Wrap Text
Quarterly update for the period ended 31 March 2021
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
(Share code MTN)
(ISIN: ZAE000042164)
(MTN or the Group)
Quarterly update for the period ended 31 March 2021
MTN is a pan-Africa focused mobile operator with a clear vision of Leading
digital solutions for Africa’s progress. We have 278 million customers in 21
markets and are inspired by our belief that everyone deserves the benefits
of a modern connected life.
Salient features
- Group service revenue up by 17.8%
- Group earnings before interest, tax, depreciation and amortisation ( EBITDA)
up by 21.3%
- EBITDA margin improved to 44.2% (from 42.7%)
- MTN South Africa service revenue up by 11.8%, with an EBITDA margin of
39.8% (from 36.6%)
- MTN Nigeria service revenue up by 17.2%, with an EBITDA margin of 53.1%
(from 52.7%)
- Subscribers decreased by 1.7 million to 277.9 million,
impacted by new SIM registration regulations in Nigeria (ex-
Nigeria subscribers were up 3.4 million)
- Active data subscribers increased by 1.3 million to 115.6 million
- Active MTN Mobile Money (MoMo) customers increased by 0.2 million to
46.6 million
- MoMo value of transactions up 86.6% YoY to US$53.2 billion
Unless otherwise stated, financial growth rates are presented on a constant
currency basis and are year-on-year (YoY, 3M to March 2021 vs 3M to March
2020). Non-financial growth rates are presented as quarter-on-quarter
(QoQ, 1Q 21 vs 4Q 20).
Service revenue excludes device and SIM card revenue. Data revenue is mobile
and fixed access data and excludes roaming and wholesale. Fintech includes
MoMo, insurance, airtime lending and e-commerce. Active data users is a count
of all subscribers at a point in time which had a revenue generating event
in the specified period of time (90 days) prior to that point in time and
also during the past 30 days had data usage greater than or equal to 5
megabytes. MoMo users are 30-day active users.
Group President and CEO Ralph Mupita comments:
“The MTN Group has delivered a solid Q1 2021 trading performance, with service
revenue and EBITDA margins expanding on the back of continued commercial
momentum across the Group, with the Ambition 2025 strategy gaining execution
traction, during challenging COVID-19 macro-economic conditions.
Many of the markets that we operate in have started to emerge from the second-
wave of COVID-19 infections. While their economies are on a trajectory of
steady recovery, we remain conscious of the ongoing impacts and challenges
presented by the pandemic. At MTN, we maintain our commitment to supporting
our broad range of stakeholders through our Y’ello Hope and other socio-
economic initiatives. In particular, we continue to focus on four priority
areas: social; commercial; network and supply chain; and funding and
liquidity.
Operationally, Group service revenue grew by 17.8% and EBITDA increased by
21.3%, with the EBITDA margin expanding by 1.5pp to 44.2%, maintaining our
strong operating leverage and delivering in line with our medium-term
objectives. The overall Group results were supported by double-digit service
revenue growth from our large operations and continued focus on our expense
efficiency programme. MTN South Africa (MTN SA) recorded a strong performance
in its core consumer and enterprise business units with wholesale recovering,
and MTN Nigeria and MTN Ghana continuing to build on the strong operational
execution and commercial momentum.
MTN’s solid operational and financial performance in Q1 2021 was delivered
despite a 1.7 million decline in subscribers to 277.9 million. This was
largely due to the decline in subscribers in MTN Nigeria as a result of the
restriction on all new SIM activations in the market under revised
registration regulations in Nigeria. By way of background, overall
subscribers in the Nigerian market declined by 12.0 million in Q1, according
to the Nigerian Communications Commission (NCC). In this context active data
subscribers increased by 1.3 million to 115.6 million, while MoMo customers
increased by 0.2 million to 46.6 million. Across the group our instant
messaging platform ayoba ended the quarter at 5.3 million monthly active
users as we focused on improving the user experience for Android -based
devices.
Excluding Nigeria, growth in total subscribers, active data subscribers and
MoMo subscribers increased by 3.4 million, 1.3 million and 0.3 million
respectively in Q1. On 19 April 2021, the suspension on issuing new SIMs and
various other activities were lifted subject to adherence with the
regulator’s stipulated guidelines.
In driving our platform strategy, MoMo active monthly users grew by 32.9%
YoY while the average volume of transactions processed through our fintech
platform was up 46.7% YoY to 16 567 per minute and the value of transactions
increased by 86.6% to US$53.2 billion. As we establish our payment platform,
the number of active merchants accepting MoMo payments doubled YoY to 521 000
while the total value of MoMo merchant payment (gross merchandise value –
GMV) rose by approximately 299.2% to US$4.8 billion. In Nigeria we added
54 000 agents to end the quarter with 449 146 registered MoMo agents.
