MTN Nigeria Communications Plc – 2022 Annual Results Presentation Transcript

MTN Group
2022 Annual Results Presentation
Date: 13 March 2023

Video

At MTN our Ambition 2025 is to provide leading digital solutions for Africa’s progress. In 2022, just as we all started to emerge from COVID-19, the world suddenly faced challenges of a different kind, and the impact of these rippled through our markets. But as we did during the pandemic, we in partnership with our stakeholders made a plan. We rolled up our sleeves. We asked our stakeholders how we could help. We engaged more. We partnered more. We contributed. We connected more people. We provided the best customer experience, leveraging the most valuable African brand. We contributed to reducing the cost to communicate. We delivered results to our shareholders. We remained inspired by our belief that everyone deserves the benefits of a modern connected life.

At the heart of it all, one singular question continued to drive us. What are we doing today? We are building the largest and most valuable platforms. We are driving industry-leading connectivity operations to accelerate our vision of providing leading digital solutions to support Africa’s progress. We are creating shared value. We are living inspired thanks to our 17 000 skilled and dedicated MTNers. We are creating the MTN of tomorrow. We know headwinds remain, but we are up for it. We are doing for tomorrow, today.

Thato Motlanthe

Good afternoon everybody, and welcome to MTN Group’s annual results for the year ended the 31st of December 2022. I trust you’re all well. I’m happy to be joined by our investors, analysts and other stakeholders at the Innovation Centre. My name is Thato Motlanthe. I’m the Head of Investor Relations. Also, a warm welcome to the MTNers across the markets and everyone who’s dialled in throughout various platforms, who are either watching on CNBC Africa, the MTN YouTube channel, or on the webcast that we’ve provided.

Let’s first get through some of the housekeeping before we start. And on the screen, you should see our standard disclaimer and safe harbour statement. And that covers our presentation for the day. And for those in the room, just a quick reminder of the emergency exits. There’s one exit on my right and one at the back of the auditorium.

Turning to the period under review. And just to set some context, I think the past 12 months has been pretty difficult. It’s brought challenges that have continued for many companies around the globe, and that includes MTN. Our business has however demonstrated true resilience, and we’ve continued to roll up our sleeves in fairly rapidly responding to these challenges, and taking the lead in the ever-evolving landscape we find ourselves in. We’re driven by the belief that everybody deserves the benefits of a modern connected life.

The presentation today will reflect on the full-year strategic, operational and financial performance. And I think just in terms of the agenda, the programme will run as follows. MTN Group President and CEO Ralph Mupita, will give us a strategic and operational overview. He’ll be followed up by Tsholo Molefe, who is our Group CFO, and she’ll provide financial highlights. Thereafter, Ralph will come back onto the stage to give us a sense of the key focus areas for the coming year. We will then open up the floor for questions and Ralph and Tsholo will come up and answer these. Just for those who have dialled into the webcast, you can use the platform to send through your questions. For those who will be tweeting during the session, the hashtag is #MTNAnnuals22, and our Twitter handle is @MTNGroup. And it’s now my pleasure to welcome on stage Ralph Mupita, our Group CEO.

Ralph Mupita

A very good afternoon to everybody joining us for this results presentation. And to all our investors and stakeholders who have joined us at 14th Avenue, it does feel a little bit like the pre-COVID situation where we had this room full to the rafters. And we appreciate those who made the effort and those who have joined us on other platforms. Also, a special thank you to all the MTNers who have been delivering the results that Tsholo and I have the pleasure and privilege to present. Thank you. We are presenting on behalf of all of you.

You should have now had some time to look at our very comprehensive SENS announcement released earlier on, that has got quite comprehensive feedback around what we did last year in terms of operational, financial and strategic progress. But what Tsholo and I will attempt to do in the next hour or so is to give you some of the salient features within the results as well as to focus a little bit on the year ahead and what the key areas that we see as MTN management. But before I go into the strategic and operational review, let me start off by picking up a couple of highlights around how we saw the results.

We saw four key messages coming out of the results, which I’ll try and summarise. The first is we saw very strong commercial performance in a very challenging macro. We were able to grow our subscriber base. We are now at 289 million subscribers across our 19 markets. And we’re particularly encouraged by the progress around the demand for data and fintech services, which I’ll talk to in a little bit more detail. We continue to see strong data net additions coming through our business, as well as the fintech subscribers and the fintech ecosystem continue to expand. That’ll be the first message that I would want to highlight.

The second is that the company is in stellar financial health. We haven’t had the leverage as low as it is now. So, the Holdco leverage at 0.8x, consolidated leverage at 0.3x. And we have cash and undrawn facilities collectively at R60 billion, which gives us the ability to be able to withstand any shocks that may come through in the year that lies ahead, but also an ability for us to take advantage of opportunities. These challenging times often present opportunities, and we need to be well arranged and have the financial resources to be able to take advantage of them. So, we’re very encouraged by the resilience that is within our balance sheet.

