MTN to raise R15bn in asset sales, re-launch MoMo in SA

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MTN group CEO and president Rob Shuter.
MTN group CEO and president Rob Shuter.

The MTN group plans to generate more than R15 billion over the next three years through asset sales, as it moves forward with a strategy to "optimise the portfolio, reduce risk and improve returns".

This is according to MTN group president and CEO Rob Shuter, speaking during a call with journalists this morning.

The telco giant today announced a strong set of results, for the year ended 31 December 2018, with reported headline earnings per share (HEPS) growing by 85%. Shuter also said MTN would extend its Mobile Money (MoMo) offering to four new countries, including re-launching the service in SA.

The group has committed to a portfolio review to realise more than R15 billion over the next 36 months and the first move in this regard was today's announcement that MTN will dispose of its associate in Botswana, Mascom, for $300 million (R4.3 billion).

Shuter said the decision was "because that is a market where we don't have control, it's not MTN-branded and we really can't execute our Bright strategy there".

In 2017, following a strategic review, Shuter announced 'Bright', essentially a growth strategy under six strategic pillars.

Shuter said that in terms of its e-commerce ventures and investments in tower companies, "although we need a tight commercial integration in the markets in which we overlap, we do not need to own them in the long-term, so we have said they are not long-term strategic to the group".

The group has R40 billion tied up in the value of the e-commerce and tower company investments, and said these will be monetised over time.

MTN last year already announced the sale of its Cyprus business for around R4.1 billion and a localisation transaction through its listing in Ghana.

"In the opco portfolio, the focus for this year will be the localisations in Nigeria, Zambia and Uganda; to manage our conflict markets on a self-funding basis; and also a lot of work to achieve a turnaround in the West African portfolio," Shuter added.

"So, if you put together the work we will be doing in the localisations, associates and also the e-commerce and tower assets we have announced, we will be realising at least R15 billion in asset realisations over the next three years. This excludes any proceeds that may come from HIS, which is a R23 billion investment on its own."

Results rebound

A strong set of results pushed up MTN's stock on the Johannesburg Stock Exchange by almost 8% in early trade today, after its recent beating. On Wednesday, MTN's shares declined for the eighth straight day, and according to Bloomberg data, the telco's share price, as of the close yesterday, had fallen 34.54% over the last 12 months; year-to-date was trading 14.5% lower; and over a five-year period had dropped by almost 63%.

Today's full year results, however, show a positive story, with the group subscriber base growing by 16 million to 233 million customers across 21 markets in Africa and the Middle East.

The number of active data users for the year increased by 10 million to 79 million and the active Mobile Money subscriber base rose to 27 million. The strong commercial momentum drove a 10.7% constant currency increase in service revenue to R125.4 billion.

Shuter said the group is "pretty encouraged by the results" and the service revenue growth is "way ahead of where we were last year at 7.2% and it's also ahead of inflation, which is great and means we are actually delivering real growth in the markets".

"So the combination of strong momentum, decent revenues and a lot of improvements in margin actually means we have hit all of our medium-term guidance for 2018."

Group earnings before interest, tax, depreciation and amortisation rose more than 15% and reported HEPS increased to 337cps from 182cps in 2017, which is an 85% increase. Adjusting for once-off items, HEPS would have been 565cps, MTN said.

The total full year dividend of R5 was met and the group declared a final dividend of R3.25.

"We see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity," said Shuter. "We are also extending our Bright strategy to build MTN into a digital operator with a major focus on the fintech, digital, enterprise and wholesale business areas."

Considering the improved performance in 2018 and its growth plans, the group revised its guidance to investors upwards, targeting double-digit growth in service revenue, improved profit margins and capex efficiency, and a new target to drive return on equity from 11% to over 20% in the next three to five years.

MoMo is back

"We are going to be extending the Mobile Money markets from 14 to 18 by launching in South Africa, Nigeria, Afghanistan and Sudan," Shuter told journalists.

Shuter announced last November that he wanted to bring MoMo back to SA, where it previously failed.

In September 2016, MTN SA announced it was decommissioning the offering in the country due to lack of commercial viability, but Shuter said the company knows what to do to make it work this time.

"What we see in the rest of the markets is we are successful when we set ourselves up to compete with cash.

"I think in the previous iterations [of MoMo] we were more focused on building a digital banking system that would compete with the commercial banks. So this time, we are really going back to our roots and will be focusing on the areas of the country where we have large unbanked or under-banked populations primarily transacting in cash. I think that is the sweet spot for MTN Mobile Money," Shuter explained.

He emphasised the group's focus on accelerating growth, saying MTN will "continue to extend our advanced services like insurance and lending. We have also announced a significant extension of our digital strategy: we will be launching our music streaming service across the portfolio in the first part of the year.

"We have also announced that we have built an instant messaging platform which will be integrated with Mobile Money to form the first step of what we call the African WeChat and instant messaging will be launched in two markets in the next month or so."

African issues

Shuter also acknowledged to journalists that the company is "tackling difficult stakeholder situations".

"We know when we went into the year we had difficulty in Benin and Cameroon. I think we worked through those in a pretty good fashion. Clearly, the second half was characterised by issues in Nigeria, and towards the end of the year in Uganda.

"We did manage to solve the $8 billion dispute on legacy dividends [in Nigeria] but we have got more work to do with the Nigerian attorney-general matter, and also with our licence renewal in Uganda. Suffice to say, we accept that and we are putting a lot of effort and resources into improving our regulatory management."

The dispute with the Central Bank of Nigeria was resolved in December 2018 when it agreed to pay $53 million. The original demand from the central bank was $8.1 billion it alleged the company had illegally repatriated using improperly issued paperwork between 2007 and 2008.

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