MTN Group, the leading mobile telecommunications provider in Africa, with the largest subscriber base on the continent, has experienced a downturn in its revenue for the first quarter of the year 2024. This information was disclosed in the company’s latest financial report, which was released to the public by the Johannesburg Stock Exchange (JSE), where the company is listed.
The report, which covers the financial activities up to the 31st of March, indicates that despite the decline in the company’s overall revenue, there is a silver lining as its financial technology services have seen an increase in earnings.
According to the data presented in the financial update, MTN Group’s customer base has reached a milestone of 288 million subscribers across the 18 markets where the company has established its presence in the vast Pan-African region.
In a closely watched industry comparison, Vodacom, which stands as MTN Group’s most formidable competitor, has also released its financial figures for the fiscal year concluding on the same date, March 31st. Vodacom’s report reveals that the company has successfully crossed the 200 million subscriber threshold. Furthermore, Vodacom has reported a significant surge in its annual revenue, boasting a 26.4% increase which translates to a total revenue of R151 billion.
MTN Group, a dominant player in the African telecommunications market, has released its financial results for the first quarter of 2024, showing a mix of declining and growing figures in different segments of its business. The group’s service revenue saw a significant decrease of 18.8%, with voice revenue experiencing a substantial drop of 32.2% and data revenue decreasing by 14.7%. However, the fintech segment of the business bucked the trend with an 11.4% increase in revenue.
The company’s overall subscriber count saw a slight increase of 1%, totaling 287.6 million, while the number of active data subscribers grew by 7.8% to 149.2 million. The Mobile Money (MoMo) platform also showed positive growth, with a 6.2% rise in monthly active users, reaching 65.5 million. Additionally, data traffic soared by 36.2% to a staggering 4,359 petabytes.
The volume of fintech transactions witnessed an 18.3% growth, reaching 4.8 billion transactions, and the value of these transactions increased by 11.2% to $72.3 billion.
Ralph Mupita, the CEO and President of MTN Group, acknowledged the challenging macroeconomic conditions of the first quarter, marked by persistent high inflation and local currency devaluations in several key markets. Despite these challenges, Mupita noted a downward trend in inflation rates across the company’s markets, with a reduction to 13.7% in Q1 2024 from higher rates in the previous year. He also highlighted the strong commercial momentum in Nigeria, despite the financial challenges posed by the devaluation of the naira and ongoing inflation.
Mupita pointed to global geopolitical tensions as a factor affecting the company’s performance, including the civil war in Sudan, which has had a severe impact on network operations and revenue generation in that market. The company also faced disruptions due to cable cuts, which caused significant downtime for subsea cables connecting Africa, particularly affecting West Africa.
The company has invested R5.4 billion in capital expenditures (excluding leases) in its networks and platforms, achieving a capex intensity of 11.8% for the period. This investment has been instrumental in driving the growth of data traffic and fintech transaction volumes, which increased by 36.2% and 18.3%, respectively.
Excluding the performance of MTN Sudan, which suffered an 83.2% decline due to the civil war, the group’s service revenue growth for Q1 would have been 13.3%. Mupita also mentioned that subscriber growth was affected by registration regulations in Ghana and Nigeria, as well as the decline in subscribers in Sudan due to the conflict. Nevertheless, the increase in active data subscribers supported the growth in traffic and data revenue.
The number of MoMo active users increased by 6.2% to 65.5 million, with advanced services showing a significant year-on-year growth of 63.3%, outpacing the growth of basic services, which increased by 16.9%. Rwanda, Uganda, and Nigeria were the main contributors to the 40.1% increase in active merchants, which now stand at 2.2 million in Q1. This growth in merchants, along with the increases in transaction volume and value, supported a 25% year-on-year growth in service revenue.
Despite inflationary pressures, the group’s overall earnings before interest, taxes, depreciation, and amortisation (EBITDA) increased by 3.9%. However, the EBITDA margin declined by 2.5 percentage points to 38.1%, affected by cost pressures from inflation, currency depreciation (especially in Nigeria), network resilience costs, electricity tariff increases in MTN South Africa, and the impact of the Sudanese conflict.
Through an expense efficiency program, MTN realized savings of R430 million in Q1. The group’s net-debt-to-EBITDA ratio was at 0.5x as of March 31, 2024, comfortably within the loan covenant limit of 2.5x, and the net interest cover of 5.6x was also within covenant thresholds.
MTN Group managed to upstream R718 million in cash from its operating companies during a typically softer quarter. Despite facing headwinds, the company maintains a strong liquidity position, with available headroom of R39.1 billion as of March 31, 2024.
Mupita anticipates that the trading environment will remain challenging in the near term, with continued high inflation in some of MTN’s key markets, pressure on local currencies, and the ongoing civil war in Sudan. However, he remains optimistic about the medium to long-term structural growth opportunities for data adoption and financial inclusion. MTN will continue to follow its capital allocation framework, manage near-term risks, and focus on executing strategic priorities to achieve its medium-term objectives.