The third message is we are making progress in Ambition 2025 and executing aligns to what we have promised our stakeholders. Good to see progress really around fintech and FibreCo separations. Fintech is the one that we’ve been focusing on the last couple of reporting periods, and we are glad that we can report that we are making substantial progress in the structural separations of these businesses. It’s heavy lifting market-by-market to create the group Fintech structure, and we’ve made very pleasing progress. And as we announced with our results, we’ve also received offers for minority investment from potential strategic partners that we are busy reviewing, and we have given ourselves a timeline of six to eight weeks to be able to come back and conclude on that process. So, we’re very encouraged by the engagements that we’ve had so far.

The other point around strategic progress is really around asset realisation programme. We set out a target of R25 billion of monetisation over a three-year period. So, we’re reporting that we have done R18.8 billion, and R12 billion of those proceeds actually came through last year, which was actually a very challenging year, but we managed to get upstreaming and cash out of markets such as Nigeria. And the final point I’d raise on the strategic progress is really around the progress we’ve made towards exiting the consolidated Middle East markets. We’re out of Syria and Yemen. And we’ve done a lot of work towards getting out of Afghanistan, and we’ve signed the SPA with M1. And now it’s subject to regulatory approvals, as well as transition agreements.

In terms of creating shared value, again, good progress. In the year under review, we actually increased our capital expenditure investment to our networks and platforms by 17% to R38 billion. But at the same time, we brought the cost to communicate down by just over 22.7%. We are increasing broadband coverage across our markets, and we’re making a very healthy contribution to capital formation of countries that we operate in, as well as paying the taxes that are due from the economic activity that we make. So, those would be the four headlines that I would raise right up front.

This chart that you see is one that we’ve shared since the end of COVID. During COVID, there was quite a demand shift as people moved online and moved to their homes, where we saw very strong growth both in terms of data traffic and fintech services. We’ve continued to track this graph, which basically looks at how much additional demand we’ve seen in our networks, particularly for data on a quarterly basis, as well as the transaction volumes on fintech platforms.

So, you can see that from the start of COVID to the end of lockdown arrangements on the data side, we saw an average 570 petabytes per quarter. And post that it moved to 935. And on the fintech transaction volumes, we were seeing 1.9 billion transactions a quarter. Now we see 2.9 billion transactions. And if you look at the graph on fintech actually in the year under review, you saw a very strong surge in the level of transaction activity. And as I’ll explain later, we’ve seen a very healthy development within the merchant ecosystem, which is really driving the activity.

So, the key message with this slide is that we still see continued structurally higher demand for data and fintech services across our markets. And that’s fuelling the growth that you see in the non-financial numbers, as well as the financial numbers. Just talking about the highlights from a non-financial perspective, and sticking with data and fintech services, you can see we’ve had very healthy growth on active data users. Now we have 137 million. Our 2025 target is to get to 200 million. So, we feel that we’re making good traction there.

And then on Mobile Money, we grew by 21%, up to 69 million. Again, we feel highly convicted that the progress we’re making is taking us towards the 2025 ambition that we set out of 100 million Mobile Money users by the end of 2025. So, on the non-financial highlights showing again that the structural demand we are seeing, we’re able to capture as MTN, in particular around data and fintech services.

Just to cover some of the financial highlights, and Tsholo will take us into all the detail, I’ll just pick up on some of the key areas. We’re very encouraged with a solid performance on service revenue, in a heightened inflation environment. We achieved 15.3% service revenue growth at a time that we would have experienced inflation at around 15.1%, so we still eked out service revenue growth above inflation. This time, the average inflation of the prior year was actually more like 11.5%. So, good growth on service revenue.

If we go to the EBITDA margin, we basically maintained the EBITDA margins. Tsholo will take us through a view of that. But if you look at all the markets that added to the EBITDA margin, South Africa was down 0.1%. And the drag actually on EBITDA margin would be in some of the head office lines, and Tsholo will take us through that. So, the operational prints on EBITDA margin actually on the portfolio has been very strong.

Headline earnings per share growth at 18%. We saw ROE expanding to 23.4%. And we declared a dividend for financial year 2022 in line with the commitment that we’ve made on 330 cents, so that’s 10% up. And as I mentioned earlier on, the leverage is at a pretty much at an all-time low, certainly in the last six years that I’ve been here. And we’re seeing the leverage at 0.8x and 0.3x, and the liquidity of the company is also very strong at R60 billion. Tsholo will take us through the results in a lot more detail, but these are a very pleasing set of results driven by this unique growth engine that MTN has in terms of its scale, the strength of networks, the brand, as well as the market positions that we have across all our markets.

