MTN Nigeria Communications Plc (MTN Nigeria) on Friday January 28 announced its audited results for the financial year ended December 31, 2021.
The leading telecommunications company’s Mobile subscribers decreased by 8 million to 68.5 million but returned to positive net additions in fourth quarter (Q4) 2021. Active data users increased by 1.7 million to 34.3 million. Active fintech subscribers rose by 4.8 million to 9.4 million. Service revenue increased by 23.3% to N1.7 trillion.
Key metrics:
Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 27.9percent to N877.1 billion. EBITDA margin increased by 2.1 percentage points (pp) to 53 percent.
Profit after tax (PAT) grew by 45.5percent to N298.7 billion. Earnings per share (EPS) rose by 45.5percent to N14.67 kobo. It proposed final dividend of N8.57 kobo per share. MTN Nigeria also reported enhanced guidance for service revenue growth of “at least 20percent” over the medium term.
MTN Nigeria is one of Africa’s largest providers of communications services, connecting approximately 68 million people in communities across the country with each other and the world.
Guided by a belief that everybody deserves the benefits of a modern connected life, MTN Nigeria’s leadership position in coverage, capacity and innovation has remained constant since its launch in 2001.
MTN Nigeria is part of the MTN Group – a multinational telecommunications group, which operates in 20 countries in Africa and the Middle East.
Karl Toriola, MTN Nigeria CEO, said: “2021 was a significant year for our Company. We commemorated our 20th anniversary with a celebration of our customers and all the stakeholder relationships that enabled our journey. In addition, we made good progress towards our Ambition 2025 objectives, demonstrating the strength and resilience of the business. This reflects the firm foundations on which our business is built, the tenacity and commitment of our people, and the support of our stakeholders.”
“We continue to deepen our contributions to society in line with our priority to enhance shared value. During the year, our total contribution to the Government through direct and indirect taxes was N669.2 billion, up 83.4percent, representing approximately 40percent of our total revenue. We extended our interventions, in response to the challenges to our nation arising from the COVID-19 pandemic, providing a further N1.5 billion to the Coalition Against Covid-19 (CACOVID) in support of efforts aimed at curbing the spread of the virus. This is supplementary to other interventions to protect the health and well-being of our people, customers and stakeholders. We also worked hard across our business to embed new ways of working while harnessing the opportunities presented by the trends in digital adoption,” the CEO said.
“In line with our objective to share our Company’s success with our various stakeholders, the first phase of a series of transactions to increase Nigerian ownership in MTN Nigeria was conducted during 2021 by way of bookbuild to institutional investors and fixed price offer to retail investors (the Offer). The outcome of the Offer will be announced once regulatory approvals have been obtained.
“In addition, we committed to participating in the Road Infrastructure Tax Credit scheme to rehabilitate the Enugu-Onitsha expressway, with ongoing engagement to kick off the project. We signed a five-year deal to support the Nigerian Football Federation as the official communications partner and actively supported the Super Eagles’ participation in the African Cup of Nations competition. We are also committed to designing and constructing a new, world-class corporate headquarters,” the CEO said.
Operationally, our mobile subscriber base declined by 10.6percent and was impacted by the regulatory restrictions on new SIM sales and activations. However, we are pleased to have returned to positive growth in Q4 2021, adding approximately 1 million subscribers as we continued to ramp up the alignment of our SIM registration and activation centres with the regulations.
“Active data subscribers rose by 5.3percent YoY to 34.3 million as we continued to drive data conversion from our existing subscriber base. To enable this, we significantly enhanced our connectivity infrastructure with the acquisition of an additional 800MHz spectrum and the accelerated rollout of our 4G network, which now covers more than 70percent of the population.
Furthermore, we were successful in our bid to acquire a 100MHz spectrum licence in the 3.5GHz band, on which we will roll out 5G services, at the auction held in December 2021. 5G provides the foundation on which future network performance will be built. Our successful bid presents an exciting opportunity to be at the forefront of delivering technological advancements to as many Nigerians as possible,” noted further.