The total value of remittance grew by 160.5% to US$552 million in Q1; in
addition, we facilitated a total loan value of US$231.5 million, a 27.7% YoY
increase. At the end of Q1, our InsurTech platform counted 12.6 million
registered insurance policies reflecting growth of 66.7%.
The fintech separation project is progressing well , in line with our Ambition
2025 strategy. MTN Rwanda recently received a license to operate a separate
fintech entity bringing the number of separated entities to 12 (out of 16
fintech markets). We continue to progress our work in establishing the Topco
structure for fintech and anticipate that the process of finalising a
separated Group fintech structure will be completed before the end of Q1
2022.
GlobalConnect’s fibre development and separation projects are also
progressing well with the first FibreCo established in Zambia. We have rolled
out more than 2 000 km of additional fibre in Zambia, and concluded new
cross-border links in Ghana, Cote d’Ivoire, and Uganda. Through a combination
of growing subsea cables and the largest fibre network on the continent, we
are building scale infrastructure assets to meet explosive growth in data
traffic and an accelerating digital economy in Africa.
In continuing to drive our industry-leading connectivity business, we
recorded voice and data revenue growth of 7.0% and 32.7% respectively amid
sustained demand for work-from-home services, digital entertainment as well
as online education offerings. In the streams leading our push into
platforms, we delivered growth in fintech and digital revenue of 31.1% and
32.3% respectively, supported by increased adoption and usage of our digital
channels and offerings. Fintech revenue contributed 8.7% to total Group
service revenue. Wholesale revenue grew by 55.6% on the strength of national
roaming in MTN SA.
Group leverage remained comfortably within covenant limits, improving to
0.6x, from 0.8x at 31 December 2020. Holding company (Holdco) leverage
remained hampered by delays in cash upstreaming from MTN Nigeria but improved
slightly to 2.1x, from 2.2x at December 2020. The faster deleveraging of our
Holdco is a key priority. We continued to invest in building our ‘second to
none’ technology platforms in deploying R6.4 billion of capex in Q1.
IHS remains key to our asset realisation programme (ARP) and we are confident
of making progress on realising this asset in the short -term. In line with
IHS’ public statement in August 2020, IHS continues to explore an IPO of its
shares subject to regulatory approvals and market conditions remaining
favourable.
MTN SA continues its work in exploring a potential sale and leaseback of its
passive tower infrastructure. Having issued invitations to offer expressions
of interest in this regard, MTN SA has received over 20 responses and has
engaged financial advisors to assist with the process. We anticipate that
this process will be concluded by the end of Q3 2021.
MTN Rwanda listed on the RSE on 4 May 2021, making history by being the first
mobile network to list shares and enable investors to trade them directly on
the RSE. Enabling Rwandans the opportunity to participate in the company’s
success is part of our work to promote local ownership and participation in
MTN businesses across our markets. This ambition to create shared value is
a key pillar of our strategic framework.
On 26 April 2021 MTN was named as one of the final two bidders for a new
telecom licence to operate in Ethiopia, along with equity partners including
China-based Silk Road Fund. This is an exciting growth opportunity, in
Africa’s second most populous country and represents the last and largest
telco liberalisation opportunity in the world. MTN’s participation in the
process aligns with its strategy to capture growth from digital acceleration
across the continent and is guided by its capital allocation framework and
the market entry opportunity meeting internal project IRR hurdles.
Our potential entry into the market would be in a risk-mitigated manner and
through partnerships to ensure that the opportunity is pursued whilst
remaining committed to the enhanced medium-term targets and guidance. In our
equity partnership-based bid, we envisage ultimately holding approximately
56% of the equity in the potential new business with the equity partners
holding the balance, should our bid be successful.
Looking ahead, we are focused on executing our Ambition 2025 strategy,
driving growth, de-leveraging the Holdco balance sheet and unlocking value,
whilst navigating the impacts of the pandemic. Our capex guidance for 2021
is maintained at R29.1 billion. This aligns with our commitment to continue
investing in the capacity and resilience of our networks as well as scaling
our platforms to drive accelerated growth in our business. We remain
committed to our disciplined capital allocation framework.”
The Group’s results are presented in line with the Group’s operational
structure. This is South Africa, Nigeria, the Southern and East Africa (SEA)
region, the West and Central Africa (WECA) region and the Middle East and
North Africa (MENA) region and their respective underlying operations.
