Introduction — Chima Nwaokoma
- Good day everyone. Thank you for joining this call to discuss MTN Nigeria’s results for the first quarter ended 31 March 2022. I trust everyone is keeping safe. My name is Chima Nwaokoma. l am responsible for Investor Relations in MTN Nigeria. With me on the call are Karl Toriola, CEO; Modupe Kadri, CFO and Hassan Jaber, our new COO who joined us early this month. On the MTN Group side, we have Thato Motlanthe, Group Investor Relations Executive.
- Karl will provide you with an overview of the operational performance, some regulatory updates and outlook for the remainder of the year. Modupe will cover some of the financial points. After that, we will move on to Q&A.
- 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 your line will be enabled for you to speak. The chat function is also available to enter your questions.
- l would like to remind everyone, our results were released this morning, and a version of the release is on our website — mtnonline.com/investors.
- Finally, please note that this call is scheduled to last for an hour.
With these, l will now hand over to Karl.
Operational Highlights — Karl
Good afternoon, everyone. Thank you for joining the call. Thank you, Chima. It’s great to be here once again. I’ll start with the operational highlights and the key strategic milestones, and then provide regulatory updates before handing over to Modupe to cover some financial points.
Before l start, l want to reemphasize that we are now joined by Hassan Jaber. He is an experienced executive who has been CEO in several Opcos and COO in our most advanced digital and data markets. It is great to have him on board, and he is going to reinforce our operational strength in the organisation.
Operationally, we continued to improve our performance in Q1, building on the momentum we achieved in Q4 2021 and delivering on several key milestones as we grow our connectivity business and platforms.
- Our performance during the period was underpinned by solid commercial momentum. On a year-on-year basis, our subscriber base declined by 1.3 million (about 1.9%) on last year’s base, due to the impact of the regulatory restrictions on new SIM sales and activations. However, we added 1.7 million subscribers to our network during Ql 2022, to close off with a mobile subscriber base to 70.2 million at the end of March. This demonstrated good momentum on the 1 million in net additions we reported Q4 2021 and we expect to increase that trajectory and momentum going forward.
- l will provide a further update on the NIN registration issues in a moment, but as a general thought, we are encouraged that we have seen an increase in gross connections that supported our mobile subscriber growth in Q1. This has stemmed from our expanded customer acquisition touchpoints and rural telephony initiatives, as well as use of our enhanced customer value management (CVM) toolkit. As a result, voice revenue rose by 5.8% YoY.
- In terms of data, our active subscribers rose by 10.5% YoY to 35.9 million, supported by the addition of 1.6 million active users in the quarter as we continued to drive data conversion from our new and existing subscriber base.
- The higher data users helped to drive the strong growth in data revenue of 54.0%, which was also boosted by increased data usage. This was supported by our continued aggressive 4G network expansion, increased smartphone penetration, and the enhanced qualify and capacity of our network. All these initiatives and activities have helped to underpin rising data traffic. We also continue to drive home broadband penetration, reaching over 775 thousand users, up by over 160 thousand in Q1.
- Fintech revenue rose by 46.5% on the back of the growing adoption of our Fintech services and expanded user base. We look forward to the launch of PSB to drive further growth, especially in more advanced services, but l will talk a bit more about that a bit later.
- We continue to expand our MoMo agent network, with more than 166-thousand active MoMo agents out of approximately 800-thousand registered agents. Having established a significant foundation of registered agent network, we are now focusing on scaling the active base of agents — who are defined as those who make at least fen revenue-generating transactions every 30 days. The total volume of transactions was more than 56.1 million, up 132.7% YoY; driven by around 10.7 million active users, which in turn were up by 135.2% YoY in the period.
