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MTN records blockbuster fintech transactions ahead of spin-off

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 11 Aug 2022
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

MTN Group recorded runaway fintech success in the first half of the year, generating six billion Mobile Money transactions worth over $116.3 billion (R1.8 trillion), setting Africa’s largest telco on a comfortable path as it readies to spin off its financial services business.

The Pan-African telco reported its half-year performance today, saying in the first six months of its fiscal year 2022, it had 60.7 million Mobile Money (MoMo) users, a solid growth of 24% year-on-year.

The group has been banking on this new area of growth for some time, and today group president and CEO Ralph Mupita revealed the unit’s buoyant showing.

“We made progress in our work to separate our fintech and fibre businesses from our GSM business, and have started the process of engagement with select potential strategic investors into the group fintech structure, the outcome of which should be concluded by the end of the year.”

Initially, MTN had set the second quarter of its 2022 financial year as the deadline to spin off its lucrative fintech business, while the fibre unit was to be unbundled a few months later.

Today, Mupita revealed that in addition to the separation of the two units as part of the MTN Group’s Ambition 2025 strategy, the telco is also building five scale platform businesses.

He noted the fintech platform is the “most mature of these, and in the first half, it had 60.7 million MoMo users (up 24% year-on-year), generating six billion transactions worth US$116.3 billion”.

In the current reporting period, MTN green-ticked most of its key performance metrics, buoyed by growth in data revenue, which surged 35.9%, driven by MTN Nigeria, MTN Ghana, MTN Cameroon and MTN South Africa.

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On broadband, Mupita said the MTN Group accelerated investments in the six months despite the challenging environment.

“Notwithstanding the tough macro conditions, MTN remained focused on investing in our markets to increase broadband coverage and reduce the cost to communicate. We accelerated network investment to R17.1 billion and spent an additional R7 billion on securing 4G and 5G spectrum in the key markets of South Africa and Nigeria.”

The investment in networks, he added, increased access to broadband services to 85.5% of the population and led to an average 22.5% reduction in data tariffs.

Turning to the group’s financial metrics in the six months, the MTN Group’s service revenue grew by 14.8% to R92.5 billion; earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 15.1% to R43.9 billion before once-off items; and the EBITDA margin expanded by 0.3 percentage points to 45.3%.

Commenting on the group’s financial strength, chief financial officer Tsholo Molefe said in the six months, MTN accelerated the deleveraging of the balance sheet, boosted by the repatriation of R9.4 billion in cash from operating companies, including R4.5 billion from Nigeria.

“We continue to explore opportunities for further liability management and remain focused on reducing the hard currency liabilities on our balance sheet.”

Farewell to Afghanistan

MTN says it accelerated its portfolio transformation in the period under review, in line with its Pan-Africa focus, and the telco has since accepted a binding offer for 100% of MTN Afghanistan.

The Afghanistan deal comes almost two years after the African telecoms giant announced plans to exit operations in the Middle East.

Since then, the MTN Group exited Yemen and also quit Syria, abandoning its operations after relations with the regulator there became toxic, making the business insupportable.

MTN says it has now firmly set its sights on Africa, and is prioritising creating shared value, broadening local participation and deepening capital markets.

In Ghana, for example, Mupita said MTN has since increased local ownership to 23.7% through share sales to pension funds and strategic investors.

Looking ahead, the headwinds facing customers and the business look likely to persist in the second half, but the group has built safety nets around its operations, noted the CEO.

“The business is well-positioned to navigate the prevailing market conditions. In South Africa, we are focused on improving the resilience and availability of the network, given the constrained on-grid power situation.

“Battery and generator solutions will be deployed to restore network availability to the world-class standards our customers have been used to. This resilience plan will be executed within the capital expenditure envelope of the business.”

In SA, Mupita has cautioned on power cuts, saying if the situation continues unabated, it may drill a hole in its revenue.

MTN SA is currently burning more than 400 000 litres of fuel per month to maintain connectivity and provide a decent customer experience. It has also deployed over 2 000 generators to counter the impact of stage four (and higher) load-shedding.

“If we experience the same level of load-shedding in H2 as we did in H1 in South Africa, service revenue will come in slightly under guidance, with margins at the lower end of the range communicated to investors.

“The structurally higher growth opportunities in our markets continue to support the investment case of a compelling Africa growth story that delivers digital and financial inclusion to Africans,” commented Mupita.