The SEA region includes Uganda, Zambia, Rwanda, South Sudan, Botswana (joint
venture-equity accounted), eSwatini (joint venture -equity accounted) and
Business Group. The WECA region includes Ghana, Cameroon, Ivory Coast, Benin,
Congo-Brazzaville, Liberia, Guinea Conakry and Guinea Bissau. The MENA region
includes Iran (joint venture-equity accounted), Syria, Sudan, Yemen, and
Afghanistan.
In line with MTN Group’s strategy that was announced in March 2021, MTN Ghana
results have been reported under the WECA region effective 1 January 2021
(previously included in SEAGHA region). Prior year numbers have been restated
for SEA and WECA accordingly.
MTN Syria results have been disclosed up to February for 2021 and 2020, as
a result of derecognition effective February 2021.
COVID-19 pandemic impact on the business
Given the flux in lockdown restrictions in some markets and ongoing
uncertainty around COVID-19 impacts, we continue to manage the risks of the
pandemic. Our focus remains on four key areas, namely: social (our people,
communities and stakeholders); commercial (including our customers); network
and supply chain; and funding and liquidity.
Social
The health and safety of our people remains our priority. We are empowering
them to work from home and strict protocols are in place for those who cannot
work remotely. As at 31 March 2021, we had reported 1 557 COVID -19 infections
and mourned the loss of 11 MTN employees across our markets.
We remain committed to safeguarding the wellbeing of our staff, customers
and communities through initiatives such as the MTN Global Staff Emergency
Fund and various Y’ello Hope packages. We also provide ongoing support for
healthcare and government relief efforts in the fight against COVID-19
through our foundations. MTN also continues to support the African Union’s
(AU) efforts to immunize Africa’s healthcare workers against COVID-19
through, for instance, the US$25 million sponsorship of vaccine programmes
announced in January 2021.
Commercial
Although trends have eased from the peaks of 2020, our key commercial metrics
remained resilient in Q1.
Group data traffic (including Iran) was approximately 67.0% higher YoY, with
large increases in MTN SA (up 76.3% YoY), MTN Nigeria (up 86.7 YoY) and MTN
Ghana (up 64.0% YoY). Voice traffic, which experienced the most pressure
early on in the pandemic, continued its healthy recovery. Group voice traffic
was up by 11.6% YoY, MTN SA was down by 3.0% however overall traffic growth
was supported by MTN Nigeria (up 8.7% YoY) and MTN Ghana (up 16.5% YoY), in
terms of the larger markets.
Group fintech transaction volumes were up by 46.7% YoY and the value of
fintech transactions in US$ terms was 86.6% higher. In some of our markets,
MTN continues to zero-rate transaction fees to support customers and drive
increased adoption.
The trajectory of our commercial trends in 2020 started to reflect the impacts
of COVID-19 from Q2. We therefore expect trends to be impacted for the
remainder of the year as we lap the base effects from the prior year. The
initial reaction in 2020 was a weakening of many of our commercial KPIs
before they recovered strongly from the latter parts of H2.
Network and supply chain
We remain focused on expanding our network coverage and ensuring its
resilience. Since lockdowns restrictions have eased, we continue our work to
rollout sites and meet our capex target for the year. As at 31 March 2021,
we had rolled out 940 3G and 2 626 4G sites respectively. In the quarter,
the headroom on our data networks was approximately 29.0% in South Africa,
38.0% in Nigeria and 27.0% in Ghana.
Funding and liquidity
We continue to build the resilience of our balance sheet through the
acceleration of our portfolio transformation and Holdco deleveraging.
Managing liquidity and our funding mix remain key priorities. At 31 March
2021, group net debt was R44.6 billion, supported by an improved operational
cash position. Our net debt-to-EBITDA ratio was 0.6x, well within our
covenant of 2,5x. Our interest cover was 5.9x, comparing favourably with the
covenant limit of no less than 5,0x.
At the Holdco level we sustained a healthy liquidity position, with Holdco
net debt of R41.4 billion. At the end of March 2021, our Holdco leverage was
2.1x, affected mainly by the delay of cash upstreaming from MTN Nigeria
because of challenges in securing foreign currency.
During Q1, we upstreamed R2.7 billion from our Opcos, which was in line with
expectations. As noted, Nigeria remains the notable exception with no cash
upstreamed during the quarter, however we continue to work on securing
foreign currency to upstream. At 31 March 2021, the dividends that had accrued
to the Group and are yet to be upstreamed from Nigeria amounted to
NGN118.5 billion (approximately R4.3 billion). The final FY 20 dividend
declared by MTN Nigeria, to which the Group’s net portion amounts to NGN87.5
billion (approximately R3.2 billion), is subject to approval by MTN Nigeria’s
shareholders at its annual general meeting, scheduled for 7 June 2021.
