Release Date: August 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MTN Group Ltd (MTNOF, Financial) reported strong commercial momentum with healthy growth in subscriber additions and usage in core connectivity and FinTech businesses.
- The FinTech ecosystem expanded significantly, with transaction volumes up by ZAR9.7 billion and advanced services growing by 58% year-on-year.
- The company made good progress on strategic initiatives, including regulatory compliance in Uganda and Ghana, and the orderly exit from Afghanistan and Guinea Bissau.
- MTN Group Ltd (MTNOF) improved its balance sheet by reducing dollar-denominated debt from 80% to 22%, closing the period with holdco leverage at 1.6 times.
- The Board is comfortable maintaining medium-term guidance and anticipates a dividend for FY2024, reflecting confidence in the company's operational momentum and ability to manage headwinds.
Negative Points
- The sharp devaluation of the Naira significantly impacted reported earnings, with the Naira averaging about 1,500 in the first half, leading to currency shocks.
- The ongoing conflict in Sudan resulted in network downtime and an impairment of about ZAR3.8 billion, affecting both top-line and bottom-line performance.
- Headline earnings per share declined by 50.5%, largely due to currency effects and the conflict in Sudan.
- Operating expenses increased by 28% year-on-year, driven by higher network expenses, energy costs, and inflationary pressures, particularly in Nigeria.
- The company faced challenges in upstreaming cash from Nigeria due to negative equity, impacting overall financial flexibility.
Q & A Highlights
Q: Can you touch on the SA prepaid recovery? What needs to happen on prepaid and what will you entice us with over the next six months?
A: We put the price increases only in June and then going to July. We expect that it will filter into the external channels by August. You can expect to see a relatively recovering prepaid performance towards September and into Q4. We are comfortable that in terms of where we are, we're actually mark-to-market in terms of pricing.
Q: Did you get anything out of Nigeria in terms of cash upstreaming, and at what rate?
A: We have cleared the interim 2023 dividend and have been able to upstream that. It is included in the ZAR6.5 billion we indicated.
Q: Your data subs grew 10%, traffic was up 35%, but revenue is only up 2.4%. Can you explain this discrepancy?
A: The mobile traffic, specifically prepaid, saw about a 9% increase in data traffic, which aligns with the revenue performance. The biggest contributor to traffic growth was the FWA traffic profile, which we grew aggressively to build the home base. Going forward, we will try to optimize and manage this profile better.
Q: What is the rationale behind extending the (inaudible) deal?
A: Reflecting on the sharp devaluation of the naira, the discussion was to extend it for another three years. The detail of that extension will be communicated as part of the AGM, but the (inaudible) Board will have the right to unwind any time in that period.
Q: Will Nigeria be subject to minimum applicable tax laws while it is loss-making?
A: Yes, there is a minimum tax, even when you make losses, which is about 0.5% of total turnover.
Q: What impact do the tower contract renegotiations have on MTN's negative equity position? Could you provide a timeline for resolving the negative equity?
A: There are many factors that move that number, including naira movements and CPI. The big issue is a decent tariff increase. We need a combination of all factors to resolve the negative equity, and it will be a progressive effort.
Q: What are the sustainable margins in Nigeria?
A: We have taken an approach to apply IFRS 16 to mimic economic reality. Comparing businesses should be done at the PAT level rather than just EBITDA margins, as there is a lot of movement between EBITDA and PAT.
Q: Please quantify the ICT one-off in South Africa and its EBITDA contribution.
A: The ICT project with GBM had a total revenue of around ZAR80 million with a very muted margin.
Q: How much headroom do you have left in Nigeria to optimize pricing in terms of the lack of price hike so far?
A: The growth seen includes usage and bundle optimization effected in October last year. If we don't get the tariff increase progressed, we will have to discuss further bundle optimization with the authorities.
Q: Could you provide some color on where lenders and the NGX and other stakeholders sit with respect to upstreaming of cash from Nigeria, given the negative equity position?
A: Nigeria can't declare dividends while in a negative equity position, and all dividends have been upstreamed.
Q: Having spent about ZAR4.6 billion on network resilience, is there a possibility that this investment would be subject to write-offs or amortization given ongoing reduced load shedding?
A: It's too early to proclaim the end of load shedding.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
