MTNN earnings beat fails to lift share price 7-trading session straight
MTN Nigeria Plc. share price has been on declining in the last 7-trading days despite a strong earnings pull.
Closed at N110 Monday, though it had peaked at N116.20, sentiment remains low despite promise to spend N600 billion on network.
The telecom giant and one of Africa’s largest providers of communications services delivered a blockbuster earnings performance as it beat rivals to increase market share.
Despite harsh business operating environment, the Telco firm’s revenue came strong, but the profit came stronger with improved costs and operating expenses management.
The group raised revenue by 13% year on year but profit expanded by about 39% with analysts projecting further growth in the bottom line for 2020.
MTNN closed the trading session at N110 per share on the bourse on Monday, the Telco’s capitalisation pitched at N2.238 trillion on 20,354,513,050 shares outstanding.
Its 2019 audited result shows a well balance scorecard as analysts’ project further improvement for year 2020.
The strength of the result came from the group ability to reduce cost, expand customers’ base followed by a more efficient corporate strategies that seek to raise quality of services.
As an example, MTNN direct network operating cost sloped downward to N242.012 billion in 2019 as against N305.519 billion recorded in the comparable period in 2018.
This translated to improved gross profit margin because MTNN expended less on its networking servicing at the same time when revenues expanded compare with 2018.
But the telecom firm recorded increase in its inter-connectivity cost in 2019, which deviated from its cost management strategy for 2019.
At the growth rate of 10% year on year, MTNN’s inter-connectivity cost as per audited financial statement for 2019 jerked up to N105.249 billion compare to N95.63 billion paid in 2018.
This was also followed by a marginal reduction in roaming cost in the period. Roaming cost declined to N4.037 billion compare to N4.173 billion paid in 2018.
A slight increase was also recorded in transmission cost as discount and commission payment ballooned, somehow in line with increase business activities.
Transmission costs paid in 2019 was N5.553 billion as against N5.508 billion in the comparable period in 2018.
But discount and commission payment surged 10% year on year to N56.585 billion compare to N51.287 billion last year.
MTNN personnel cost surged to N30.705 billion in 2019. This represents a 13.09% increase when compare with N27.152 billion payroll maintained in 2018.
The group profit after tax calculated under International Financial Reporting Standard 16 by 38.8% from N145.685 billion to N202.1 billion.
The group audited result shows that free cash flow level increased 51.4% year on year to N378 billion.
This means that the management has strong buffer for dividend payment and further capital expenditure.
On that note, unrelenting telecom firm however indicates plan to invest N600 billion on its network in the next three years.
It would be recalled that in January 2019, MTN Nigeria adopted IFRS 16 in preparation of its financial information.
The audited financial statement shows that mobile subscribers increased by 6.1 million to 64.3 million. Also, active data users increased by 6.5 million to 25.2 million.
Despite harsh operating environment as well as increased rivalry among major competitors, MTN service revenue increased by 12.6% to N1.2 trillion as against N1.039 trillion in the comparable period in 2018.
The group earnings before interest, tax, depreciation and amortisation, EBITDA, grew massively at 45.2% to N629.9 billion.
This resulted to 12.1 percentage point increase in EBITDA margin to 53.9% in 2019.
At the bottom, profit before tax expanded 31.1% year on year to N290.1 billion as the firm’s earnings per share rose by 38.8% to N9.9k.
The Board of Directors declared a final dividend of N4.97. This brings the total dividend for the year to N7.92 kobo per share.
Speaking on the result, MTN Nigeria CEO, Ferdi Moolman said: “I am pleased with our performance in 2019, which demonstrates the progress we have made in the implementation of our BRIGHT strategy.
“Despite a challenging operating environment, we continued to deliver double-digit growth in service revenue in line with our medium-term guidance.
“Voice revenue growth remained healthy, and data revenue continued to accelerate, supporting a 12.6% increase in service revenue with an acceleration in growth to 14.0% year on year in the fourth quarter of 2019”.
Moolman said: “Following the completion of the SIM re-registration exercise in the third quarter of 2019, we recorded 2.7 million net additions in the fourth quarter”.
He said in total, MTN added 6.1 million new subscribers to its network in 2019. Although the last quarter is usually seasonally strong, 14% service revenue growth in the fourth outpaced the seasonal effect”.
“In the third quarter, we focused on several initiatives to enhance coverage and drive data usage penetration.
“These initiatives include optimising frequencies, expanding our 4G network coverage with over 6,000 additional sites leveraging 800MHz spectrum and repositioning our commercial data offerings”, Moolman stated.
MTN achieved an increase in active data subscriber net additions by 2.9 million in the fourth quarter of financial year 2019.
Also, its 4G population coverage rose by 8.4% to 43.8%, giving people in 68 additional cities access to 4G.
“We closed the year with 132 cities covered by 4G and became the first mobile network operator in West Africa to demonstrate the capability of 5G technology.
“We are excited about its potential for our customers and Nigeria’s overall national development plans”, the management said.
Issues with government
MTNN said it is delighted with the progress made in resolving dispute with the Attorney General of the Federation (AGF) on the adequacy of taxes and duties paid.
“We have discontinued the legal action against the AGF following the transfer of the matter to the relevant authorities and look forward to a final resolution.
“We have always fulfilled our tax obligations and remain committed to maintaining good relationships with all regulatory authorities”, the management added.
During the year, the management focused on building subscriber base, this resulted to 10.5% growth in net additions to a total of 64.3 million subscribers.
Then, active data subscribers rose by 34.9% to 25.2 million on the back of several initiatives.
As a result, the ratio of active data users to total mobile subscribers increased by 7.1 percentage points to 39.2% in 2019 with strong potential for future growth.
MTN Nigeria’s voice revenue growth came healthy at 8.4% and this revenue segment accounted for 72.7% of service revenue.
Stretching further, voice traffic increased by 7.6%, thus supported revenue growth.
The management said: “we have seen rapid acceleration in data revenue growth enabled by greater population coverage, a revamp of our data portfolio and initiatives to drive 4G device penetration”.
MTN Nigeria then added 5.3 million new smartphones to its network, bringing smartphone penetration to 41.8% of its base, while data traffic rose by 85.8% in the period.
The management said: “Our interventions in the year helped to drive a 42.4% increase in data revenue for the year.
“Data contributed 18.8% to service revenue, up 3.9% from 14.9% in 2018.
We further focused on building a sustainable active user base for our digital business, while improving the customer journey and experience on value-added services (VAS)”.
In Q4 2019, MTN Nigeria launched MusicTime, one of its flagship digital offerings.
The active base for the digital subscriptions surpassed 2.1 million users during the year, as MTN continue to build critical mass for its portfolio of digital products and services.
MTNN earnings beat fails to lift share price 7-trading session straight