MTN quarterly update

07-MAY-18

MTN reported a very positive quarterly update on Thursday the 3rd of May. I say positive because the cloud of uncertainty around the frequency fees and license disputes in Benin and Cameroon seem to be behind the company. More Benin than Cameroon at this point as the revised terms in Cameroon haven't been signed yet, however, the great news here is that Vodafone has pulled out of Cameroon which means more opportunity for MTN to grow its customers if they do come to an agreement with the Cameroonian government.

The company reported the following numbers quarter on quarter:
- Service revenue increase of 9.1%
- Data revenue increase of 26.9%
- Voice traffic contrary to popular belief increased by 24.2% and data traffic increased by 56.7%
- Added 4.1 million new subscribers showing an increase of 1.9% from the comparable quarter last year.
- Mobile Money (MoMo) customers increased by 3.9% to 22.7 million people on the MoMo network.

The new management is obsessed with operational excellence and flawless execution. You can see it from their aggressive investment in CapEx to improve network quality resulting in people porting back to MTN, seen in the increase of both prepaid and postpaid subscribers.

Nigeria, RSA, Iran and Ghana are by far the most important regions for MTN and thus their performance is crucial to the company's overall numbers.

Nigeria, still very strong on the turnaround momentum with service revenues increasing by 14.4%, fuelled by the addition of 2.3 million new subscribers on top of the 2 million new subscribers from the December quarter.

Mzansi service revenues increased by 2.5% thanks to strong growth in data and digital revenues of 12.1% and 17.7% respectively. There's still a big push into modernising the infrastructure in Mzansi with management investing a further R1.7 billion in CapEx to maintain its position as the best network in the country.

Iran grew service revenues by 15.2%, fuelled by again strong data and digital growth of 50.7% and 21.3% respectively. The company managed to repatriate EUR30 million from Iran in the quarter.

Ghana was the shining star for the quarter with services revenues growth of 29.3%, where data revenues soared 51.5%. Mobile Money (MoMo) was 15% of total revenues with 7.4 million active MoMo subscribers.

The quarter wasn't smooth sailing as we saw MTN lost customers in Yemen and Afghanistan, and the situation in those countries isn't getting better unfortunately (thoughts and prayers). On the other hand, MTN agreed with the government of Benin to settle on $126 million for historical frequency fees and a five-year license extension.

This is a premium emerging market telecoms company that we like and we enjoy the fact that there isn't anything comparable to it in the market. The turnaround is in full force, and new management is at the helm streamlining the processes. The business will benefit positively in the long-term from all of managements efforts and that 300 million magic number might not be 5 years away!