MTN: Y’ello Summer, Y’ello Dividends
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The Y’ello Summer campaign was run several years ago, before MTN had to say Y’ello Regulators instead and deal with all kinds of issues in countries like Nigeria. It’s been a tough time for long-term shareholders. Those who bought recently are smiling all the way.
The yellow telecommunications giant has put in a share price performance in the past year that is far more inspiring than its new logo. I haven’t seen many people on Twitter gushing over the new corporate identity.
Like so many other sectors and businesses, the core services upon which MTN was built are now ex-growth i.e. mature. The group has to deliver growth through new offerings into the substantial customer base across Africa.
In the year ended December 2021, MTN’s service revenue only grew by 1%. The group is focusing on “digital solutions” and that is coming through in the numbers, with data revenue up 16% and fintech revenue up 17.4%.
Subscribers grew by just 2.9 million, heavily impacted by new SIM registration regulations in Nigeria. Excluding Nigeria, subscribers grew by 11 million.
Mobile Money customers increased by 22.6% in 2021 to 56.8 million. The value of transactions grew 56.8% to USD239.4 billion, which means each customer is pushing more money through the platform than in the year before.
EBITDA grew by 5.3% and EBITDA margin continued to expand, this time by 170bps to 44.5%. This helped drive an increase in HEPS of 31.8%.
Net debt in the holding company has dropped to R30.1 billion from R43.3 billion, which does wonders for expansion in the equity value. A return on equity improvement of 260bps to 19.6% does wonders for shareholder happiness.
The focus in MTN has been on deleveraging the balance sheet, with substantial progress made in that regard. In-country listings in Africa have been successful, which in my opinion de-risks the operations in countries like Nigeria where there is now much higher local ownership.
The improvements in the business are captured by the declaration of a dividend of 300 cents per share. MTN expects to pay a minimum ordinary final dividend of 330 cents per share in FY22, so there’s an expectation of 10% growth in the dividend.
The capital expenditure burden is expected to decrease over the medium-term, which will help in unlocking cash flows. Ongoing growth in fintech and other services will help drive EBITDA margin. MTN is making great progress on delivering its “Ambition 2025” strategy and the share price reflects that, having increased by a colossal 158% in the past year.
The share price is nearly back to where it was in 2015, a time before the model fell apart as MTN dealt with huge challenges in Africa and a dicey balance sheet. At this stage, the future for MTN appears to be as bright as the logo.
The big question for investors is simple: to what extent is that future already reflected in the share price?