But looking into the year under review and unpacking a little bit of the macro context that we operated in, there were four big forces that we had to deal with as we navigated 2022. The first set of forces are really around the macro, supply chain, regulatory, energy and power. And I’ll pick up some of the salient points. On the macro, I think enough has been said around this elevated inflation environment that we operated in. I think you will note that in a market like Ghana, inflation ended up at 50%. South Africa was more like 7.6% and Nigeria 21%.

And then we had local currencies weakening against the US dollar. And also, the availability of US dollars in several of our markets was a challenge, in particular Nigeria, but we were able to still get upstreaming done during the period. On regulatory matters, two big forces that we have had to deal with were SIM registrations both in Ghana and Nigeria. And as we worked through the year towards Q3 and Q4, these were well managed.

And then the big factor that really impacted 2022 was really around the situation on loadshedding in South Africa. And I’ll cover a bit more detail on our outlook on load shedding. The first half of the year that we saw in South Africa had a relatively de minimis amount of loadshedding. And we did highlight with the H1 results when we released them, that if we saw elevated loadshedding, that would impact service revenue development as well as margin. And that has come to pass as we had anticipated it would. And I’ll give a bit more detail exactly how we dealt with that situation, and how we’re looking at it going forward.

So, just our strategy to navigate the environment that we were operating in. These are the four major programmes that we spoke to investors about at the half year that we will tackle. There were commercial objectives, supply chain, network, as well as financial resilience. And we marked our own homework a little bit here to show how we thought we did in the year under review.

So, on commercial, this was really about scaling up on a CVM, particularly within South Africa, but more broadly, as well as optimising pricing. And in part some of that price optimisation was increases in headline pricing. We brought some of that through in several markets. And I think the ones that are most notable are that we made progress in Ghana, both for data and for voice; South Africa, where we have announced relatively modest price increases on the postpaid side that are under implementation; and then in Nigeria, where we had secured a price increase that was reversed. We still are highly committed and engaged on that one, because we think it’s essential that we bring that through. So, that reflects the rating that we put there. On device management in South Africa particularly, H2 was better than H1. But as always with the increasing dollar to rand exchange rate, we kept it at amber.

Supply chain, I think things were very well managed within the context of last year.

And then our network, we have been engaged in reviewing some of our towerco contracts. And then we are in implementation of the SA power resilience programme. We put a little red ring around the yellow. The yellow is really against our own four-stage network resilience plan. But the red is showing that actually, the second half of the year, in terms of loadshedding it was much more significant than we had anticipated, than I would argue the broader South Africa anticipated, where we saw sustained levels of loadshedding above stage four. And that is much more what that red ring encompasses.

On financial resilience, are we in excellent shape in terms of the balance sheet. As I said earlier on, the leverage is very comfortable, 0.8x against the target of 1.5x. Ample liquidity that we have. And we managed to execute on our liability management programme. We said we wanted to tackle particularly the Eurobonds, which are in 2024 and 2026. And last year, were able to early settle $300 million of the 2024 bonds, which now leaves about $450 million that we would like to work on in the course of this year. And so very good progress around the balance sheet and the shape and the mix of debt that we have. So, we feel pretty pleased with the financial resilience initiatives that we delivered in the year.

Just coming to the markets and picking up some of the salient points, obviously, in South Africa, the big issues were really around loadshedding and the impact that had on our network availability. The other issue is that with heightened inflation, we saw quite a lot of pressure on the consumer, particularly on prepaid customers. Charles is here and Dineo. They are very willing and able to answer any questions you may have around that. But we continue to focus on investing in the network. We spent R8.8 billion of capex investment, strengthening our position on our 4G networks, as well as expanding on 5G. Just under 600 new 5G sites, giving us a total population coverage as at the end of last year about 21% 5G population coverage. So, well done to Charles and co in that regard.

The securing of 100 MHz of multiband spectrum was also a major milestone for the Opco. That gives us also now the frequency assets to enable us to expand coverage, but also over time to bring down the cost to communicate in South Africa. And as I mentioned earlier on, a lot of focus and initiative really around network resilience in execution. On some of the results we delivered, and Tsholo will talk to it, we saw a very strong net addition. We saw 1.5 million net adds in the period, and subscribers growing by just under 4.4% to just over 36.5 million. So, all in all, under very challenging circumstances, good growth from the South African business. And Tsholo will cover the financials.

