MTN accelerates growth, delivers on dividend, simplifies the group and lifts its medium-term targets
MTN Group published its financial results for the year ended December 2018 on Thursday, meeting all its medium-term targets, reducing its holding company leverage and accelerating service revenue growth driven by the implementation of its BRIGHT strategy.
It increased its subscriber base by 16 million to 233 million customers across 21 markets in Africa and the Middle East. The number of active data users increased by 10 million to 79 million and the active mobile money subscriber base rose to 27 million. This strong commercial momentum drove a 10,7% constant currency increase in service revenue to R125,4 billion.
“The service revenue growth rate achieved is ahead of both prior year and our guidance and – more importantly – is above the average rate of inflation in our markets, which means we are delivering real growth in service revenue,” said Rob Shuter, MTN’s group president and CEO.
Group Ebitda rose more than 15% and reported headline earnings per share (HEPS) increased to 337 cents from 182 cents in 2017. Adjusting for once-off items HEPS would have been 565 cents per share. The total full year dividend of 500 cents is well covered and a final dividend of 325 cents has been declared.
Optimising the portfolio
MTN has conducted an extensive review of its portfolio to reduce risk, improve returns and simplify MTN. This review covered not only its subsidiary companies but also its associates and its investments in e-commerce investments and tower companies. The group has R40 billion tied up in the value of the e-commerce and tower company investments and has announced that they are not viewed as long-term strategic assets of the group and will be monetised over time.
The group has committed to the portfolio review realising more than R15 billion over the next 3 years excluding any proceeds from its R23 billion position in IHS.
Pursuant to this it announced that it would be disposing of its associate in Botswana, Mascom, for $300 million where its lack of control position and MTN branding meant that the group is not able to execute on its BRIGHT strategy.
Stabilising leverage, managing regulatory challenges
The group stabilised its gearing, bringing the holding company leverage down to 2,3 times at December 2018 from 2,9 times at June 2018 and within the target range of 2,0 to 2,5 times. The group’s overall gearing moderated to 1,3x.
“We have made good progress to improve the holding company leverage bringing it within the medium-term guidance range we set out. Proceeds we receive from the asset realization program will support efforts to further reduce debt and de-lever the holding company balance sheet.” said group CFO Ralph Mupita. “We believe the holding company leverage is appropriate, and we can well manage the debt and deliver on our 500 cents progressive dividend policy in the future.” he added.
The company overcame several regulatory headwinds in 2018, the most material of which was the Central Bank Central Bank of Nigeria dispute on historical dividend repatriations. This was resolved and MTN announced in December 2018 that they had agreed to implement a notional reversal of the 2008 private placement and consequently made a resolution payment of $53 million. The group is committed to further enhancing its risk management and stakeholder management processes.
“We see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity,” said Shuter. “We are also extending our BRIGHT strategy to build MTN into a digital operator with a major focus on the fintech, digital, enterprise and wholesale business areas.”
“Key focus areas for 2019 are the launch of our own music streaming and instant messaging applications and extending MTN mobile money from 14 to 18 countries through launches in South Africa, Nigeria, Afghanistan and Sudan”
Considering the improved performance in 2018 and its growth plans, the group revised its guidance to investors upwards, targeting double-digit growth in service revenue, improved profit margins and capex efficiency and a new target to drive return on equity from 11% to over 20% in the next three to five years.