- Turning to digital revenue, this grew by 35.3% as penetration of our digital products continues to deepen, driven by increased usage from our active base. We reached 7.4 million digital subscriptions in Q1, which was up by 164.1% YoY. In that mix, ayoba — our instant messaging platform — accounted for 45% of the subscriptions. We are transforming our Y’ello Digital Platforms into a one-stop destination that caters to all consumer segments, enabling us to scale.
- Finally, revenue from the enterprise business rose by 34.3%, underpinned by the onboarding of new customers across segments and the uptake of our enhanced services. Our enterprise business is transitioning from product to platform while leveraging core mobile and fixed connectivity to serve customers across all segments better.
Overall, we are pleased to have delivered growth across all our key revenue lines. Service revenue grew by 22.0%, in line with our medium-term growth guidance of ‘at least 20%’.
Our ability to drive service revenue growth while managing expenses resulted in EBITDA growing by 25.7% and EBITDA margin expanding by 1.5pp to 54.6% YoY. Modupe will provide more colour on this.
Update on key strategic initiatives
l will now just highlight some of the key strategic milestones we have delivered on as we continued to grow our connectivity business and platforms.
Rollout of 5G services
- We have fully paid for one lot of the 1OOMHz in the 3.5GHz spectrum band and have been assigned the 3500 — 3600 MHz frequencies with effect from 24 August 2022, for a 10-year period. This will enable us to commence the initial rollout of 5G services in the six geopolitical zones once we obtain the regulatory clearance.
- With the rollout of 5G services, we will be able to further deepen broadband penetration in Nigeria, enhance customer experience and unlock new revenue streams from the numerous use cases 5G offers. These include home broadband, virtual reality (VR), augmented virtual reality, gaming, music, robotics, etc.
Launch of MoMo PSB
- We were granted final approval for our MoMo Payment Service Bank (PSB) by the Central bank of Nigeria. This approval will enable us to offer financial services and support the government in fulfilling its agenda of driving financial inclusion in Nigeria.
- We expect to launch our MoMo PSB in Q2, leveraging the solid foundation we have laid with our super-agent licence to deepen the range of additional services we can offer customers to drive digital and financial inclusion.
- As a reminder, the PSB licence allows us to offer the following services:
- Operate electronic wallet
- Accept deposits and maintain the float
- Carry out payment and remittances within Nigeria, including inbound cross-border personal remittances
- Sell fx from remittances to authorized fx dealers
- Issue debit and pre-paid card
- Invest in federal government and CBN securities
It does not allow lending, acceptance of fx deposits, insurance underwriting and outbound cross-border remittances. Details are in the CBN guidelines.
- On the regulatory front, on 4 April 2022, the Nigerian Communications Commission (NCC) announced ifs decision not to extend the deadline for NIN-SIM linkage Further and required all operators to restrict outgoing calls for subscribers whose SIMs are not associated with National Identity Numbers (NINs). We held an investor call on 8 April to provide a fffirst read on this.
- Following the NCC’s directive, we implemented the directive on approximately 19 million of our affected subscribers at that date. The subscribers whose outgoing calls were restricted for non-submission of their NINs require their NINs to be verified before being reactivated.
- As at 25 April, about 8.7 million of those who were initial restricted have subsequently submitted their NINs for verification. This brings the total of subscribers who have submitted their NINs to approximately 60 million as at 25 April 2022. This represents about 85% of our subscriber base.
- Of the 8.7 million, approximately 1.2 million have been reactivated as at 25 April 2022; leaving about 7.3 million affected subscribers who are yet to have their voice service reactivated. Overall, outgoing voice revenue from the subscribers who are yet to be reactivated constitutes approximately 7.8% of total service revenue based on FY 2021.
- As MTN Nigeria, we continue to engage our affected subscribers while providing hardware support for the National Identity Management Commission to accelerate the verification of NINs submitted. We have taken significant steps to help drive NIN enrolment for subscribers who do not yet have a NIN, deploying over 4,200 points of enrolment across the country. We have also provided multiple channels to enable our customers to submit their NIN for verification and linkage.