Just a little bit on the load shedding impact. And I’ll also talk in the lookahead section. It’s important to discuss the context. So, we had 208 days of loadshedding in South Africa last year. 62 days of them were actually in H1. And the mean level of loadshedding was well below four. What we saw in the second half of the year was 146 days. And just in the last quarter, three months, 91 days of loadshedding. And as we’ll discuss in the outlook, that loadshedding in the second half was actually at a sustained level at stage four plus. And we are taking the view now that we believe that given where the energy availability factor is in South Africa, and all the initiatives, that it is prudent for us to take a view that stage four plus is what’s going to be with us on a sustained basis, certainly over the next three, maybe as much as five years. And hence, we’ve made the decisions around our target margin.

So, this has obviously impacted availability of the network, impacted revenues as well as costs. And as the headline shows that our estimate is that the earnings impact was about R695 million, or to service revenue, actually about 1.6% to service revenue. Those who want to add back these things would have would have seen that the underlying operating momentum within SA would have been well above 5% service revenue growth had the loadshedding impacts not come through. Again, what did we do? Charles and team focused a lot on executing our four-stage resilience plan.

We added batteries to our sites. And if you’re talking about what batteries to deploy, probably this time last year, you’d have been talking about putting in batteries that have a four-hour recharge cycle. Today, we’re talking about six to eight hours needed in the battery deployments. And we’re also now talking about gensets being required, not only just on our sites and switches, but also on some of our sites. So, there’s now a push also towards gensets that we are implementing, and Charles can cover some of that in Q&A. So that’s South Africa, in terms of what was the focus area for 2022.

Nigeria had very challenging macro conditions of elevated inflation and having to deal with NIN registration. I think these were very excellent results delivered, 21.5% as service revenue growth delivered against blended average inflation of 18.8%. We saw key activities accelerating 4G network coverage, as well as launching 5G. So, congratulations to Karl and his team. I think we’re seeing a very sustained level of growth in that market, and we’re seeing the EBITDA margins being achieved well within the guidance that we’ve set ourselves.

And the other key points in the results has been the launch of MoMo PSP, which we did in May 2022. And we’ve seen good progress, seeing the NIBSS switch now being open for both inbound and outbound, which is encouraging us as we look ahead for 2023 and seeing the acceleration of MoMo PSB.

If I talk about the other markets, again, a very pleasing set of results broadly across markets. Very strong data growth across all regions, SEA, WECA and MENA. I think that’s a feature. And as I mentioned, the operational EBITDA margins when you look at them on a collective, they all were accretive to the EBITDA margin growth that we saw across the markets. And Tsholo will take us through a little bit of that detail.

Important to see the fintech recovery, particularly in Q4, where we saw very strong recovery for a market like Côte d’Ivoire. We’d always say that Côte d’Ivoire under the competitive context of a new market entrant, that we are going to be very disciplined with our strategy and deployment. And that 15-month response strategy came to an end in December, and as we predicted that we would be back in growth, and we actually saw that in Q4 for Côte d’Ivoire — 7.7% growth as we lapped out some of the P2P price cuts taken. So, we’re seeing very good growth in that market.

We’re seeing very good growth in Uganda and Rwanda, and also in Ghana, where we had seen the 1.5% e-levy coming out in May. It has been reduced now to 1%, which has been encouraging. But the business has continued to see particularly in Q4 very strong and resilient fintech growth across all markets.

On MENA, two points to mention. MTN Irancell is obviously an associate. We have a 49% shareholding. Again, the underlying growth of earnings in that business has been very strong in a very challenging macro environment. So, just under 68% earnings growth. If you look at actually the EBITDA margin expansion, it looks more like 400 basis points. And that’s in a very challenged macro, where you’re seeing inflation very close to 50%. So, very pleasing growth. And Snapp, which we always position as the Uber of Iran, again, that is a little gem of a business within that market. That now has four million rides a day. Two years ago, we were talking about three million. So, that business has continued to expand over time.

Just on the fintech side, again, we focused a lot on the ecosystem effect, because we think that over time the ecosystem is what’s going to drive the value creation over time. So, our investment into the fintech ecosystem and its expansion, we believe is what will enable us to monetise the opportunity that we see. Obviously, we’ve seen very pleasing growth in the subscribers. So, now we’re at 69 million and well arranged to get to 100 million. But I want to call out actually a major trend that happened through last year, which is that merchants have now overtaken agents in the year.

So, the merchants have almost doubled in the year. And we’re pushing Serigne and the team to get to at least three million. So, he knows I’m always pushing for a target above the three million, which I think is actually more achievable. And we’ve always said that actually the real effect of Mobile Money, or the fintech, is where the acceptance is pervasive across markets. And what enables that is that we’ve got to sign on more and more merchants. And I would argue that that is one of the real success stories of the year under review, which is the merchant expansion, which we are halfway there towards our three million target, as we’ve got another three years to go on Ambition 2025.

