of these transactions rose by 32.8% to $163bn.
Despite the continued competitive pressure on the prepaid market at MTN South Africa, service revenue growth edged up 0.7%.
South African data revenue increased by 4.9%, but fintech revenue decreased by 18.1%. Reported ebitda declined by 12.5%.
The group said MTN SA delivered a mixed performance in the first quarter, with continued growth in postpaid, enterprise and data partially offset by the impact of deliberate actions taken to reset the prepaid base with regards to the contribution from XtraTime.
“These actions weighed on short-term revenues but are intended to improve the sustainability and profitability of the prepaid business over the medium term,” it said.
Across its operations, the group invested capital expenditure of R9.6bn to sustain the quality, coverage and capacity of its networks.
Mupita said a more supportive macroeconomic and foreign exchange backdrop in Ghana, Nigeria and Uganda supported accelerated investment to meet robust demand and to capture the future opportunities MTN has identified.
“We continue to transition to our Ambition 2030 strategy, with good progress in our strategic priorities,” he said.
“In connectivity, we continue to drive strong performances in MTN Nigeria and MTN Ghana while focusing on delivering improvements in MTN SA, and particularly its prepaid business,” he said.
The group continued work on the structural separation of its fintech businesses in several markets, announcing key regulatory approvals in the quarter.
MTN Ghana became the first market to announce the completed structural separation of its fintech business, while MTN Nigeria obtained governance approvals. At the MTN Nigeria AGM at the end of April, shareholders voted in favour of the structural separation of MoMo Payment Services Bank and the Y’ello Digital Financial Services. In Uganda, regulatory approvals are outstanding.
In digital infrastructure, the proposed IHS acquisition will position the platform to unlock additional value from its tower portfolio.
The group announced in February that it would buy the 75% it doesn’t already own in Africa’s largest cellphone tower operator, IHS, for $2.2bn (R35bn) in an all-cash transaction. The deal will result in service-revenue uplift and core earnings margin expansion.
After the deal, which values IHS at $6.2bn, the tower operator will delist from the New York Stock Exchange.
The synergies for the transaction are clear-cut — MTN operates in all of IHS’s African markets and IHS derives about 70% of its revenue from MTN.
The transaction is currently progressing through the relevant regulatory and authority approval processes.
Operationally, the group will remain focused on maintaining the robust operating performance in Nigeria and Ghana, and accelerating the encouraging momentum seen in several of its other markets.
At MTN SA, the group continues driving initiatives to improve performance, particularly in prepaid.
In its fintech platform, it is focused on completing the structural separation in Nigeria, Ghana and Uganda.
“We remain confident in our ability to deliver against our strategy, underpinned by our disciplined capital allocation, cost control and robust risk management processes,“ Mupita said.
The group has retained its medium-term guidance, which targets service revenue growth of “at least high-teens” for MTN Group; “low to mid-single digits” for MTN South Africa; “at least low-20%” for MTN Nigeria; and “high-20% to low-30%” for fintech.
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