MTN Nigeria Communications Plc (MTNN) released its 2021FY audited results at the close of business on Friday (28 January). The report revealed that Q4-21 standalone PAT rose by 28.5% y/y to NGN78.34 billion while EPS stood at NGN3.85 (+28.5% y/y), bringing the 2021FY EPS to NGN14.67 (+45.5% y/y). The growth in 2021FY EPS was driven mainly by the robust expansion in the top line (+22.9% y/y) and expansion in EBITDA margin (+209 bps to 53.0%). The company has proposed a final dividend of N8.57/s, bringing the 2021FY total dividend to N13.12/s (vs N9.40/s in 2020FY), implying a dividend yield of 6.9% based on the last closing price of N190.00/s.
Service revenue grew by 20.9% y/y in Q4-21 (2021FY: +22.9% y/y), due to the broad-based expansion across voice (up 0.9% y/y; 56.8% of revenue), data (up 65.2%y/y; 33.5% of revenue), and value-added services (up 55.6% y/y; 4.5% of revenue). Management revealed that the growth in voice revenue on a full year basis (+8.4% y/y) was supported by an increase in minutes of use by its active SIM base and the success of customer value management initiatives, both of which limited the impact of SIM registration and activation restrictions in H1-21. For us, we think the higher minutes of use was supported by a sustained recovery in activities in the informal sector given the patronage by artisans and unskilled workers.
We highlight that MTNN’s subscriber base declined on a y/y basis by 8.0 million to 68.5 million as of 2021FY, due to regulatory restrictions on new SIM sales and activations. However, the management was able to reverse the trend in Q4-21, adding approximately 1 million subscribers following the alignment of its SIM registration and activation centres with regulatory guidelines. We expect MTNN to sustain its efforts in onboarding new subscribers going forward.
On data revenue (+55.3% y/y to NGN516.24 billion in 2021FY), 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, the average MB per user rose by 62.7% y/y, enabling overall data traffic growth of 85.3% y/y in 2021FY. Smartphone penetration grew by 4.0 ppt to 50.0%, while 4G penetration rose to 70.3% in 2021FY from 60.1% in 2020FY. MTNN also expanded its mobile money (MoMo) agent network with the addition of over 374,000 registered agents in 2021FY bringing the total number to 770,000 agents.
Despite the higher increase in network operating costs (up 25.9% y/y) compared to revenue (+22.9% y/y), the sub-inflationary growth in operating expenses (up 10.3% y/y) pushed EBITDA higher by 27.9% y/y to NGN877.07 billion in 2021FY. Similarly, EBITDA margin expanded by 209 bps to 53.0% in 2021FY (9M-21: +158bps to 52.6%).
Net finance cost rose by 15.8% y/y in 2021FY due to the growth in finance cost (+11.4% y/y) amid the decline in finance income (-24.7% y/y), which is reflective of the impact of the low yield environment amidst marginally lower cash and cash equivalents (-5.2% y/y to NGN260.89 billion).
Overall, pre-tax profit grew 32.1% y/y to NGN115.34 billion in Q4-21 (2021FY: +46.1% y/y to NGN436.69 billion). However, a lower effective tax of 32.1% in Q4-21 compared to 30.1% in Q4-20 led to the slower growth in profit-after-tax (up 28.5% y/y in Q4-21).
The company will hold a conference call today at 3 pm Lagos time to discuss the results.
Cordros Capital says “We are impressed with the robust topline expansion delivered by MTNN despite regulatory headwinds which impacted SIM registrations. We also like that the company remained operationally efficient, underscored by the expansion in EBITDA Margin despite the impact of currency devaluation on BTS lease cost amid higher network maintenance cost.