Two other points I’d make is the fintech structural separation intercompany agreements are largely complete. This is a very detailed and involved exercise which has taken our legal team, our M&A team, as well as the finance and tax teams, led by the respective executives, to drive that market by market. It is not a very straightforward process. But we’ve made very good progress. And I would argue that those intercompany agreements are largely in place and are being effected. And the other point that we raised in the results release is that we have received offers that we believe are compelling towards minority investment within the fintech space. And we are engaged with those potential strategic partners over the next six to eight weeks to try and get to a conclusion point. And we had announced the process at the end of Q3 last year, that we have actually got into that process in a lot of detail. So, those are the points I would make really around the fintech space.

On the portfolio transformation, as I mentioned, we’ve now got shy of R19 billion achieved against our R25 billion target, R12 billion of those proceeds actually last year. In a very challenging year, we were able to get that underway predominantly driven by the sell down in Nigeria. We also had a sell down in Ghana. And then the tower sales to IHS also came in the year. And we add all of that up. That’s what makes up the majority of the R12 billion. We remain committed to continue the ARP into the future.

What has held us back, particularly in Nigeria, has been the paucity of FX. So, we’ve pulled back on that. And we anticipate, subject to foreign currency being easily available, that we would pick up on that activity or further sell down in the second half of the year. But that’s obviously subject to market conditions. And then obviously, IHS at these current valuation levels, we think the asset is fundamentally undervalued. So, we don’t have any plans right now to sell anything in terms of our shareholding in IHS. We are far from what we think fair value is, and for now we’ll hold our position, particularly given the fact that the balance sheet does not need us to make any sales right now, given the compass that we have. We will continue to make progress around the portfolio transformation, and in the outlook, I’ll make a few more comments around that.

Then on creating shared value, we always have framed it under three objectives that are ecoresponsibility, sustainable societies and sound governance. And to talk to some of the KPIs, how we achieved on reducing greenhouse gas emissions, excluding South Africa, we got to 12.3%. For last year, we had an internal target of reduction by 3.5%. So, it’s very good to see that we delivered 12.3%, excluding SA. And obviously SA, because of the amount of backup power and diesel, SA lags the plan that we had.

In terms of broadband coverage, again comfortably in line towards meeting our targets. And we’re making good progress on diversity and inclusion at 40%, against our medium-term target of 50%. And in terms of economic value added, we believe that we’re making a contribution to societies more broadly, particularly around the capital investment that we’re putting into our networks and IT, the platforms that we run.

Before I hand over to Tsholo to take us through the numbers, just an assessment of where we are against our medium-term guidance. We are encouraged by the progress we’ve made under very challenging market conditions. As I said, South Africa was a tale of two halves. H1, we had service revenue of 4.1%. The print in H2 is 3%, to give us the blended rate of 3.6%. That is effectively largely due to the intensity of loadshedding, and the progress we still need to make around ensuring that we have the appropriate batteries and back-up power across pretty much all our sites.

On accelerate fintech platform growth, this is the ratio. So, in the denominator is both voice and data. And what we often reflect on is at the time we put our targets, we were anticipating that voice would be very low growth, maybe one or two percentage points. Today, it’s still 4%. And that data would have been around 25%. You saw data at 33%. So, the denominator is still growing when we thought it was going to shrink. So, it’s a bit of a nice problem to have. And then in the numerator, the taxes, particularly in Ghana, Cameroon and Benin, slowed the monetisation of the transaction activity that you saw. But as we look foward, we’re very encouraged that this is a KPI that we should still push towards. We see 20% already achieved and exceeded in SEA. We see in WECA it’s 16.7%. So, we believe that portfolio effect for MTN over the medium term should be able to push towards that 20%.

I won’t talk much about asset realisation. As I said, we’re still going to push to get towards greater than R25 billion. And the ROE has been a very pleasing result to see it now at 23.4%. In 2018, that number was 11.5%. So, almost doubled in the space of five years, showing that the capital we’re deploying is driving return creation over time. Let me now hand over to Tsholo, and I’ll come back after her presentation to give some views on prospects and guidance.

Tsholofelo Molefe
Thank you very much, Ralph. A very warm welcome and good afternoon to everyone joining us for the results, and a special y’ello to all our MTNers joining us in various platforms and those that are here with us this afternoon. I’m pleased to present to you the financial performance overview for the year 2022. I’ll first start by just highlighting some of the key material items and significant once-off items that impacted our results. I will then cover some salient points on our group income statement. And then I will share with you the performance of two of our major subsidiaries: Nigeria as well as South Africa. And I will also share with you how we have utilised sources of cash generated, how we’ve improved the balance sheet, as well as improved return on equity.