We approach liquidity management prudently with a clear focus on cash
preservation. At 31 March 2021, our Holdco liquidity headroom stood at
approximately R42.1 billion – comprising R17.1 billion in cash (excluding
the restricted cash in Nigeria) and R25.0 billion in committed, undrawn
credit facilities.
Our medium-term focus is to deleverage faster through reducing our exposure
to US dollar debt and improving the funding mix at the Holdco level. By the
end of March 2021, we had made good progress in this respect and repaid our
USD term loan debt of US$150 million of which US$75 million was an early
settlement. We continue to focus on strategies to optimise our funding mix
and improve liquidity to meet the ongoing needs of the business.
MTN South Africa
MTN SA delivered a solid performance, with service revenue up 11.8% YoY.
This was achieved through ongoing momentum in commercial execution, market
share gains and cost optimisation. All core business units: consumer business
unit (CBU) prepaid, CBU postpaid, EBU and wholesale showed strong and
sustained growth for the quarter.
Total subscribers increased around 95 000 in the quarter to 32.1 million
with postpaid subscribers up around 79 000 to record a base of 6.8 million,
including IoT. This was driven mainly by competitive offerings and stabilised
churn. The prepaid subscriber base closed at 25.3 million, with over 16 000
subscribers added in the quarter.
Overall mobile data revenue grew by 18.5% driven by robust data traffic
growth, which increased by 76.3%. This momentum in traffic volumes was
supported by the continued availability of temporary high demand spectrum
assigned by the Independent Communications Authority of South Africa (ICASA)
to operators in the country. During Q1, the effective data tariff reduced by
a further 33.0% as MTN SA continued to fulfil its commitment to improving
affordability of data for its customers. An active prepaid data subscriber
now consumes approximately 2GB of data, on average, with the active postpaid
data subscriber using nearly 10GB of data per month.
MTN SA’s consumer prepaid business expanded its service revenue by a solid
4.4% in Q1, benefiting from subscriber growth and an increase in usage. The
higher usage resulted from a strong performance in recharges across our
distribution channels and was further stimulated by solid commercial
execution of MTN SA’s customer value management (CVM) initiatives.
The consumer postpaid business remained resilient in a highly competitive
trading environment. Service revenue growth of 10.5% was achieved mainly
through healthy subscriber growth, well-managed churn and driving competitive
deals in the market where the uptake of MTN SA’s data first offers remained
particularly robust.
The enterprise business recorded another solid quarter of double-digit growth
with service revenue up 17.3% on the back of ongoing demand for work - and
learn-from-home solutions. This brings the enterprise business to its seventh
consecutive quarter of growth. The pace of enterprise service revenue growth
could moderate for the remainder of the year due to base effects in 2020.
The run-rate from Q2 in the prior year saw a notable increase in demand for
enterprise solutions spurred by the national COVID -19 lockdown, including
some short-term university deals.
At the end of March 2021, the National Treasury appointed MTN SA as a service
provider to the national government. This provides an additional growth
opportunity for the MTN SA to leverage the investment in its industry-leading
network to offer innovative products and services in support of government’s
telecommunication requirements.
Wholesale revenue increased by 103.0%. This was driven by both the base
effects of the Cell C national roaming agreement, which was substantially
lower in Q1 2020, as well as the transition plan and timely cash payments by
Cell C in the current year. Revenue recognition remains on the cash basis as
Cell C continues to work towards its recapitalisation. W holesale revenue
growth is expected to abate for the remainder of the year due to the base
effects of the recovery in national roaming revenue from Q2 2020 onwards.
Excluding the impact of national roaming, MTN SA grew service revenue by
7.6% while R350 million of Cell C national roaming revenue remained
unrecognised as at 31 March 2021.
MTN SA produced a healthy EBITDA margin of 39.8%, up by 3.2pp, supported by
the strong service revenue growth, as well as the implementation of smart
commissions models and the execution of the expense efficiency programme.
The EBITDA margin for the remainder of the year, and particularly Q2, will
be impacted by base effects as device volumes declined materially in the
comparable period in 2020 due to COVID-19 effects. This supported the margin
in the base, although MTN SA continues its work to manage the margin of its
device sales to strengthen underlying profitability. MTN SA grew EBITDA by
22%.
Since its launch in South Africa in January 2020, MoMo has performed well,
with approximately 3.1 million registered users at 31 March 2021. The focus
remains on scaling the MoMo business and deepening financial inclusion
through driving adoption as well as innovative and relevant service
offerings.
MTN has retained and strengthened the leading position as Best Network in
the country and in each major metropolitan area (Johannesburg, Tshwane,
Cape Town, Durban), per the MyBroadband network quality survey.
