MON, JULY 31 2023-theGBJournal |MTN Nigeria Communications Plc (MTNN) grew its revenue by 23.3% y/y in Q2-23 (H1-23: 22.0% y/y), following a broad-based increase across MTNN’s value channels – Voice (+17.3% y/y), Data (+30.4% y/y), Digital (+58.6% y/y), Fintech (+7.0% y/y) and Others (+24.0% y/y).
The unaudited performance published at the close of business Friday, also showed 67.1% y/y decrease in standalone EPS to N1.38, bringing H1-23 EPS to N6.33 (Q2-22: N8.95).
The dip in earnings was driven mainly by the marked expansion in net finance costs (+164.3% y/y).
The board proposed an interim dividend of N5.60/s, which implies a yield of 2.1% on the last closing price of N272.00 (July 28).
Management alluded that improved usage of its voice propositions and increased subscriber base supported voice revenue (+17.3% y/y) in the period.
Pertinently, MTNN’s subscriber base (Q2 net additions: +0.40 million) grew to 77.10 million as of H1-23, with the addition of 1.50 million subscribers.
Also, the growth in data revenue (+30.4% y/y), which contributed 40.9% to revenue, was delivered largely through increased usage supported by network expansion for the company and improved smartphone penetration nationally.
However, management noted that the harmonization of telecommunication codes in Q2 inhibited data revenue growth as users adjusted to the new codes, amid a 7.0% y/y decline in active data users due to lower gross connections.
During the quarter, total expenses grew by 24.0% y/y (H1-23: +27.8% y/y), owing to the (1) impact of higher consumer price index (CPI) adjustments on lease rental costs; (2) new site rollouts; and (3) rising energy costs.
EBITDA (+23.6% y/y) grew faster than revenue in the quarter, with EBITDA margin printing 52.8%, 16bps higher than the preceding quarter. However, highlighting the increased costs over the HY period, the H1-22 EBITDA margin declined by 58bps to 53.0%.
Net finance costs (+255.3% y/y) rose markedly in Q2-23, following a 256.1% increase in finance costs as net foreign exchange loss (Q2-23: N126.82 billion | Q2-22: N12.02 billion) was 10.6x the value in the prior period, highlighting the impact of the FX devaluation on MTNN’s finance charge.
Consequently, pre-tax profit declined by 64.3% y/y to N44.6 billion in Q2-23. Following an effective tax rate of 38.6% (Q1-22: 32.2%), profit after tax printed N27.39 billion (-67.7% y/y).
”While MTNN’s key fundamentals remain strong, we acknowledge the supernormal increase in net finance costs, which we believe was unavoidable following the revamp of Nigeria’s FX policy,” says Cordros Research analysts in a note to theGBJournal.
“For the rest of the year, we are quite concerned about the impact of the foreign exchange liberalization policy on the EBITDA margin, given that the costs of MTNN’s tower contracts – renewable at the beginning of each quarter – which are priced in USD will be adjusted to reflect the new reference rate,” they said.
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