So, if we can briefly touch on the material items that have impacted our results, firstly, on the macroeconomic environment, you’ll see that our markets are really subject to forex volatility. We also saw the rand average exchange rate performing stronger against other currencies in the markets that we operate in, with negative impact on the reported service revenue growth rate compared to the constant currency growth rate. But it closed weaker against the US dollar as well as the euro, and thus impacting the balance sheet items as well as Holdco leverage. We also had some forex impacts of about R5 billion that has impacted our finance charges, which I will share with you later.

Secondly, our numbers were also impacted by rising inflation and high energy costs due to the macroeconomic environment that we operate in, which really resulted in upward pressure on our operating expenses. Our group blended inflation, as Ralph indicated, averaged about 15.1%. And this was compared to 11.5% in 2021. Other significant items that impacted reported results were the goodwill and asset impairment on two of our subsidiaries, Afghanistan, as well as Guinea Bissau, and two of our associates being MoWali as well as MEIH. We also recognised a net accounting gain on disposal of SA towers of about R405 million, with net cash proceeds on disposal of R5.1 billion.

This year, we also had a remeasurement on our deferred tax asset in Mauritius, where we took a reassessment of the recoverability of the asset in the balance sheet in light of current market conditions as well as the macroeconomic environment. So, based on this, we really measured the deferred tax asset and reduced the balance by R1.2 billion, thus, taking that loss. These significant items obviously have had an impact on our expenses, our EBITDA, our EBIT, as well as our headline earnings per share.

If we can then move on to the group income statement. Just on the last two columns on the slide, we show the movement of reported as well as constant currency, year on year. As indicated, we’ve delivered service revenue growth on a reported basis of 14.4% to R196 billion, and about 15.3% increase in constant currency. And this was in line with our medium-term guidance. This was also largely driven by the double-digit growth that we saw in Nigeria as well as Ghana. And all three of our regions, as Ralph indicated, delivered healthy top-line growth that’s contributing to our overall service revenue growth.

On a reported basis, EBITDA before once-off items grew by 12.4% to R90.8 billion, but in constant currency increased by 14.3% to almost R90 billion, and also largely driven by healthy operational results across most of our markets. The increase in depreciation, amortisation as well as goodwill impairment was moderated at 1.7%. We saw an increase in depreciation due to capex additions as well as the goodwill impairments. But these were set off by the disposal of towers in MTN SA where we had to discontinue the depreciation.

Net finance costs increased by 24.4% in constant currency, and this was largely driven by the forex losses, as I indicated, R5 billion in forex losses of which some of it was due to losses driven by cash upstreaming, mainly in Nigeria. We also saw increased borrowing costs, particularly in Nigeria, from funding activities, refinancing, as well as due to interest rate hikes. The share of results from associates and joint ventures increased by a stellar 64% to R3.4 billion, and this was largely driven by the strong underlying performance from MTN Irancell.

The income tax expense, as you can see, grew by 45.8%, largely due to higher withholding taxes, the taxes paid on the sale of towers in South Africa, the remeasurement of the deferred tax asset in Mauritius, as well as the increase in non-deductible expenses. So as a result, we had a reported a group effective tax rate of 41.5% due to the remeasurement of the deferred tax, the Nigeria education tax as well, the Ghana special levy as well, together with withholding taxes, which really increased the group effective tax rate. But on a normalised basis, the effective tax rate was at 37.1%. There was also a significant increase in non-controlling interest, up 51.8% during the period, and this was primarily due to our localisation in Nigeria, Ghana, as well as Uganda. Adjusted headline earnings increased by 18.3%, which was impacted positively by the adjustment on nonoperational items totalling 159 cents per share. I will now just unpack our group service revenue in a bit more detail. As you can see, data was the biggest driver of growth followed by solid growth from fintech as well as SMS and ICT, with voice showing still healthy growth. We continue to see this healthy growth from voice which was up 4.2%, really supported by the voice traffic growth of 3% year on year. The main contributors again were Ghana and Nigeria in terms of revenue: voice revenue growth at 23.8% from Ghana and for Nigeria a 6.9% increase. But these were set off by the decline that we saw in South Africa due to loadshedding impacts, but also the tough macro affecting the consumer.

Data revenue growth, as you can see, increased by 32% with Nigeria and Ghana again showing the biggest growth at 48% and 42% respectively, driven by strong data traffic growth of 33%, underpinned by 12% increase in active data subscribers. Fintech revenue grew 14.3% driven by base growth of 21% to 69 million active MoMo users. Wholesale, on the other hand, grew by 12.8% with steady national roaming performance in MTN South Africa specifically. Other revenue, which mainly comes from SMS and ICT, grew 20.5% from a Group perspective. And this was largely in markets like Nigeria as well as SA.