For the rest of the 2021 outlook, the challenges facing consumers in a tough
macroeconomic environment remain a factor and MTN SA remains committed to
delivering innovative and attractive products and services.
MTN Nigeria
MTN Nigeria made significant progress, building on its growth momentum,
delivering service revenue growth of 17.2%. This performance was largely
supported by growth in data and voice revenue and was achieved despite a
5 million decline in subscribers to 71.5 million This was due to the effects
of customer churn and the regulatory restrictions on new SIM sales and
activations.
Voice revenue growth was strong at 5.0%, supported by an 8.7% increase in
traffic and customer value management initiatives. The impact on voice
revenue of the industry-wide suspension of new SIM registration in mid-
December was partly offset by increased usage by active SIMs in the base,
and a migration to higher quality of experience.
Data revenue maintained the positive momentum from Q4 2020, rising by 42.6%
YoY. This was led by increased usage and traffic, supported by 4G penetration
and increased network capacity following the acquisition and activation of
an additional 800MHz spectrum in March 2021 . In line with MTN Nigeria’s 4G
acceleration, 4G network now covers 61.8% of the population – up from 60.1%
in December 2020. MTN Nigeria added approximately 1.2 million new smartphones
to its network, bringing smartphone penetration to 47.5% of our base, up
from 45.9% in 2020.
Fintech revenue rose by 28.5%, driven by increased adoption of Xtratime and
core fintech services. MTN Nigeria continues to expand its MoMo agent network
and broaden our service offerings to include assisted withdrawal irrespective
of the bank where the account is domiciled. Registered MoMo agents increased
by 54 000 to 449 146. The volume of transactions processed was over 24 million
in the quarter, up more than four times YoY, from an active base of 4.6
million subscribers.
Digital continued to gain traction with the uptake of products and services
as well as the structural turnaround in the business. As a result, digital
revenue rose by 101.0%, supported by growth in rich media and value-added
services, while the active user base was largely flat at 2.8 million.
The enterprise business continued its recovery from the impact of the COVID-
19 lockdown as economic activity improved. However, service revenue for
enterprise was largely flat YoY mainly due to the non-recognition of USSD
revenue in Q1. Normalised growth (excluding USSD revenue) was 2.6%. MTN
Nigeria continues to engage with the NCC, Central Bank of Nigeria (CBN) and
deposit money banks (DMBs) to conclude the operational modalities for the
new pricing framework that has been agreed upon for USSD services. The
mechanism for and timing of the recovery of the industry-wide outstanding
debts that exist for USSD services provided to the DMBs , of which
approximately N40.2 billion (approximately R1.5 billion) was due to MTN
Nigeria as at end of Q1, form part of this process.
In addition, MTN Nigeria remains in dialogue with the DMBs on a pricing
option for airtime sales commission, while diversifying airtime recharge
channels to offer subscribers more options to purchase airtime and stay
connected.
Expenses rose by 16.1% mainly driven by a 21.4% increase in operating expenses
arising from an accelerated site rollout and the effects of Naira
depreciation on lease rental costs. The overall increase in expenses was
partly mitigated by the comparatively moderate growth of 7.8% in cost of
sales following the suspension of new SIM sales and activations. As a result,
EBITDA rose by 17.8%, supported by revenue growth, with the EBITDA margin
expanding by 0.4pp to 53.1%.
Southern and East Africa (SEA) region
SEA region delivered double-digit top line growth in most of its markets,
with overall service revenue increasing by 28.4%. This result demonstrated
the region’s resilience as it was achieved in the context of challenging
trading conditions. The reinstatement of lockdown regulations, restrictions
and curfews led to lower levels of economic activity in many of the markets.
The region’s performance reflected strong growth in data revenue (up 44.6%)
across the region and a 0.9 million QoQ increase in subscribers to
33.8 million.
MTN Uganda’s performance was hampered by the implementation of some service
restriction orders (SROs) restrictions in January 2021, which negatively
affected data and fintech services. Service revenue grew by 3.8% with growth
in voice revenue (up 2.6%), data revenue (up 3.2%) and fintech revenue (up
6.7%). The trajectory into the end of Q1 was, however, encouraging with the
reinstatement of some services which has supported a gradual improvement in
service revenue. The EBITDA margin widened by 2.8pp to 51.2% through the
delivery of expense efficiencies.
MTN Rwanda achieved a significant milestone in listing on the RSE on 4 May
2021. For the quarter, the trading environment was impacted by COVID -19 with
lockdown restrictions reintroduced during the first part of Q1. MTN Rwanda
delivered a resilient performance despite the challenges, growing service
revenue by 21.0% and improving EBITDA margin by 2.9pp to 51.4%, supported by
tight management of costs.
