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MTN Nigeria Communications Plc HY 2021 Results Transcript

By Published On: June 30th, 2022Categories: Corporate announcement, Transcripts

Chima Nwaokoma

  • Good morning, good afternoon, good evening everyone, and thank you for joining this call. My name is Chima Nwaokoma, I’m your host. I’m responsible for Investor Relations in MTN Nigeria. With me on the call are Karl Toriola, our Chief Executive Officer; Mazen Mroue, our Chief Operating Officer; and Modupe Kadri, our Chief Financial Officer. On the MTN Group side, we have Thato Motlanthe, our Group Investor Relations Executive.
  • Karl will provide you with an overview of the business performance and outlook for the remainder of the year, and Modupe will cover some of the financial points. Thereafter, we’ll move on to the Q&A session.
  • Please note that this call is being recorded and all participants are in a listen-only mode. If you want to ask a question, kindly indicate by raising up your hand and you will be enabled to speak. The chatroom is also available for you to enter your questions.
  • Just to remind you, our results were announced last Friday, and a version of the announcement is on our website.
  • Finally, please know that this call is scheduled to last for an hour.

With this, I hand over to Karl for the overview.

Business Overview – Karl

Good afternoon everyone and thank you for joining us on this H1 results call. Thank you to Chima for arranging the call, and to Mazen and Modupe for being here with me as well. We made good progress in H1, strengthening the resilience of our business, and managing the impact of the COVID-19 pandemic; while enhancing support to our people, customers, and other stakeholders. In addition, we’ve announced our participation in national impact projects to mark our 20th anniversary and demonstrate our long-term commitment to Nigeria (our 20th anniversary comes up on the 9th of August).

RITC participation.

  • The Board of Directors of MTN Nigeria approved the participation in the Road Infrastructure Tax Credit scheme. We refer to it as RITC. This is in response to the government’s drive towards public-private partnership in the rehabilitation of critical road infrastructure in Nigeria.
  • We intend to participate in the restoration and refurbishment of the Enugu-Onitsha Expressway. Conversations in this regard have already commenced with the government, the Ministry of Finance particularly, and further announcements will be made in due course.
  • It’s still too early to ascertain the exact cost of the project, however, in terms of the expected financial impact of the RITC scheme,
    • we expect full recovery of the costs incurred will be utilized as tax credits against company income tax payable.
    • We expect the single uplift equivalent of MPR plus 2%, as this qualifies as tax- exempt income. This will reduce our yearly effective tax rates and there are guardrails within which we’ll be investing so it’s not an open-ended investment.

Head Office Project

  • In line with our desire to plant deeper and even more permanent roots in Nigeria, we have also initiated plans to commission a purpose-built, state-of-the-art MTN Head Office, designed to showcase the flexible working structures that our driving efficiency gains in our new normal working environment.
  • This and the RITC projects are aligned with our wider commitment to environmental sustainability and the Head Office project will meet the highest global environmental standards. It goes without saying that these are multi-year projects which are planned with our cash flow in mind and bring financial benefits as well as stakeholder and ESG benefits. So, something like the Head Office, we will be constructing our head office, but on a long term sustained basis, we will not be paying leases, and we will be scheduling the construction and the completion of the Head Office to align with the expiration of the current leases that we have. The next of the projects I’ll speak to is localization.

Localisation

  • MTN Group has stated its intention to sell down up to 14% of its investments in MTN Nigeria subject to market conditions over the medium term. As a result, MTN Nigeria shareholders approved an equity shelf program in the last Annual General Meeting.
  • This will facilitate a process to increase ownership of the company by more Nigerian retail and institutional investors – we will focus more on retail investors, and the transaction will be conducted in phases.

Network investment

  • In terms of network investment, we continue to invest in an improved world-class network, accelerate the expansion of our 4G coverage, and provide home broadband.
  • As part of our rural connectivity program, we plan to connect approximately 1000 rural communities to our network this year, with an additional 2000 communities in 2022.
  • In the next two years, we’re going to invest over ₦600 billion to expand broadband access across the country, in support of the Government’s broadband plan.

CACOVID Support

  • For CACOVID support, we extended our commitments to the Coalition Against COVID-19 known as CACOVID, with an additional ₦3 billion contribution over a two-year period, half of which we’ve already paid.
  • This is in support of efforts to promote health and security of Nigerians as we navigate our way through the pandemic, and in line with our Y’ello Hope initiatives, through which we provided support to a broad base of stakeholders to a value of approximately ₦25 billion now in 2020, and that included free communications etc.

Operational Review

  • In terms of our operational performance, our mobile subscribers closed H1 at 68.9 million subscribers down 9.9% from December 2020. This was due to the regulatory restrictions imposed by the ministerial directive in mid-December 2020 on new SIM sales and activation, which was lifted on the 19th of April 2021.
  • Although the initial run rate of gross connections has been slower than the usual rate, due to new process requirements, we anticipate growth to normalize in the short term as more of our acquisition centres are certified for SIM registration.
  • As of the end of July, we had 2,483 certified centres for SIM registration, while many other centres undergoing the certification process.
  • Our voice revenue grew by 13.1%, benefitting from an 11.8% increase in traffic, our customer value management initiatives, and partly the lower base in comparative 2020 voice revenue that resulted from lockdowns during that period. You will remember that the lockdowns in Nigeria happened in the second quarter of 2020, primarily in April and May. The impact on voice revenue from the industry-wide suspension of new SIM registration was partly offset by higher usage in our active SIM base, as well as migration to a higher quality experience.
  • Our data revenue grew by 48.3% driven by increased usage from the existing base, supported by the acceleration of our 4G rollout and enhanced network capacity following the acquisition and activation of an additional 800MHz of spectrum in Q1.
  • Data traffic rose by 83% YoY, and the average MB per user rose by 50.3%. Smartphone penetration was up by 5.8 pp to 49.3%. Our 4G network now covers 65.1% of the population up from 60.1% in December 2020. We continue to invest in our network, accelerating the expansion of our 4G coverage and rural connectivity, as well as providing home broadband.
  • Our Fintech business continues to gain traction with the expansion of our agent network and increased adoption of our XtraTime and our core Fintech services. Service revenue from Fintech rose by 48.2%, XtraTime accounted for approximately 95% of the revenue.
  • Our registered MoMo agents increased by 121,000 in H1 2021 to more than 515,000. Transaction volumes increased by 280% approximately YoY to 55.6 million in H1 2021, and our active subscriber base is now more than 6.1 million, up 180% YoY.
  • We remain optimistic about the PSB license as we continue to deepen our relationships with the Central Bank and the stakeholder ecosystem, demonstrating that we can play a critical role in the acceleration of financial inclusion in Nigeria.
  • The recent announcements by the Centra