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Wednesday, August 10, 2022

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MTN share price up after forecasting sharply higher earnings

An elderly customer speaks to an employee inside an MTN Group telecommunications store in the Hyde Park district of Johannesburg, South Africa. Photographer, Waldo Swiegers, Bloomberg.

An elderly customer speaks to an employee inside an MTN Group telecommunications store in the Hyde Park district of Johannesburg, South Africa. Photographer, Waldo Swiegers, Bloomberg.

Published Aug 2, 2022

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MTN Group’s share price increased more than 3.4 percent yesterday after forecasting robust earnings for six months to June, 30 and following strong results from its Nigeria subsidiary.

The share price traded at R143.65 yesterday after a trading statement said interim headline earnings per share (Heps) were expected to increase by between 40 to 50 percent.

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It would translate to between 542 cents to 581 cents for the six-months, compared with 387 cents at the same time last year.

MTN’s share price had surged to more than R200 in February, the first time it had breached this level in nearly seven years, but the price fell again after the Nigerian Communications Commission announced in April that all mobile operators had to restrict outgoing calls for subscribers with SIMs not linked to a National Identity Number (NIN). MTN Nigeria said days ago that about 10 million subscribers affected had since submitted their NIN, of which about 2.6 million had been reactivated following verification.

Yesterday’s earnings forecast followed the release of MTN Nigeria’s interim results, which showed earnings per share 28.1 percent higher in the six months to June, 30 to N8.92 kobo (R0.35), after the number of its mobile subscribers increased by 7.6 percent to 74.1 million.

A feature of MTN Nigeria’s results was the exceptional uptake of its fintech business, with active fintech subscribers higher by 87.3 percent to 11.5 million at the end of the interim period.

MTN Nigeria received final approval for its MoMo Payment Service Bank (PSB) in the first half, and commercial operations began on May, 19 leveraging off the existing MoMo business.

At the end of June, MTN Nigeria had 4.2 million registered MoMo wallets, of which 2.4 million were active within six weeks of operations.

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Meanwhile, parent MTN said its Heps had been negatively impacted by some non-operational and once-off items of about 94 cents (2021: 118 cents), including hyperinflation in some countries where it operates, but excluding impairments (2 cents), foreign exchange losses (88 cents) and an IFRS 2 charge from the MTN Ghana localisation transaction (4 cents).

Its earnings per share was expected to increase by between 195 percent and 205 percent, translating to a range between 437 cents to 451 cents, compared with 148 cents in the same period in 2021.

The EPS would include impairment losses relating to goodwill of about 25 cents (73 cents), an impairment loss on remeasurement of disposal groups of 52 cents (2 cents) and a net loss on the disposal of SA towers of 45 cents.

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MTN’s interim results are expected to be announced on August, 11.

In Nigeria, active data users increased by 13.2 percent to 36.8 million. Service revenue increased by 19.9 percent to N947.9 billion. Profit after tax (PAT) grew by 28.1 percent to N181.6 billion. The interim dividend of N5.60 kobo per share increased by 23.1 percent.

MTN Nigeria chief executive Karl Toriola said good progress had been made in strengthening the resilience of the business in the face of an increasingly challenging environment with rising energy, food and general inflation putting pressure on consumer spending.

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The conflict in Ukraine as well as implementation of a “Zero-Covid” policy in China, had also put a strain on global supply chains. Exchange rate risks, and capital expenditure for network expansion had been accelerated into the first half.

The group was on track to launch 5G services across the country in the third quarter of 2022.

Growth was slower in the second quarter mainly due to restrictions arising from the new NIN-SIM directive. Consequently, service revenue grew by 19.9 percent, broadly in line with our medium-term growth guidance of “at least 20 percent”.

Free cash flow was down by 14.3 percent due mainly to the accelerated capex, which was up 67.1 percent. In the second half, capex was expected to abate, which should benefit free cash flow in the remainder of the year.

MTN informed shareholders in mid-June that it was in early discussions to acquire Telkom’s entire issued-share capital.

The company said it would buy Telkom in return for shares or a combination of cash and shares.

MTN’s shares rose sharply on the news, jumping over 7 percent on the day.

However, the company is still trading over 19 percent lower in the year-to-date, declining from around R172 per share on January 3 to R139 at market close on Friday.

South Africa’s second-biggest mobile network had a strong start to the year, with its share price surging over R200 for the first time in nearly seven years in February, 2022.

That was spurred by a reduction in debt for its holding company and solid performance in markets like Nigeria, which benefited significantly from the rising oil price.

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