So, before I continue with other elements of our Group performance, I’d like to just touch on the financial performance of SA and Nigeria, starting with South Africa. On this slide, you will see that MTN South Africa delivered service revenue growth of 3.6%, as we indicated, really enabled through commercial and operational execution discipline across all the business units. So, if we unpack this further, you will see as I indicated, voice revenue was down 8.8% largely due to network interruptions from loadshedding, the general macroeconomic environment. But we’re also starting to see customers moving over to voice over IP and as well as data substitution from traditional voice having an impact on voice. But we saw an increase in data revenue of 13%, supported by data traffic growth of 33% in South Africa, with active data subscribers growing by 7%, totalling 18.9 million subs.

On the fintech side in South Africa, which comprises of airtime lending fees, we saw a decline here of 2.8% as customers prioritise other spend due to economic pressures. But MTN SA continued to scale up its fintech ecosystem, now with about 1.2 million users, up 105% year on year. Wholesale revenue was up 6.3% in South Africa supported by national roaming deals, particularly with Cell C as well as Telkom. Following the completion of the Cell C recapitalisation, we saw MTN SA moving to an accrual basis of accounting for national roaming services. We recognised revenue of about R2.7 billion in this regard, which was an increase of 2.1%.

Looking at the expenses in South Africa, you will see that cost of sales grew by almost 8% largely due to an increase in device costs. The device cost of sales went up by 9% due to the increase in subsidised devices to remain market competitive. Device gross margins also declined by 3.2 percentage points as a result. Commission and distribution expenses also went up 6.3% due to increases in device distribution, as well as activation commission.

When we look at operating expenses, we saw that it largely remained flat with a 0.5% increase overall. The marginal growth was achieved despite an increase in network cost predominantly in rent and utilities as well as maintenance which grew by 22% for the year. And this was due to management response on expense efficiencies, which offset the significant costs growth. But last year we also had a significant increase in terms of the share-based payments. Additional expenses for generator fuel due to excessive loadshedding impacts also had an impact on the operating expenses line.

So, when we look at MTN SA’s EBITDA margin, we see that it declined by 0.4 percentage points to 38.5% for the year. But the EBITDA margin decline, as I indicated, was driven by lower-than expected service revenue performance, as well as increased cost of sales amidst continued focus on cost efficiencies. South Africa spent R8.8 billion in capital expenditure excluding IFRS leases, with a total capital expenditure including leases of R15.3 billion. And the R15.3 billion included about R5.1 billion from the sale and leaseback of the towers portfolio. And when we look at capex excluding leases, this is really in support of continued investment in 3G and 4G as well as the rollout of 5G. As we indicated earlier, just under 600 of 5G sites were rolled out during the period with capex intensity of 17.4% ex leases for the period.

Just on this slide, the business units within South Africa, unpacking the service revenue a bit more. You can see that the consumer prepaid business grew by 0.3%, and this was supported by strong data consumption, partly offset by the pressure that we mentioned on the voice revenue line. The consumer postpaid business grew by 3.2% in a challenging environment, driven by the growth in subscriber numbers and the sustained uplift on data consumption. Enterprise service revenue grew by 17.5%, really sustained growth there supported by growth in mobile data revenue, bulk SMS as well as IoT.

If we can then move on to MTN Nigeria, which has already reported its results in January. So, I will just briefly touch on salient items. We can see that it delivered a solid performance with doubledigit revenue of 21.5% ahead of the blended inflation as we indicated earlier. And the main drivers of growth were in voice, data, fintech and overall. Voice maintained a steady recovery at 6.9% growth, and this was really impacted by the re-activations as more customers’ SIMs were reactivated, as well as the gross connections ramping up following the implementation of this NCC directive on NIN-SIM registration.

We saw strong data revenue growth as well of 48%, as I indicated, underpinned by increased usage from the existing base with impressive data traffic growth of 67% overall, supported by the acceleration of 4G sites rolled out. Fintech revenue had commendable growth as well of 19% during the period due to sustained growth, particularly in the use of XtraTime, which went up by 18%, and the broader use of fintech services by customers.

In terms of total expenses, we see a total expense increase of 21%, with cost of sales growing by 25.6%. And this was largely driven by higher commission and distribution costs of 23% due to increased airtime sales and activation commissions. We also saw aggressive data device sales growth relative to last year, following the lifting of the ban on the SIM sales. Regulatory fees were up 31.5% due to the growth in revenue as well. When we look at opex, we see an increase of 18.9%, broadly in line with inflation, but really due to higher network operating costs from accelerated site rollout, the devaluation of the naira, as well as CPI impact on the BTS rentals, thus increasing the network operating costs.