The SEA portfolio recorded a blended EBITDA margin of 48.9% in Q1, which was
up by 4.2pp.
West and Central Africa (WECA) region
A number of the markets within the WECA region operate in challenging
political, economic and trading environments. Despite this, the region
reported service revenue growth of 14.3% for the quarter, well above the
region’s blended average inflation of approximately 6.5%. The overall service
revenue performance was enabled by a 1.3 million QoQ increase in subscribers
to 64.9 million, and solid growth in data, fintech and digital revenue.
MTN Ghana’s operational performance for the first quarter was anchored on
strong commercial execution, with service revenue growing by 22.4%. This
result reflected an improvement in voice (up 3.3%), supported by growth in
subscriber base and execution of customer value management initiatives. Data
revenue growth was strong (up 40.3%), driven by the continued demand of data
resulting in an increase in active data users, smartphones and data usage.
The robust fintech revenue growth of 46.0% was driven by an increase in MoMo
users, higher person-to-person (P2P) transactional activity and advanced
services such as retail merchant payments, insurance, and international
remittances. The EBITDA margin for MTN Ghana increased by 1.2pp to 54.6%,
supported by various expense efficiency initiatives including enhanced
penetration of electronic distribution channels and optimising network costs.
MTN Côte d'Ivoire recorded a 9.4% increase in service revenue through active
marketing and the successful transformation of sales and distribution,
resulting in market share gains in a highly competitive environment. The
operation delivered double-digit revenue growth in data (up 47.0%), fintech
(up 25.7%) and digital (up 22.7%). Voice revenue declined 4.5% due to pricing
pressures. The EBITDA margin declined by 1.1pp to 34.3%.
MTN Cameroon’s service revenue grew by 8.7% in a challenging environment as
the conflict in the Northwest/Southwest regions continued. The growth in
service revenue was supported by an increase in data revenue (up by 22.9%)
and fintech revenue (up 41.1%) which benefited from CVM initiatives and
pricing optimisation across products. Voice revenue declined 4.4% mainly due
to aggressive pricing propositions resulting in a decline in effective rate
per minute. The EBITDA margin for MTN Cameroon expanded by 3.7pp to 36.3%,
lifted by expense efficiencies.
Excluding MTN Ghana, the WECA markets grew service revenue by 9.6% and
delivered a 0.5pp improvement in EBITDA margin to 20.4% in Q1.
Middle East and North Africa (MENA) region
The performance delivered by the MENA region remained resilient
notwithstanding ongoing challenges in the operating environment, with double-
digit service revenue growth of 36.3%. This was mainly supported by strong
growth in data revenue and an increase in active data users. Total subscribers
(excluding MTN Irancell) increased by 0.4 million in the quarter to 26.4
million.
MTN Sudan increased service revenue by 142.9%, underpinned by growth in voice
(up 140.7%) and data (up 167.8%) on the back of re-pricing. The EBITDA margin
declined by 1.8pp to 35.7% due to the material devaluation of the official
exchange rate in the country, which in turn resulted in cost increases that
could not be fully recovered.
The MENA portfolio recorded a blended EBITDA margin of 26.6% in Q1, which
was down by 3.7pp.
MTN Irancell, our equity-accounted joint venture, delivered solid results in
a challenging environment. Service revenue grew by 41.2%, supported by
increased data revenue. The EBITDA margin widened by 1.5pp to 39.3%.
Despite the impact of Covid-19 on the Iran Internet Group, ride-hailing app
Snapp remained the market leader, ranking among the top ride -hailing apps
globally with almost 2.5 million daily rides. Snapp Box is the leading last-
mile delivery network in the country with 200 000 orders each day. Food
delivery app Snappfood orders grew 111% YoY; it leads the market with almost
200 000 daily orders. Snapp market orders grew by 98% YoY and remains the
leading supermarket delivery app in the country.
Portfolio optimisation and asset realisation programme (ARP)
Our ARP, launched in March 2019 and enhanced in March 2020, aims to reduce
debt, simplify our portfolio, reduce risk and improve returns. Our stated
target for the ARP is to realise proceeds of at least R25 billion over three
to five years. MTN’s broader portfolio transformation ambition is to
accelerate these objectives to actualise our focus on pan-Africa, support
our shared value objectives and structure the business to reveal value.
IHS is key to our ARP and we are confident of making progress on realising
this asset in the short-term. In line with IHS’ public statement in August
2020, IHS continues to explore an IPO of its shares subject to regulatory
approvals and market conditions remaining favourable. At present, demand for
infrastructure assets remains strong and conditions in the US equity market
remains favourable for a listing.
