1 August 2023

MTNGH 1H2023 Results : The Power Duo: MoMo and Data Propels Growth

In brief

Scancom PLC (“MTN Ghana”) released its unaudited 1H2023 financial results yesterday, posting robust revenue growth, strong EBITDA margins, and a significant expansion in earnings outturn. In line with our expectations, data (+41.0% y/y) and mobile money (+48.8% y/y) revenue largely drove performance. Surprisingly, voice revenue (+13.9%) continued to grow steadily in double-digit numbers, despite mobile subscribers decreasing by 1.6% y/y to 27.3mn, primarily due to disconnections related to SIM registration directives. Nonetheless, MTN Ghana increased its active data and mobile money subscriber base by 7.6% y/y and 21.5% y/y to 14.1mn and 14.2mn respectively.

Performance: Data and MoMo drives performance    

  • MTN Ghana’s net profit increased by 27.9% y/y to GHS 1.7bn mainly on the back of a significant expansion in topline
  • Service revenue increased by 32.3% y/y to GHS 6.2bn, driven largely by strong data and MoMo income
  • Data revenue increased by 41.0% y/y to GHS 2.6bn, on the back of growing traffic and upward price revisions
  • The substantial increase in data traffic (41.9% y/y) was driven by the growing demand for data, anchored on the 7.6% y/y increase in active data subscribers and the 31.8% y/y growth in MB per active user per month
  • As expected, mobile money saw a remarkable increase in its revenue, jumping from 9.0% y/y growth in 1H2022 to 48.8% y/y in 1H2023
  • This growth was supported by a 75.3% y/y and 58.8% y/y increase in cash-out and advanced services revenue, respectively. Peer-to-peer revenue, however, declined by 4.8% y/y due to changes in consumer behaviour post e-levy implementation
  • Despite the 1.6% y/y decrease in subscriber numbers due to SIM registration directives, MTN Ghana managed to grow its voice revenue by 13.9% y/y to GHS 1.8bn on the back of several customer value management initiatives
  • Total cost increased by 33.5% y/y to GHS 2.7bn in 1H2023, owing to the prevailing inflationary pressures and increase in IFRS 16 lease costs treatment
  • On account of the heightened cost pressures, the EBITDA margin declined by 130bps to 56.1% in 1H2023 although EBITDA outturn increased by 30.9% y/y to GHS 5.6bn
  • Overall, net profit margin increased by 289bps to 28.8%

Outlook: Robust earnings performance barring regulatory disruptions and heightened cost pressures

  • In our previous publication, we expected MoMo revenue to strengthen, voice growth to soften, and data to wax stronger. These expectations were largely realized in the 1H2023 performance
  • In this publication, we remain bullish on MTN Ghana’s revenue outlook but maintain our concerns over the impact of the challenging macroeconomic environment and regulatory disruptions on earnings margin momentum
  • In our opinion, growth will primarily be driven by data and MoMo revenue lines
  • We believe that the growing demand for data will be sustained in the medium-to-long term as consumer behaviour and smartphone penetration continues to increase megabytes consumed per active subscriber, creating higher data traffic
  • Moreover, given MTNGH’s CAPEX spend of GHS 2.2bn in 1H2023, we are convinced that MTN Ghana is committed to investing in bridging the data infrastructure gap. This will improve service quality, expand capacity, and extend network coverage further to support data subscriber growth, consumption and revenue
  • Furthermore, with MTN Ghana already achieving 99.3% population coverage in 4G networks, we are confident that data growth will remain strong in the short-to-medium term (1 – 3 years)
  • With regard to MoMo, we have observed a positive impact resulting from the reduction of in the chargeable e-levy rate from 1.5% to 1.0%. Customers’ worries have started to diminish, leading to increased activity on the MoMo platform as a whole
  • In our view, competitors will be unable to nip significant market share from MTN Ghana in the near-to-medium term as they have not made comparable investments in scaling their platforms for advanced services and expanding their agent infrastructure, unlike MTN Ghana
  • On voice, we still expect growth to soften as consumers shift towards using data, even for calls. Additionally, we believe that the full impact of the SIM disconnection activities carried out on 1st June, 2023, will be felt in the subsequent quarters
  • On regulations, we continue to caution that the major setback to performance is the directive on regulating voice, data and SMS prices, as this tampers with margins
  • Overall, we maintain a positive outlook for MTN Ghana in the subsequent quarters

Interim Dividend Announcement

  • MTN Ghana declared an interim dividend of GHS 0.05 per share for the 1H2023 financial period.
    o Ex-dividend date – Wednesday, 16 August 2023
    o Qualifying Date – Friday, 18 August 2023
    o Payment Date – Friday, 8 September 2023

Valuation: Under Review

  • We are in the process of initiating coverage on MTN Ghana and have therefore placed our recommendation under review
  • MTN Ghana is trading at a current P/E of 11.1x and trailing 12-month P/E of 5.6x
  • The large telco is also trading at a current EV/EBITDA multiple of 5.1x and a trailing 12-month EV/EBITDA of 2.8x

Investor Call

  • MTN Ghana will be hosting an investor call on Wednesday, 2nd August, 2023 at 13h00 GMT to discuss their 1H2023 results. Please click here to register for the call.

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