MTN Nigeria Communications Plc (MTNN) released its Q1-22 unaudited results this morning, April 29, 2022, showing a 31.3% y/y increase in PAT to NGN96.82 billion while EPS stood at NGN4.76 (+28.5% y/y). The growth in earnings was driven mainly by the robust expansion in the top line (+22.2% y/y) and expansion in EBITDA margin (+151 bps to 54.6%), both of which completely offset the growth in OPEX (+20.5% y/y).
Service revenue grew by 22.2% y/y to NGN264.00 billion in Q1-22, due to the broad-based expansion across voice (+6.5% y/y | 56.1% of revenue), data (+54.5%y/y | 34.7% of revenue), and value-added services (+46.5% y/y | 4.4% of revenue). Management revealed that the growth in voice revenue was supported by increased gross connections and higher usage from its active customer base. We believe that voice revenue also benefitted from MTNN’s customer acquisition touchpoints and rural telephony initiatives.
MTNN added 1.70 million subscribers in Q1-22, a continued improvement from the 1.00 million subscribers added in Q4-21. Management revealed that this was made possible by ramping up SIM registration and NIN enrollment capacity. We understand that approximately 60 million subscribers have submitted their NINs (as of 25 April 2022), representing about 85% of MTNN’s subscriber base (70.20 million as of Q1-22).
On data revenue (+54.5% y/y to NGN163.31 billion in Q1-22), management noted an increase in its subscriber base, expanded 4G coverage and improved network capacity to support increasing data traffic drove the growth. Notably, the average MB per user rose by 69.8% y/y, enabling overall data traffic growth of 84.8% y/y. In addition, MTNN added about one million new smartphones to its network in Q1-22, while 4G penetration rose to 71.7% from 70.3% in 2021FY.
EBITDA rose by 25.7% y/y to NGN257.15 billion in Q1-22, supported by the faster growth in revenue (+22.2%) compared to network operating costs (+16.2% y/y). However, operating expenses grew significantly (+20.5% y/y) on the back of increases in the Interconnect and roaming costs (+14.8% y/y), Discounts and commissions (up 15.2% y/y), and Advertisements, sponsorships and sales promotions (+64.9% y/y) lines. Notwithstanding the elevated cost pressures, EBITDA margin expanded by 151bps to 54.6% in Q1-22 (Q1-21: 53.1%).
Net finance cost rose by 18.7% y/y in Q1-22 due to the growth in finance cost (+28.6% y/y) amid a substantial increase in finance income (+273.8% y/y to NGN4.59 billion), which was mainly supported by higher interest on bank deposits (NGN3.89 billion in Q1-22 vs NGN302.00 million in Q1-21).
Overall, pre-tax profit grew 39.4% y/y to NGN143.59 billion in Q1-22. However, a higher effective tax of 32.6% in Q1-22 compared to 28.4% in Q1-21 led to slower growth in profit after tax to NGN96.82 billion (+31.3% y/y).
Industry observers say beyond the solid topline growth delivered by MTNN, we are impressed with the growth in subscriber base during the quarter, which extended the rebound in Q4-21.