MTN SA has issued interested parties with an invitation to offer non -binding
expressions of interest to the company, as it explores the potential sale
and leaseback of its passive tower infrastructure. Both global and local
intermediaries have been engaged by MTN SA to act as financial advisors in
connection with the proposed transaction. Following the initial announcement
in 2020 regarding the potential transaction, MTN SA has received over 20
expressions of interest from a wide and varied set of industry players, both
in South Africa and internationally, and we expect the process to be concluded
by the end of Q3 2021
MTN Rwanda’s earlier-mentioned listing on the RSE on 4 May 2021 is an
important step towards broadening local participation in Rwanda’s leading
mobile network operator and deepening the capital markets in the country. We
believe it will help establish the basis for a new and emerging technology
asset class on the RSE.
As noted, MTN is one of the final two bidders for a new telecom licence to
operate in Ethiopia, along with equity partners including China-based Silk
Road Fund. Our participation in this bid is aligned with our pan -Africa focus
and capital allocation framework.
Update on regulatory and legal considerations
Spectrum allocation and auction in South Africa
On 2 October 2020, ICASA released the Invitation to Apply (ITA) for spectrum
auction. The planned auction has been put on hold due to pending litigation.
MTN SA remains optimistic that the pending litigation is resolved soon and
that all parties will engage constructively to enable the auction to proceed.
MTN SA has agreed to ICASA’s proposal to work towards entering settlement
negotiations with the regulator to find a mutually acceptable solution on
the narrow concerns raised by MTN SA regarding the ITA. These concerns relate
to the inclusion of the vital 3.5GHz “5G anchor band’’ in the opt-in round
and the exclusion of MTN from participating in the opt-in round, due to the
arbitrary Tier 1 and Tier 2 classification.
The temporary spectrum allocated at the start of lockdown has continued to
significantly ease the congestion in hotspots across the country where data
traffic has surged. MTN SA is currently in engagements with ICASA to further
extend the temporary spectrum until it has finalized the spectrum auction.
The temporary spectrum has allowed MTN SA to zero-rate over 1 000 health,
education and job websites, helping more than 5 million financially
vulnerable South Africans each month as they navigate this demanding period.
SIM registration in Nigeria
On 9 December 2020, the National Communications Commission’s (NCC) suspended
the sale and activation of new SIM’s for all operators in Nigeria. On 15
December 2020 the NCC further directed operators to update SIM registration
records with national identification numbers (NIN’s) for every SIM connected
to networks in Nigeria. The NCC has extended the deadline to complete this
a number of times.
Nigerian Federal Ministry of Communications & Digital Economy (FMoCDE),
completed a general policy for the communications sector in the country and,
on 19 April 2021, the suspension on issuing new SIMs and various other
activities was lifted subject to adherence with the regulator’s stipulated
guidelines.
Thus far, MTN Nigeria has made good progress with more than 35.5 million
subscribers having submitted their NINs as at 30 April 2021, representing
approximately 63% of its subscriber base and 50% of service revenue. MTN
Nigeria is also actively supporting the Government’s NIN enrolment programme,
with 182 points of enrolment active across the country. It is working with
NIMC to increase the enrolment centres to provide an access point for as
many Nigerian as possible.
On 4 May 2021, the Federal Government approved an extension of the deadline
for NIN registrations to the 30 June 2021.
Classification of MTN Ghana as a significant market power
Since October 2020, MTN Ghana has applied a 30% asymmetrical interconnect
rate, effective for two years, in line with a directive from the National
Communications Authority (NCA) which followed its classification of MTN Ghana
as a significant market power. MTN Ghana remains in constructive discussions
with the NCA and will update stakeholders on any significant developments.
MTN Afghanistan anti-terrorism complaint
On 5 February 2021, MTN Group filed a reply in support of its September 2020
request that the court dismiss MTN from a civil case filed against it in
2019, which had asserted claims for civil monetary relief under the U.S.
Anti-Terrorism Act. MTN had requested that the court dismiss the complaint
for two independent reasons: firstly, the court lacks jurisdiction over MTN,
which does not operate in the United States, and secondly, the complaint
does not allege any conduct by MTN that violated the Anti-Terrorism Act.
The February reply followed the response on 8 December 2020 by the plaintiffs
to MTN separately from other defendants because of MTN’s distinctive
arguments as a telecommunications company with no presence in the United
States, including that it argues that it is not subject to the U.S. court’s
jurisdiction. In its written reply in February, MTN reiterated its position
that the case should be dismissed because the plaintiffs cannot establish
jurisdiction over MTN in the United States or plead a viable claim under the
U.S. Anti-Terrorism Act.
