MTN share price up almost 200% year to date and to surge higher on Nigeria license

MTN, which on Friday received a provisional licence to operate its mobile money platform in Nigeria, is on track to generate a fifth of its revenue from fintech.

Nigeria is the continent’s biggest market but only a small percentage of the population use a bank account, making mobile money a very attractive prospect, says tech analyst Arthur Goldstuck.

MTN’s share price rose as much as 19.41% during the day and is up 173.2% in the year to date. It closed 13.15% higher at R167 on Friday.

South Africa’s two leading telecoms operators, Vodacom and MTN, continue to diversify into digital payments, insurance and shopping apps in a bid to tap the unbanked potential on the African continent.

The diversification comes as the popularity of voice calls declines and as data prices — and thus profits — drop.

While mobile money has not seen much growth in South Africa because 70% of the population has a bank account, M-Pesa is probably the best-known mobile money platform in Africa with more than 50-million customers in Kenya, Tanzania, Mozambique, Lesotho, Ghana and the Democratic Republic of Congo.

Vodacom and Safaricom run M-Pesa, which came to public attention because of its success in Kenya, where only one in 10 citizens had a bank account when it was launched. Using mobile payments is now the de facto banking system in Kenya, said Goldstuck.

Nigeria could be a similar success story, he said.

The country is MTN’s biggest market, where it earns 32% of its revenue.

The provisional licence opens the doors for MTN to submit applications to the Nigerian regulator for a final licence, which would enable it to offer payment services and receive deposits — an opportunity it has been waiting years for.

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Bloomberg reports a third of MTN’s income in many markets could come from mobile money. John Davies, an analyst at Bloomberg Intelligence, said in a note: “Mobile money can make up as much as one-third of sales in some markets.”

This pits MTN against the third-largest mobile operator in the world, Airtela. The Indian telecommunications company is in 14 African countries, including Nigeria.
MTN already makes 25% of its revenue in Uganda from its mobile money offering MoMo, and 23% in Ghana.

MTN CEO Ralph Mupita has previously told Business Day that it wants to grow its fintech stake from almost 8% of its revenue to 20%. It had 51.1-million MoMo users at the end of September.

The value of transactions surged 67.2% year on year to $175.5bn during the September quarter.

MTN has grown the number of MoMo users from 11-million at the end of 2019, jumping to 46.4-million by the end of 2020. The company launched MoMo in South Africa in January 2020 to take advantage of its high number of users.

It aims to double its fintech customer base to 100-million in the next five years.
The licence announcement came a day after MTN sold 14%, or 575-million Nigerian shares, in a sale done via an accelerated bookbuild — a share sale held over a short period of time.

This was the latest in a series of disposals by the company as it works to pay down its debt, sharpen its focus on returns and reduce risk.

MTN has done much in the past two years to sell noncore businesses and find ways of growing new revenue streams.

“MTN and their competitors are gradually transitioning to being providers of financial services, using their networks and infrastructure,” said Petri Redelinghuys, founder and trader at Herenya Capital Advisors.

Vodacom launched its Super App in South Africa this year. It allows users to shop for multiple brands through one app using technology from Chinese e-commerce giant Alibaba.

It features well-known retailers such as Game, Makro and Clicks.

Vodacom and MTN’s broadening revenue streams on the continent pose a risk to SA’s third-biggest mobile operator, Telkom, which does not earn the same level of fintech revenue.

At the same time Telkom continues to lose fixed-line customers as people switch to cellphones.

MTN has had its fair share of struggles in Nigeria, paying a $53m fine over a dividend repatriation in breach of foreign exchange rules, which was reduced from the initial $8.1bn, according to Bloomberg. It settled a tax dispute with the Nigerian government in 2020.

MTN cannot add SIM card subscribers because Nigeria has stopped new sales of SIM cards. In 2016, it paid a $1.6bn fine, down from an initial $5.2bn, for failing to disconnect 5.2-million subscribers in a crackdown against unregistered SIM cards in the country.

Repatriating money from Nigeria is an ongoing challenge, with R4.2bn waiting to be repatriated in December 2020.

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