MTN Quarterly Update - Strong Data Growth

Last week MTN released their quarterly update for the period ending 31 March. The share has been battered this year due to a weak oil price. The company has significant operations in Nigeria and Iran, two countries that rely on oil production. Looking at high level numbers, they added 6.6 million customers - taking their customer base to 257 million, revenue grew 11% and their EBITDA profit margins expanded. Looking at a country level, most operating regions saw double-digit revenue growth; unfortunately MTN SA saw revenue go backwards by 6.2%. Part of the reason for the drop in local revenue is due to a change in their roaming agreement with Cell C.



The exciting growth for the group comes from their data and fintech divisions, which saw revenue growth of 26.4% and 26% respectively. In South Africa, there was a 53% increase in data traffic, which translated into revenue growth of 7%. As those numbers demonstrate, usage is increasing at a quicker rate than prices are falling. In Nigeria the figures were even better, revenue increased 59% and data traffic was up 130%.

Creating a network to handle all that traffic costs a huge amount of money. Originally MTN planned to spend R28 billion this year on building their network, due to Covid-19 disruptions that number will drop to around R21 billion. Still a significant number. The positive of the lockdown is that more people are using data. MTN said they saw a surge of 30% in their April data usage.

Due to the tough environments that MTN operates in, the share looks rather cheap. One problem is that they struggle to get profits out of Iran and Nigeria. If you think the Rand has been weak recently, over the last year the Iranian Rial weakened by 47% to the USD. Those risks are offset by the opportunities that 250 million customers bring to the group.