MTN Nigeria continued well with its expense efficiency saving, which was aimed at driving the margin expansion. And we saw an improvement in margin of 0.2pp during the period with margins at 53.2%. So, this was really despite the impact that they saw of the rising inflation as well as forex devaluation. On the capital expenditure side, MTN Nigeria spent R13.7 billion for the period excluding leases. And this was, as we mentioned, due to accelerated rollout of 3G and 4G sites with capex intensity excluding leases of 17.7%.

If I can touch on our Group fintech revenue before I move to other items, you will notice that Group fintech revenue now contributes almost 9% to total Group service revenue, with a growth of 14.3%, as I indicated. The growth during the period was impacted by the introduction of e-levies and MoMo taxes in our markets, as Ralph indicated, as well as pricing pressure due to increased competition. But despite these challenges, we are pleased that we managed to maintain a solid growth in active users of 69.1 million active users.

We started seeing a recovery in the last quarter in markets like Ghana, as well as Côte d’Ivoire following significant decline at the beginning of the year. The bulk of the fintech revenue services, as you can see from the pie chart, is really from withdrawal at 55% of the fintech revenue, which declined from 59% in 2021, while advanced services contributed about 15% now from 10.5% last year. So, we saw payments and e-commerce growing by 69%, as you can see on the bar chart, year on year with banktech having an increase of 50% overall, and remittances showing an increase of about 73%. So, although these are still a nascent, we’re encouraged by this increase, as we are starting to see these advanced services growing, which is really in line with our goal to have more of these advanced services relative to the basic services.

So, as Ralph indicated earlier, we are on track with our structural separation with intercompany agreements now in place. So, the process of allocating the costs is really underway, and largely complete. So, as we indicated previously, this will be a process of margin evolution until the fintech business moves to being a standalone business.

If we move on to the Group expenses, you can see that they were well managed given the challenging macroeconomic environment. Group cost of sales increased by 13%, largely driven by an increase in commissions and distributions, as well as increased handsets in markets like Nigeria and South Africa, as I indicated. And then when we look at the operating expenses, we can see an increase of 14.9%. And the main impact, as I indicated earlier, was due to the network operating expenses, which contributed 17.7% of the total cost. And as a result of the increase in the number of sites rolled out, high inflation, loadshedding impacts in South Africa, as well as high energy costs, due to the macro, we saw a significant increase there.

Opex growth was also driven by high litigation costs at head office, as we deal with many litigation items, an increase in professional fees for strategic projects that we’re doing, as well as marketing campaigns as we continue to accelerate our Ambition 2025 initiatives. So, just in terms of the measures that we have taken to cap the inflationary impacts, we’ve continued with our expense efficiency programme, which we started just over three years ago, where we gave ourselves a target of in excess of R5 billion off a 2020 base. And we have achieved R6.4 billion since then. During this period, we realised about R2.7 billion worth of efficiencies. And these were mainly from Nigeria and South Africa. And these were mainly in the areas of mobile network, sales and distribution, general and administration expenses. We also had some good savings from our IT optimisation. So, the total cost-to-revenue ratio has broadly been in line with what we expected, given the fact that we are operating in high inflationary environments. And we are happy that we’ve been able to achieve those efficiencies under the circumstances. So, we are really pleased to have seen the results of our EEP yielding these results, really enabling us to be able to cap the inflationary pressures. And we will continue with these cost efficiencies as we move forward.

In terms of the Group EBITDA margins, Group EBITDA, just to indicate that in this slide, I show the absolute terms of EBITDA, as well as the Group margin. Overall Group EBITDA on underlying operations was up 14% in constant currency to R90 billion. This growth was really broad based, led by the performance of Nigeria, the WECA markets as well as MENA region, as we showed earlier on. The Group’s reported EBITDA margin remained largely steady at about 44% before once-off items. This was on the back of top-line growth as well as the disciplined execution of our expense efficiency programme. So, we had positive contributions from all markets, except in South Africa, where the margin was impacted by the device cost as well as additional expenses due to loadshedding.

Head office eliminations of about R1.8 billion impacting the margin was mainly due to lower reversals of the price share performance provisions in this year, in the current year, compared to last year. And this was due to share price movement. And we also had a loss on consolidation of aYo for the full 12 months of 2022 versus only six months in the prior year. And also, we had an overall impact of R280 million on our MTN insurance business due to higher bad debts and lower contribution this year relative to the previous year. So, these were just some of the impacts on the margins.

If we then move on to our adjusted headline earnings per share analysis, this table provides a reconciliation of the attributable earnings per share through to adjusted headline earnings per share, which gives more visibility on our operational performance. The difference between the attributable earnings per share, which grew by 40%, as well as the basic earnings per share, which grew by 16.9%, is due to the significant once-off items that I mentioned earlier. You will see that the Afghanistan impairment had an impact of 70 cents per share, which was a write-back. And then the net gain on disposal of SA towers of 22 cents per share, and disposal of other PPE, as well as