“Our fintech business continued to gain traction with approximately 770,000 registered mobile money (MoMo) agents and active users more than doubling to 9.4 million. This provides a solid foundation on which to launch the MoMo Payment Service Bank (PSB), for which we have received an Approval in Principle. The MoMo PSB will provide a powerful platform to drive digital and financial inclusion in Nigeria. In recognition of our progress in the fintech space, we received a $500,000 grant from the African Development Bank to fund research on financial inclusion for women.
“Driven by the strong operational performance, we delivered growth across all revenue lines, demonstrating the underlying strength and momentum of the business. Service revenue grew by 23.3percent, exceeding our mid-teen target, driven mainly by growth in voice, data and fintech service revenue lines.
“EBITDA rose by 27.9percent, while our EBITDA margin expanded by 2.1pps to 53percent, in line with our Ambition 2025 objective. This was driven by solid revenue growth on the back of accelerated investments in our network, supported by cost management initiatives through our expense efficiency programme. Overall, these efficiencies translated into an increase of 46.1percent in Profit Before Tax and 45.5percent in Profit After Tax.
In line with our dividend policy, the board has proposed a final dividend of N8.57 kobo per share to be paid out of distributable net income. This brings the total dividend for the year to N13.12 kobo per share, representing an increase of 39.6percent.”
Key financial highlights
Voice revenue includes interconnect and outbound roaming voice; Data revenue includes roaming data; Digital revenue excludes bulk SMS and USSD services; Fintech revenue includes MTN Xtratime and mobile financial services; Other service revenue includes SMS, USSD, Information and Communications Technology (ICT) & infrastructure and devices; while Free cash flow (EBITDA minus capital expenditure) excluding IFRS 16 impact was N430.7 billion, up 31.1 percent.
Operational review
Service revenue grew by 23.3percent despite the 10.6percent decline in our subscriber base. Data continued to lead service revenue growth, supported by voice, fintech and digital service.
Voice revenue grew by 8.4percent due to higher usage in MTNN active SIM base, resulting in a 7.9percent growth in minutes of use. This was supported by the success of customer value management (CVM) initiatives, reducing the impact of SIM registration and activation restrictions in H1 and network restrictions in some locations towards the end of 2021. In addition, MTNN continues to ramp up gross connections through its rural telephony initiatives while expanding its customer acquisition points, further supporting growth in voice revenue.
Data revenue rose by 55.3percent, maintaining an accelerated growth trajectory in Q4 as MTNN continues to accelerate the expansion of our 4G coverage, enhance the quality and capacity of its network to support increasing data traffic, and grow active data users. Average MB per user rose by 62.7percent, enabling overall data traffic growth of 85.3percent. Also, smartphone penetration on the network grew by 4.0pp to 50percent. MTNN 4G network now covers 70.3percent of the population, up from 60.1percent in December 2020.
Fintech revenue rose by 57.3percent due to sustained growth in the use of its Xtratime product and broader fintech services by our customers. MTNN expanded its MoMo agent network, through its one distribution strategy, with the addition of over 374,000 registered agents bringing the total number to approximately 770,000, up 94.8percent. As a result, transaction volume rose by 167percent to 137.5 million from an active user base of 9.4 million, up 102percent. Additionally, the Approval in Principle we recently obtained in relation to our MoMo PSB licence application is an important step towards final approval, which will allow MTNN to expand its service offerings and scale its fintech business, thereby achieving more meaningful financial inclusion in the country.
Digital adoption continues to accelerate as customers use more digital products and services, a trend accelerated by COVID-19. As a result, digital revenue grew by 61.2percent as the active user base grew and penetration of MTNN digital products deepened. The active user base rose by 162.1percent to 7.5 million, led by Ayoba – its instant messaging platform – with approximately 3.8 million active users, up 172.9percent.
