FRI 01 APRIL, 2022-theGBJournal| Recent data published by the Nigerian Communications Commission (NCC) showed that the number of telecommunication subscribers in Nigeria grew by 1.4% to 198.12 million in February 2022 from 195.46 million as of December 2021.
Similarly, teledensity which measures the number of active telephone connections per 100 inhabitants living within an area, grew to 103.8% in February 2022 from 102.40% in December 2021. For us, this is a positive development that portends increased usage of voice calls and data services from an expanding subscriber base in the industry.
Consequently, we believe the impact would be evident in MTNN’s revenue performance for Q1-22 given its market leadership position (market share of 37.9% as of February 2022).
In 2021FY, the industry-wide suspension of sale and activation of new SIM cards by the Nigerian Communications Commission (NCC) undermined growth in subscriber base. Though the NCC lifted the ban in April 2021, the directive left a negative imprint on industry metrics. According to NCC’s data, mobile subscribers declined by 4.5% to 195.46 million as of December 2021 from 204.60 million in December 2020. Similarly, data and broadband subscribers declined by 8.0% and 9.2%, respectively, to 141.97 million and 78.04 million over the same period. For the sake of evidence, MTNN’s subscriber base declined by 10.5% y/y to 68.50 million as of 2021FY. Although the decline in subscriber base undermined the growth in voice revenue (+7.0% y/y) in 2021FY, Management disclosed that the impact was partly offset by increased usage of voice calls by its active SIM base and migration of customers to a higher quality of experience.
Furthermore, Management guided that the decline in subscriber base will bottom out and return to positive net additions in Q4-21, given efforts in ramping up SIM registration and activation infrastructure. True to Management’s guidance, MTNN added approximately one million subscribers in Q4-21.
With data from NCC indicating an increase of 2.66 million in industry’s subscriber base between December 2021 and February 2022, we estimate MTNN added c.1 million subscribers to its network over the same period.
We expect continued rebound in industry’s subscriber base in 2022, as mobile network operators have collaborated with National Identity Management Commission (NIMC) to streamline the process of onboarding new customers, given that NIN is now a pre-requisite for the sale of new SIM cards. We forecast MTNN’s subscriber base will grow by 4.4% y/y to 71.49 million customers in 2022E. Accordingly, we estimate voice revenue will grow faster by 11.6% y/y in 2022E (vs 7.0% y/y in 2021FY).
Beyond the growth in subscriber base, we expect data revenue will remain a key driver of service revenue. Data revenue has expanded tremendously from NGN67.8 billion in 2016FY to NGN516.21 billion in 2021FY, implying a 5-year CAGR of 50.1%. We believe the country’s favourable demographics underpinned by the large population (estimated at c. 200 million) with a median age of 19, rising adoption of social media platforms for communication and digital marketing, and increasing internet penetration are key drivers of data revenue. We estimate data revenue will grow by 26.5% in 2022E while the data revenue share will rise to 43.2% in 2026E from 33.6% in 2022E.
We have a target price of NGN248.18 on MTNN, implying a potential upside of 18.2% (excluding dividend) based on the price of NGN210.00/share (March 30). On our 2022E EPS, we estimate a DPS of NGN17.64/share (+34.5% y/y above NGN13.12 in 2021FY), translating to a dividend yield of 8.4%. On our estimates, MTNN trades at a 2022E P/E of 10.6x and EV/EBITDA of 5.0x compared to EM peers average of 20.7x and 6.6x, respectively. With Cordros Research.
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