FRI 29 OCT, 2021-theGBJournal- MTN Nigeria Communications Plc (MTNN) Thursday published its 9M-21 unaudited results showing, standalone PAT rose by 59.0% y/y to NGN78.49 billion while EPS stood at NGN3.86 (+59.0% y/y), bringing the 9M-21 EPS to NGN10.82 (+52.8% y/y).
The growth in EPS was driven mainly by the solid expansion in the top line (+22.9% y/y) and sub-inflationary growth in OPEX (+6.6% y/y), both of which completely neutered the impact of increase in network operating cost (+31.5% y/y).
Service revenue grew by 22.9% y/y in Q3-21 (9M-21: +23.6% y/y), due to the broad-based expansion across voice (up 7.4% y/y; 57.6% of revenue), data (up 57.2% y/y; 33.2% of revenue), and value-added services (up 62.6% y/y; 4.5% of revenue) Management revealed that the growth in voice revenue was supported by increase in minutes of use by subscribers and the success of its customer value management initiatives.
‘’For us, we think continued recovery in activities in the informal sector has increased use of voice calls particularly among artisans and unskilled workers,’’ says Cordros Research analysts.
‘’Although mobile subscribers have declined on a y/y basis by 7.5 million to 67.5 million as of 9M-21, we expect MTNN to accelerate efforts in onboarding new subscribers following the directive of the Nigeria Communications Commission (NCC) to lift the SIM registration ban in mid-April.’’
On data revenue, Management noted that the growth was driven by increased data usage from its existing base, expanding 4G coverage and improvement in network capacity to support increasing data traffic. Interestingly, average MB per user rose by 58.2% y/y, enabling overall data traffic growth of 85.5% y/y in 9M-21.
Smartphone penetration grew by 3.5ppt to 48.7%, while 4G penetration rose to 69.2% in Q3-21 from 65.1% in Q2-21 and 60.1% in December 2020. In addition, the growth in value-added services was supported by the increased adoption of MTN Xtratime (an airtime lending service) and its core fintech services.
MTNN also expanded its mobile money (MoMo) agent network with the addition of over 234,000 registered agents in 9M-2021 bringing the total number to 630,000 agents.
Despite the higher increase in network operating costs (up 31.5% y/y) compared to revenue (+22.9%), the sub-inflationary growth in operating expenses (up 6.6% y/y) pushed EBITDA higher by 27.2% y/y to NGN217.29bn in Q3-21.
Similarly, EBITDA margin expanded by 179bps to 52.4% in Q3-21 (9M-21: +158bps to 52.6%). However, we highlight that the substantial increases in network operating cost was due to increased BTS lease costs (due to the restructuring of the service agreement with IHS wherein the reference rate for naira conversion was moved from the official rate to the NAFEX rate), exchange rate depreciation, and accelerated site rollout of 4G sites.
Net finance cost rose by 26.1% y/y in Q3-21 due to the growth in finance cost (+9.3% y/y) amid the decline in finance income (-77.4% y/y), which is reflective of the impact of the low yield environment and reduction in cash and cash equivalents (-24.7% YTD to NGN207.21 billion).
Overall, Pre-tax Profit grew 47.5% y/y to NGN106.23 billion in Q3-21 (9M-21: +51.9% y/y to NGN321.35 billion). However, a lower effective tax of 26.1% in Q3-21 compared to 31.5% in Q3-20 led to the faster growth in Profit after tax (up 59.0% y/y in Q3-21).
Cordros said of the performance- ‘’We are impressed with the sustained momentum in data revenue and the fact that the share of data revenue hit an all-time high of 33.2% (5-year average: 16.0%) in Q3-21.’’
The also like that the company remained operationally efficient given the expansion in EBITDA Margin despite the impact of currency devaluation on BTS lease cost amid higher network maintenance cost induced by accelerated rollout of 4G sites.
‘’We expect sustained growth in voice and data revenue in the last quarter of the year given the increased communication activities that characterises the festive season.’’
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