MTN Nigeria Communications Plc (MTN Nigeria) Friday announced its audited results for the full year ended 31 December 2019, which reflected strong rise in earnings and capital expenditure (Capex) within the period under review.
Key takeaways from the released results showed as follows:
*Mobile subscribers increased by 6.1 million to 64.3 million
*Active data users increased by 6.5 million to 25.2 million
*Service revenue increased by 12.6% to NGN1.2 trillion
*EBITDA grew by 45.2% to N629.9 billion (IAS 17: 20.9% to N524.4 billion)
*EBITDA margin increased by 12.1 pp to 53.9% (IAS 17: 44.8%, up 3.0pp)
*Profit before tax grew by 31.1% to N290.1 billion (IAS 17: 39.9% to N309.6 billion)
*Earnings per share rose by 38.8% to N9.9k (IAS 17: 47.9% to N10.6k)
*Capital expenditure (excluding ROU[1] assets) increased by 13.1% to N208.3 billion
*Final dividend of N4.97 kobo per share recommended
*Unless otherwise stated, financial and non-financial information is year-on-year (YoY, full-year 2019 versus 2018). In January 2019, MTN Nigeria adopted IFRS 16 and adjustments are reflected in the results.
In his assessment of the result, CEO of MTN Nigeria, Ferdi Moolman noted that “I am pleased with our performance in 2019, which demonstrates the progress we have made in the implementation of our BRIGHT strategy. Despite a challenging operating environment, we continued to deliver double-digit growth in service revenue in line with our medium-term guidance. Voice revenue growth remained healthy, and data revenue continued to accelerate, supporting a 12.6% increase in service revenue with an acceleration in growth to 14.0% YoY in Q4 2019.”
According to him, “digital revenue gained momentum as we started to see quarterly growth from Q3 2019. We further focused on building a sustainable active user base for our digital business, while improving the customer journey and experience on value-added services (VAS). In Q4 2019, we launched MusicTime, one of our flagship digital offerings. The active base for our digital subscriptions surpassed 2.1 million users during the year, as we continue to build critical mass for our portfolio of digital products and services. On a sequential QoQ[2] basis, digital revenue increased by 23.0% and we target sustained growth into 2020.
“Fintech revenue growth was 23.3%, supported by increased adoption of MTN Xtratime, our airtime lending service. We launched a super-agent service in August and are pleased with the initial rollout and uptake of the service. We closed the year with a network of 108,000 agents registered nation-wide. The agent network served almost one million customers in the first four months of operation, and we are maintaining our focus on further expansion. To cater to a broader market and encourage further adoption, we are also widening the service offering – from basic transfer service and airtime/data sales to a more extensive bouquet, including cash deposit and withdrawal services, bill payments and facilitating e-commerce.
Moolman added that “Our enterprise[3] business segment continued to deliver solid results, with revenue growth of 20.3%.”
“On the cost side, the increase in operating expenses on an IAS 17 basis was 4.4%, which was below the rate of inflation. This reflects progress with our cost management initiatives and reduction of non-recurring expenses. We maintained our leadership position in network net promoter score (NPS) as we continued to invest to improve service quality and drive 4G expansion. This resulted in a 13.1% increase in capital expenditure and capex intensity of 17.8% on an IAS 17 basis. Our overall cash flow performance was pleasing, with a 26.6% growth in free cash flow to N316.1 billion (IFRS 16: 51.4% to N378.0 billion).
MTN boss further agreed that “Overall, our bottom-line remained strong with growth of 31.1% and 38.8% respectively in profit before and after tax. Earnings per share increased by 38.8% to N9.9k.
On how it was made from the start, Moolman recalled that “Following the completion of the SIM re-registration exercise in Q3 2019, we recorded 2.7 million net additions in Q4. In total, we added 6.1 million new subscribers to our network in 2019. Although the last quarter is usually seasonally strong, service revenue growth (14%) in Q4 outpaced the seasonal effect.
“In the third quarter, we focused on several initiatives to enhance coverage and drive data usage penetration. These initiatives include optimising frequencies, expanding our 4G network coverage with over 6,000 additional sites leveraging 800MHz spectrum and repositioning our commercial data offerings.
“It is pleasing to note that the promising results we reported at the end of Q3 2019 accelerated in the fourth quarter. Corresponding with the increase in our active data subscriber net additions by 2.9 million in Q4 2019, our 4G population coverage rose by 8.4pp to 43.8%, giving people in 68 additional cities access to 4G. We closed the year with 132 cities covered by 4G and became the first mobile network operator in West Africa to demonstrate the capability of 5G technology. We are excited about its potential for our customers and Nigeria’s overall national development plans.
Another key point made was the “the progress made in resolving our dispute with the Attorney General of the Federation (AGF) on the adequacy of taxes and duties paid. We have discontinued the legal action against the AGF following the transfer of the matter to the relevant authorities and look forward to a final resolution. We have always fulfilled our tax obligations and remain committed to maintaining good relationships with all regulatory authorities.
Reviewing MTN Nigeria’s operational procedures, Moolman averred that “During the year, we focused on building our subscriber base, resulting in a growth of 10.5% in net additions to a total of 64.3 million subscribers. Our active data subscribers rose by 34.9% to 25.2 million on the back of several initiatives. As a result, the ratio of active data users to total mobile subscribers increased by 7.1pp to 39.2% in 2019 with strong potential for future growth.
Voice revenue growth remained healthy at 8.4% and accounted for 72.7% of service revenue. Voice traffic increased by 7.6%, supporting revenue growth.
“In addition, we have seen rapid acceleration in data revenue growth enabled by greater population coverage, a revamp of our data portfolio and initiatives to drive 4G device penetration. We added 5.3 million new smartphones to our network, bringing smartphone penetration to 41.8% of our base, while data traffic rose by 85.8%. Our interventions in the year helped to drive a 42.4% increase in data revenue for the year (63.1% YoY in Q4 2019). Data contributed 18.8% to service revenue, up 3.9pp from 14.9% in 2018.
| IFRS 16 and IAS 17 comparison | |||||||||
| IFRS 16 | IAS 17 | IAS 17 | IFRS 16 | IAS 17 | |||||
| 2019 | 2019 | 2018 | Growth | Growth | |||||
| N’m | N’m | N’m | % | % | |||||
| Operating expenses | 321.1 | 426.6 | 408.5[4] | -21.4% | 4.4% | ||||
| EBITDA | 629.9 | 524.4 | 433.94 | 45.2% | 20.9% | ||||
| EBITDA margin % | 53.9% | 44.8% | 41.8% | 12.1pp | 3.0pp | ||||
| Capital expenditure | 251.9 | 208.3 | 184.2 | 36.8% | 13.1% | ||||
| Capex intensity | 21.5% | 17.8% | 17.7% | 3.8pp | 0.1pp | ||||
| Free Cash flow | 378.0 | 316.1 | 249.7 | 51.4% | 26.6% | ||||
| Profit before tax | 290.1 | 309.6 | 221.3 | 31.1% | 39.9% | ||||
| Profit after tax | 202.1 | 215.3 | 145.6 | 38.8% | 47.9% | ||||
| EPS (N) | 9.9 | 10.6 | 7.2 | 38.9% | 47.9% | ||||