Now that MTN has filed its reply, the next step is for the court to review
the motion and make a determination. A District Judge presides over the
case with the assistance of a Magistrate Judge. The Magistrate Judge will
first issue a recommendation to the District Judge on how to decide the
motion to dismiss, and then further proceedings before the District Judge
are possible. The judges could schedule a hearing for the parties to make
oral submissions or decide the motion on the written f ilings alone. There
is no set timetable for the court’s ruling on the motion.
MTN conducts its business in a responsible and compliant manner in all its
territories and will defend its position where necessary.
MTN Syria under judicial guardianship
On 17 February 2021, a lawsuit was filed before the Administrative Court of
Damascus by the Syrian Ministry of Telecommunications and the Syrian
Telecommunications and Post Regulatory Authority seeking interim measures
against MTN Syria. On 25 February 2021, the Court placed MTN Syria under
judicial guardianship, appointing the Chairman of Tele Invest (MTN Syria’s
minority shareholder) as the judicial guardian with responsibility for
managing the day-to-day operations of MTN Syria. This decision was affirmed
as final on 9 March 2021, following an appeal by MTN of the Court’s decision.
The appointment of the judicial guardian has significantly reduced the
Group’s ability to direct MTN Syria’s activities and therefore, for
accounting purposes, the Group is deemed to have lost control over MTN Syria.
The Group has thus deconsolidated MTN Syria’s net assets of R1.0 billion,
derecognised the related non-controlling interest and reclassified
accumulated foreign currency translation losses of R5.3 billion to profit or
loss in line with the accounting policy. The total negative impact on the
income statement is R6.3 billion on a reported currency basis. There has
been no impact on the cash flows.
MTN Group remains committed to its orderly exit of the Middle East, with
current engagements and focus on Syria, Yemen and Afghanistan.
Outlook
We are pleased with the resilient performance delivered across our markets
in Q1, despite the challenging trading environment and ongoing uncertainties
surrounding COVID-19 impacts. Our focus remains on the ongoing support of
our various stakeholders through the pandemic, managing the risks in our
trading environments as well as investing in the resilience, capacity and
quality of our networks. As we continue to navigate the effects of the
pandemic on our operating context, we also focus on seizing the opportunities
presented to accelerate digital and financial inclusion in our markets and
capture the growth to deliver on our medium-term targets.
We are committed to accelerating growth in our business through the scaling
of our platforms and sustaining our industry -leading connectivity operations
– including the acceleration of MTN SA and MTN Nigeria. We will continue to
execute on our expense efficiency programme to drive our profitability and
cash flows. The strengthening of our financial position is an ongoing
priority including accelerating the deleveraging of our Holdco balance sheet
as well as protecting liquidity and preserving cash. In achieving this
objective, we will continue to focus our efforts on upstreaming cash from
our markets, particularly Nigeria, and executing on our ARP and portfolio
transformation strategy.
The capacity and resilience of our networks and technology platforms remain
key to execution of our strategy to deliver sustainable growth across our
operations. In support of this objective, we target capex of approximately
R29.1 billion for 2021 – this is unchanged from prior guidance.
We are excited about executing on our Ambition 2025 strategy, which we believe
will position the business to capture exciting opportunities across our
markets and accelerate growth and value unlock.
Certain information presented in this quarterly update constitutes pro forma
financial information. The responsibility for preparing and presenting the
pro forma financial information and for the completeness and accuracy of the
pro forma financial information is that of the directors of MTN. This is
presented for illustrative purposes only. Because of its nature, the pro
forma financial information may not fairly present MTN’s financial position,
changes in equity, and results of operations or cash flows. It has not been
audited or reviewed or otherwise reported on by our external joint auditors.
The financial information on which this quarterly update is based, including
constant currency information, has not been reviewed and reported on by MTN’s
external auditors. Constant currency information has been presented to remove
the impact of movement in currency rates on the group's results and has been
calculated by translating the prior financial reporting period’s results at
the current period’s average rates. The measurement has been performed for
each of the group's currencies, materially being that of the US dollar and
Nigerian naira. The constant currency growth percentage has been calculated
based on the prior year constant currency results compared to the current
year results. In addition, in respect of MTN Irancell, MTN Sudan, MTN South
Sudan and MTN Syria, the constant currency information has been prepared
excluding the impact of hyperinflation. The economies of Sudan, South Sudan
and Syria were assessed to be hyperinflationary for the period under review
and hyperinflation accounting was applied.
The full financial results are available on the MTN’s website at:
https://www.mtn.com/investors/financial-reporting/quarterly-trading-update/
Fairland
05 May 2021
Lead sponsor
JP Morgan Equities South Africa Proprietary Limited
Joint sponsor
Tamela Holdings Proprietary Limited
Date: 05-05-2021 07:05:00
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