MTNN, Airtel shares rally as investors cheer mobile money approval

Nigeria’s equity buyers are beginning to price-in likely positives to MTN Nigeria Plc and Airtel Africa Plc shares following the Central Bank of Nigeria (CBN)’s approval-in-principle for the telcos’ mobile money business licences.

CBN last Friday gave an approval-in-principle for the proposed MoMo Payment Service Bank Limited, a payment service bank (PSB) owned by MTN Nigeria Communications Plc.

Also, Airtel Africa Plc’s Smartcash Payment Service Bank Limited was granted approval-in-principle (AIP) to operate a payment service bank business in Nigeria. Final approval is subject to both telcos satisfying certain standard conditions within six months.

Shares of the two major telecommunication companies –MTN Nigeria Plc and Airtel Africa Plc topped the buy-side activities on the Nigerian Exchange Limited on Monday, trading data show.

Increased bargain in shares of Airtel Africa pushed the stock price up by 10 percent or N78, from N780 per share on Friday Nov. 5 to N858 on Monday November 8. This year, the stock price of Airtel Africa has risen by 0.7percent.

Likewise on the Nigerian Bourse, share price of MTNN moved from last Friday’s low of N175.6 per share to N192.50, up by 9.6percent or N16.9 at the close of the trading session on Monday. This year alone, MTNN share price has risen by 13.3percent, thereby outperforming the market’s benchmark indicator at +7.39percent return this year.

MTN Nigeria’s unaudited interim financial statements for the nine months period ended September 30, 2021 shows that revenue grew by 23.62 percent to N1.206 trillion from N975.764 billion in the same period of 2020.

MTNN has successfully completed the issuance of its N89.99billion Series II 10-Year 12.75percent Fixed Rate Bonds due 2031 (Series II Bond) under the N200 billion Bond Issuance Programme. The book build process which commenced on October 8, 2021 was completed on October 15, 2021.

Read also: Nigeria’s stock investors lose N20bn as market closes in red

“Although MTNN’s revenue from Fintech is growing strongly, it is still from a low base. This announcement will help to further diversify and enhance its revenue base. We have an Outperform rating on MTNN,” according to Tunde Abidoye, analyst at FBNQuest.

Operating profit of N418.350 billion from N307.011 billion in 9M ‘2020 implies an increase by 36.27percent. In the same 9 months period of 2021, MTNN profit before tax (PBT) increased by 51.87percent to N321.352billion, from N211.594billion recorded in 9M ‘2020.

Also, profit after tax (PAT) rose by 52.74percent to N220.312 billion as against N144.239 billion in 9months 2020. Its basic/diluted earnings per share (EPS) of N10.82 recorded in 9M ’21, from N7.09 in 9M’20 implies an increase by 52.74percent.

Airtel Africa plc results for half year (H1) ended September 30, 2021 show H1 ’22 reported revenue grew by 25.2percent to $2.27billion with double digit growth across all regions. Revenue in constant currency grew by 27.6percent.

Airtel Africa reported strong double-digit constant currency revenue growth across all regions: Nigeria up 32.4percent, East Africa up 25.8percent and Francophone Africa up 22.1percent; and across all key services, Voice up 19.7percent, Data up 36.9percent and Mobile Money up 42percent.

Underlying EBITDA grew by 35.2percent to $1.098billion in reported currency and underlying EBITDA (Earnings before interest, taxes, and amortization) margin improved to 48.3percent, an increase of 360 basis points led by both revenue growth and improved operational efficiencies. Operating profit was up 55.1percent to $732million in reported currency. Profit after tax more than doubled to $335million, largely due to higher profit before tax (PBT) which more than offset the associated increase in tax charges.

“For Airtel Africa, while the company does not maintain fintech operation in Nigeria, it has mobile money operation in other countries where it conducts business. This should serve as a foundation to replicate its fintech operating model in Nigeria. We are optimistic about fintech revenue that could accrue to Telcos as permissible transactions expand”, said Meristem research analysts in their November 5 note.

Segun Ogunsanya, CEO, Airtel Africa Plc, said, “I am very pleased that Smartcash has been granted an approval in principle to operate a service bank business in Nigeria. We will now work closely with the Central Bank to meet all its conditions to receive the operating licence and commence operations.”

“The final operating licence will enable us to expand our digital financial products and reach the millions of Nigerians that do not have access to traditional financial services.

“I am looking forward to working closely with the Government, the Central Bank and traditional financial institutions to expand financial inclusion and meet the evolving needs of our customers and the economy,” Ogunsanya noted.

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