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Power resilience moves see MTN deliver solid earnings

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 14 Aug 2023
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

MTN South Africa’s power resilience investment helped the group deliver a solid performance for the first half of 2023, with group service revenue up by 15.1%, to R107.7 billion.

In the telco’s interim financial results for the six-month period ended 30 June, it says despite a challenging operating environment, it maintained a healthy financial position and resilience, through the execution of its Ambition 2025 strategy.

This includes accelerated investment in networks, investments in combating load-shedding, MTN signing an initial agreement with Mastercard to sell an undisclosed minority stake of its fintech arm and progressed plans to exit Afghanistan.

The group’s R108 billion service revenue was driven by increases in revenue from data services of 24% and from fintech services of 22%. Revenue from voice services increased 6% in the period.

Overall group earnings before interest, taxes, depreciation and amortisation (EBITDA) grew by 13.5%, to R49.4 billion with an EBITDA margin of 44%, as elevated inflation and foreign exchange depreciation continued to place upward pressure on costs.

Group president and CEO Ralph Mupita says by the end of June, MTN SA’s network availability was more than 90%, as a result of its power resilience investment. This was despite severe electricity shortages across the country.

“We delivered a resilient performance in H1 23 and made good strategic progress against a tough macro backdrop. In South Africa, we were very encouraged by the improved network availability on the back of our power-resilience investment, resulting in a stronger Q2 23 performance than Q1 23.

“Our business continued to grow in a challenging trading environment, with data traffic and fintech transaction volumes up by 18.5% and 37.3%, respectively. This supports our medium-term growth thesis, enabled by ongoing investment in our networks and platforms. In H1, we deployed R17.2 billion of capex, reflecting a capex intensity of 15.2% – within our medium-term target range of 15%-18%.”

In its financial results for the year ended 31 December, adverse effects of load-shedding took a toll on the group’s performance, knocking off R695 million from its annual earnings.

In March, the group announced it was investing R1.5 billion to accelerate its network resilience and counter load-shedding, site vandalism and battery theft.

Communication platforms revenue grew 11.9% year-on-year (YOY), while fixed connectivity segment revenue grew 15.2% YOY. The group says continued expansion of Bayobab (formerly MTN GlobalConnect) delivered an external revenue increase of 12.3% to $172.5 million.

Flourishing fintech

MTN Group says its fintech business delivered on its rapid expansion plans. The volume of transactions increased by 37% to 8.3 billion in the first half of the year, executed by 61 million active Mobile Money (MoMo) customers. Active MoMo agents grew 18.1% to 1.3 million.

“Following the bespoke process to identify and potentially introduce strategic minority investors into MTN Group Fintech, we executed commercial agreements with Mastercard to support the acceleration and growth of our fintech business’s payments and remittance services.”

MTN and Mastercard also signed a memorandum of understanding, which provides for a minority investment by Mastercard into the group’s fintech business, based on a total enterprise valuation of about $5.2 billion for the business on a cash and debt-free basis, it says.

In Nigeria, the group delivered a strong operational result, having navigated the cash shortages in the first quarter, as well as increased inflation.

The company’s balance sheet remained strong, with all key metrics well within the limits of its loan covenants.

“The policy changes implemented in Nigeria in Q2 23 have short-term negative impacts, but we see these as being very constructive for the investment climate in the medium to longer term. We continued to invest in world-class networks and platforms for the people of Africa, committing R17.2 billion in capital expenditure in the first six months of 2023.”

Looking ahead, Mupita notes the group will keep working to create shared value across its markets, focused on the continued execution of Ambition 2025, which remains relevant in the current macro-economic volatility and presents attractive scope for growth.