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MTN reports sharp revenue decline in Q1

Admire Moyo
By Admire Moyo
Johannesburg, 14 May 2024
MTN Group CEO and president Ralph Mupita.
MTN Group CEO and president Ralph Mupita.

MTN Group, Africa’s largest mobile operator by subscribers, has reported a decline in revenue during the first quarter (Q1) of 2024.

The JSE-listed firm today published its quarterly financial update for the period ended 31 March.

While the mobile operator’s overall revenue has taken a knock, its fintech offerings are generating more revenue than before.

MTN’s results show it now has 288 million subscribers in the 18 markets in which the Pan-African firm operates.

Vodacom, MTN’s biggest rival, yesterday announced its financial results for the year ended 31 March, showing Vodacom now has over 200 million subscribers. Vodacom’s revenue for the year was up 26.4% to R151 billion.

MTN’s Q1 results reveal that group service revenue decreased by 18.8%, voice revenue plummeted by 32.2% and data revenue went down by 14.7%, while fintech revenue increased by 11.4%.

According to the company, total subscribers increased by 1% to 287.6 million, while active data subscribers were up by 7.8% to 149.2 million.

Active Mobile Money (MoMo) monthly active users were up by 6.2% to 65.5 million, with data traffic increasing by 36.2% to 4 359PB.

Fintech transaction volumes increased by 18.3% to 4.8 billion and transaction value was up by 11.2% to $72.3 billion.

Civil war and cable cuts

“The macro environment in first quarter 2024 remained challenging, with ongoing high inflation, as well as local currency devaluations in some of our key markets,” says Ralph Mupita, MTN Group CEO and president.

“Although still elevated, we are encouraged by the abating trend in the blended rate of inflation across our footprint, which reduced to 13.7% in Q1 2024, compared to 18.5% in Q1 2023 and 15.4% in Q4 2023. In Nigeria, we saw strong underlying commercial momentum in the business, despite the financial impacts of the sharp devaluation of the naira and continued elevated inflation during the period.”

According to Mupita, global geopolitical tensions remained elevated, a factor impacting the company’s performance.

He notes this included the ongoing civil war in Sudan, which severely affected network availability and revenue generation in that market.

The firm was also impacted by cable cuts that resulted in downtime for significant subsea cables connecting the African continent, particularly in West Africa, says the CEO.

Mupita points out that MTN invested capex (ex-leases) of R5.4 billion year-to-date in its networks and platforms, with a capex intensity of 11.8% in the period.

“We drove data traffic and fintech transaction volumes growth of 36.2% and 18.3%, respectively.”

Excluding MTN Sudan (down 83.2%), which remains impacted by civil war conflict conditions, the group service revenue growth in Q1 would have been 13.3%, says the firm.

“Our subscribers increased by three million to 287.6 million. Base growth was hampered by subscriber registration regulations in Ghana and Nigeria, as well as a decline in subscribers in Sudan amidst the ongoing conflict. Active data subscribers were up by 7.8% (to 149.2 million), supporting increased traffic and data revenue growth,” Mupita says.

MoMo active users increased by 6.2% to 65.5 million, as advanced services continued their strong growth trajectory, with a 63.3% year-on-year (YOY) growth relative to basic services (up 16.9% YOY).

Rwanda, Uganda and Nigeria were the main contributors to the 40.1% increase of active merchants to 2.2 million in Q1, says Mupita, adding that transaction volume and value increased by 18.3% and 11.2%, respectively, supporting the 25% YOY growth achieved in service revenue.

Inflationary pressures

Overall group earnings before interest, taxes, depreciation and amortisation (EBITDA) increased by 3.9%.

The EBITDA margin declined by 2.5pp to 38.1% (Q1 2023: 40.6%), impacted by upward pressure on costs due to inflation and forex depreciation mainly in Nigeria, network resilience costs and electricity tariff escalations in MTN SA and the impact on operations from the conflict in Sudan, Mupita explains.

“Through the execution of our expense efficiency programme, we realised efficiencies of R430 million in Q1.

“The group net-debt-to-EBITDA ratio of 0.5x, as at 31 March 2024 (31 December 2023: 0.4x), remained well within our loan covenant limit of 2.5x. Our net interest cover of 5.6x was also within covenant thresholds.

“We upstreamed cash totalling R718 million from our operating companies, in which is a seasonally softer quarter. Despite the headwinds, we continue to maintain a healthy liquidity position, with headroom of R39.1 billion as at 31 March 2024.”

Mupita believes the trading environment is anticipated to remain challenging in the near-term, with inflation remaining elevated in some of MTN’s key markets, local currencies under pressure and the civil war in Sudan expected to continue.

He says the medium- to longer-term structural growth opportunities for data adoption and financial inclusion remain strong. As such, MTN will continue to be guided by its capital allocation framework, manage near-term risks and remain focused on executing on strategic priorities to deliver on its medium-term guidance.