“Enterprise business performance was underpinned by the onboarding of new customers across our key segments and the uptake of our enhanced services. As a result, service revenue from enterprise business was up by 12percent. We are pleased with the implementation of the new pricing framework for USSD services which will pave the way for full recovery of the outstanding debts.
On the costs side, we made good progress with our expense efficiency programme through which we realised N25.1 billion in cost savings, representing a 1.5pp margin impact. However, the continued effects of Naira depreciation on lease rental costs, acceleration in our site rollout, and the ongoing COVID-19 related expenditure resulted in operating expenses increasing by 21.9percent.
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Despite this, our ability to drive operating leverage has enabled EBITDA growth of 27.9percent and the expansion of our EBITDA margin by 2.1pp to 53percent.
“We recorded sustained increase in the demand for data, which extended beyond the usage spikes seen during COVID lockdowns. This drove our acceleration of capex investment. As a result, capex in the period was up by 36.7percent to N408.3 billion, as we ramped up investment in our network to capture growth through service quality leadership and aggressive coverage expansion, focusing on the 4G network. We deployed 9,336 4G sites representing approximately 75percent of the total sites deployed during the period, reflecting solid data revenue growth.
“We recorded healthy free cash flow of N468.8 billion, up by 21.1percent, substantiating the quality of our ramped-up investment. Core capex excluding the right of use assets rose by 26.8percent to N304.4 billion, while capex intensity remained within target levels at 18.4percent. Depreciation and amortisation rose by 12.9 percent because of the impact of increased site rollout.
Although net finance costs increased by 15.8percent due to higher borrowing, the average cost of borrowing declined by 2.1pp. As part of our strategy to optimise our capital structure, we tapped into the debt capital market and raised N200 billion in bonds across two oversubscribed issuances. The bonds issued enabled us to diversify funding sources, extend the maturity profile of the Company’s debt portfolio and optimise funding costs.
Update on New SIM Registration Directive
MTNN continues to actively support the Federal Government’s National Identity Number (NIN) enrolment programme, having deployed more than 2,300 points of enrolment across the country.
“At the same time, we continued to work with the National Identity Management Commission (NIMC) to accelerate the bulk verification of NINs collected. As of 31 December 2021, approximately 44 million subscribers have submitted their NINs, representing around 64percent of our subscriber base and 74percent of service revenue.
“The current deadline for NIN verification is 31 March 2022. While an extension is solely in the hands of the authorities, we are working constructively with them and the industry, supporting the NIN enrolment drive, to ensure that customers are not unduly inconvenienced and service revenue for 2022 is not impacted”.
Outlook
MTNN is focused on building on the platform of success laid in 2021.
“Our return to positive subscriber net additions in Q4 2021 establishes a solid basis for growth in 2022 as we ramp up gross connections through our rural connectivity drive and CVM initiatives. As part of our rural connectivity programme, we plan to connect approximately 2,000 new communities in 2022.
“We are seeing structurally sustained data growth. As a result, we are investing in network and information technology infrastructure, and have secured the relevant frequencies to meet the higher demand. This involves accelerating the expansion of our 4G coverage and providing home broadband to capture a significant share of market growth. We will commence the initial rollout of 5G services once the acquisition process is completed to further deepen broadband penetration in Nigeria, enhance customer experience and unlock new revenue streams.
“We have made significant progress with our super-agent licence, expanding the agent network across the country.
However, as the business transits to MoMo PSB once the final approval is obtained, we remain focused on developing the range of additional services we can offer customers to drive digital and financial inclusion.
“We will sustain our drive for cost management across the business through our expense efficiency programme and strengthen our operations and financial position to unlock efficiency and support margins. Although the availability of foreign exchange remains a constraint, we strive to minimise its impact on the business, ” the Telco said.
Medium-term Guidance
In line with the accelerated growth MTNN is seeing, “we expect service revenue growth of “at least 20 percent” over the medium term. In delivering on the service revenue growth guidance, we will continue to focus on capex efficiencies, margin expansion, operating cashflow growth and improving returns to shareholders”, Toriola noted.
