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MTN reports resilient Q3 results, despite multiple battles

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 07 Nov 2023
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

Africa’s biggest mobile network operator MTN Group defied tough operating environments in its markets to deliver solid financial results in the third quarter ended 30 September.

The company today announced its financial results for the period, saying it had to grapple with inflation, foreign exchange (forex) volatility, armed conflicts and power outages across its markets.

MTN Group operates in 19 markets across Africa and the Middle East, providing voice, data, fintech, digital, enterprise, wholesale and application programming interface services.

“MTN maintained a resilient performance in the first nine months of 2023, as inflation remained elevated across our markets, with an average blended rate of 17.3% year-to-date (YTD) compared to 14.2% in 2022,” comments MTN Group president and CEO Ralph Mupita.

“Encouragingly, in Q3, inflation has started to show some signs of subsiding across our footprint, led by markets such as South Africa, Ghana and Uganda.”

According to Mupita, forex markets remained volatile in the period, with local currencies under pressure against the US dollar and constrained availability of forex, particularly in Nigeria.

The rand closed September 2023 at R18.90 (December 2022: R17.05) and the naira closed at N777/US$ (December 2022: N461).

The company notes naira devaluation had a material impact on its results, particularly in Q3.

Countering power cuts

Mupita says power outages in SA continued to be a challenge in the period. However, the significant progress made in the firm’s network resilience programme – which is tracking slightly ahead of plan – combined with lower load-shedding in Q3 (compared to H1), has supported average network availability of above 95%, he adds.

“We remained focused on the execution of our Ambition 2025 strategy to navigate the ongoing macro challenges in our operating environment. We invested capex of R26.2 billion YTD in our networks and platforms, and sustained the growth in our business.”

The group delivered an increase in service revenue of 14.2%, driven by steady growth of 2.6% from MTN South Africa, as well as strong growth in MTN Nigeria (up 21.4%) and MTN Ghana (up 36.6%), the firm reveals.

It points out that the slowdown in Q3 service revenue growth (up 12.3%) was impacted by the conflict in Sudan. Excluding MTN Sudan, it notes, group service revenue growth in Q3 would have been 13.9%.

“Our subscriber base increased by 1.8% to 290.1 million. This was affected by subscriber registration regulations in Ghana and Nigeria, as well as a decline in subscribers in Sudan amid the ongoing conflict,” says Mupita.

He says active data subscribers were up by 6.7% (to 144.6 million), supporting increased traffic and data revenue growth.

MoMo active users increased by 0.7% year-on-year to 63.5 million impacted by a strategic focus shift from agent banking to wallet in Nigeria, as well as the implementation of a change in definition of activity across the group that impacted Côte d’Ivoire and South Africa adversely, he states.

Transaction volume and value increased by 33.9% and 57.1%, respectively, delivering service revenue growth of 22.1% year-on-year (up 23% in Q3 2023) with advance services contributing 25.7% (2022: 20.7%).

“Overall, we are pleased with the continued acceleration in fintech,” the group CEO says.

According to MTN, overall group EBITDA increased by 11.2%. The EBITDA margin was 43.2% YTD (Q3 2022: 44.2%), impacted by upward pressure on costs due to inflation and forex depreciation, network resilience costs in MTN SA and the impact on operations from the conflict in Sudan.

Mupita explains these impacts were partially mitigated through the company’s expense efficiency programme, which achieved sustainable cost savings of R1.5 billion YTD – achieving the target for 2023.

“We maintained a healthy liquidity position, with headroom of R45.6 billion as at 30 September 2023. We upstreamed cash totalling R3.8 billion from our operating companies in Q3, bringing the total cash upstreamed YTD to R8 billion.”

Looking ahead

Mupita comments that the momentum in MTN SA is encouraging and on a steady path of improving top-line growth and profitability.

Post the period end, he notes, MTN Nigeria has streamlined its data bundle mix and launched new offerings that should help to optimise pricing in Q4 and beyond. The business remains engaged with authorities to secure tariff increases.

“We are on track to deploy capex broadly in line with our FY2023 guidance of R40.1 billion, based on current currency assumptions, with an anticipated capex intensity within our medium-term target range of 15%-18%.

“In building on our financial resilience, we delivered on our target of R1.5 billion in expense efficiencies for FY2023 and are targeting an additional R7 million to R8 billion in savings over three years, from 2024 onwards.

“We continue with focus on our strategic priorities of exiting selected markets in our current portfolio, completing the minority investment in group fintech with Mastercard, and liability management of holding company debt. The group board continues to anticipate paying a minimum ordinary dividend for FY2023 of 330cps.”