MTN records blockbuster fintech transactions ahead of spin-off

MTN Group President and CEO Ralph Mupita.

MTN Group recorded runaway fintech success in the first half of the year, generating six billion Mobile Money transactions worth over $116.3 billion (R1.8 trillion), putting Africa’s largest telco on a comfortable path as it prepares to spin off its financial services business.

The pan-African telco reported its half-year results today, saying in the first six months of its 2022 financial year it had 60.7 million mobile money (MoMo) users, a solid 24% year-on-year growth.

The group has been betting on this new growth area for some time, and today CEO and CEO Ralph Mupita revealed the unit’s buoyant results.

“We made progress in separating our fintech and fiber businesses from our GSM business and have started the process of engaging selected potential strategic investors in the group’s fintech structure, the outcome of which should be finalized by the end of the year.”

Initially, MTN had set the second quarter of the financial year 2022 as the deadline to spin off its lucrative fintech business, while the fiber unit was to be spun off a few months later.

Today, Mupita revealed that in addition to the separation of the two entities as part of MTN Group’s Ambition 2025 strategy, the telco is also building five platform businesses.

He noted that the fintech platform is the “most mature of these, and in the first half of the year it had 60.7 million MoMo users (up 24% year-on-year), generating six billion transactions worth US$116.3 billion”.

In the current reporting period, MTN greened most of its key results, driven by data revenue growth, which rose 35.9%, driven by MTN Nigeria, MTN Ghana, MTN Cameroon and MTN South Africa.

On broadband, Mupita said MTN Group accelerated its investments during the six months despite the challenging environment.

“Despite the tough macro conditions, MTN remained focused on investing in our markets to increase broadband coverage and reduce the cost of communicating. We accelerated network investment to R17.1 billion and spent a further R7 billion on securing 4G and 5G spectrum in the key markets of South Africa and Nigeria.”

The investment in networks, he added, increased access to broadband services to 85.5% of the population and led to an average 22.5% reduction in data tariffs.

Looking at the group’s financial metrics over the six months, MTN Group’s service revenue grew by 14.8% to R92.5 billion; earnings before interest, tax, depreciation and amortization (EBITDA) increased by 15.1% to R43.9bn before non-recurring items; and the EBITDA margin increased by 0.3 percentage points to 45.3%.

Commenting on the group’s financial strength, chief financial officer Tsholo Molefe said during the six months, MTN accelerated the deleveraging of its balance sheet, boosted by the repatriation of R9.4 billion in cash from operating companies, including R4.5 billion from Nigeria.

“We continue to explore opportunities for additional liability management and continue to focus on reducing the hard currency liabilities on our balance sheet.”

MTN says it accelerated its portfolio transformation during the period under review, in line with its Pan-African focus, and the telco has since accepted a binding offer for 100% of MTN Afghanistan.

The Afghanistan deal comes almost two years after the African telecoms giant announced plans to end operations in the Middle East.

Since then, the MTN group left Yemen and also left Syria, exiting its operations after relations with the regulator there turned toxic, making the business unsustainable.

MTN says it has now set its sights on Africa, and is prioritizing creating shared values, expanding local participation and deepening the capital markets.

In Ghana, for example, Mupita said MTN has since increased local ownership to 23.7% through share sales to pension funds and strategic investors.

Looking ahead, it appears that the headwinds against customers and the business will persist in the second half of the year, but the group has built safety nets around its operations, noted the CEO.

“The business is well positioned to navigate the prevailing market conditions. In South Africa, we are focused on improving the resilience and availability of the network, given the constrained power situation on the grid.

“Battery and generator solutions will be deployed to restore network availability to the world-class standards our customers have come to expect. This resilience plan will be executed within the business investment framework.”

In SA, Mupita has warned of power outages, saying if the situation continues unabated, it could cut a hole in revenue.

MTN SA currently burns more than 400,000 liters of fuel per month to maintain connectivity and provide a decent customer experience. It has also deployed over 2,000 generators to counter the impact of stage four (and higher) load shedding.

“If we experience the same level of load shedding in H2 as we did in H1 in South Africa, service revenue will come in slightly below guidance, with margins at the lower end of the range communicated to investors.

“The structurally higher growth opportunities in our markets continue to support the investment case for a compelling Africa growth story that brings digital and financial inclusion to Africans,” commented Mupita.