MTN Group announced plans to sell ZAR15 billion ($1 billion) worth of assets over the next three years, including its stake in its Botswana joint venture, and to launch a barrage of new services across its markets.
The company also said it has met all its medium-term targets, reducing its holding company leverage and accelerating service revenue growth driven by the implementation of its BRIGHT strategy.
As was widely reported, following a strategic review of its portfolio MTN agreed to sell its majority stake in Botswana’s largest operator Mascom to JV partner Econet Wireless for $300 million.
Other units and investments up for sale were not detailed, however the company said its interests in e-commerce and tower ventures had been identified as non-long-term investments and will be sold “over time”.
Cash raised from its various divestments will be used to reduce debt.
In a statement issued alongside its annual results report, the operator said the strategic shift aims to “reduce risk, improve returns and simplify MTN.”
As it disposes of some interests, CEO Rob Shuter (pictured) said the operator group would now place a “major focus on fintech, digital enterprise and wholesale”.
Later this year, the company plans to launch a music streaming service and instant messaging applications in its markets. It is also set to expand mobile money services to Nigeria, Afghanistan, and Sudan and revive the service in South Africa.
MTN abandoned its mobile money service in South Africa in 2016, citing a lack of commercial viability. By the end of 2019 MTN Money will be available in 18 markets.
The company revealed net profit of ZAR9.6 billion in 2018, up from ZAR4.6 billion in 2017, following a number of one-off items.
Shuter said the company: “Delivered a very encouraging performance in 2018, meeting our targets for growth.”
“We continue to benefit from the demographic dividend in the countries in which we operate and, while the markets remain challenging, we continue to target service revenue growth ahead of inflation.”
Accelerates growth, delivers dividend, and lifts guidance
It increased its subscriber base by 16 million to 233 million customers across 21 markets in Africa and the Middle East. The number of active data users increased by 10 million to 79 million and the active mobile money subscriber base rose to 27 million. This strong commercial momentum drove a 10,7% constant currency increase in service revenue to R125,4 billion.
“The service revenue growth rate achieved is ahead of both prior year and our guidance and – more importantly – is above the average rate of inflation in our markets, which means we are delivering real growth in service revenue,” said Rob Shuter, MTN’s group president and CEO.
Group Ebitda rose more than 15% and reported headline earnings per share (HEPS) increased to 337 cents from 182 cents in 2017. Adjusting for once-off items HEPS would have been 565 cents per share. The total full year dividend of 500 cents is well covered and a final dividend of 325 cents has been declared.
MTN has conducted an extensive review of its portfolio to reduce risk, improve returns and simplify MTN. This review covered not only its subsidiary companies but also its associates and its investments in e-commerce investments and tower companies. The group has R40 billion tied up in the value of the e-commerce and tower company investments and has announced that they are not viewed as long-term strategic assets of the group and will be monetised over time.
The group has committed to the portfolio review realising more than R15 billion over the next 3 years excluding any proceeds from its R23 billion position in IHS.
Pursuant to this it announced that it would be disposing of its associate in Botswana, Mascom, for $300 million where its lack of control position and MTN branding meant that the group is not able to execute on its BRIGHT strategy.
The group stabilised its gearing, bringing the holding company leverage down to 2,3 times at December 2018 from 2,9 times at June 2018 and within the target range of 2,0 to 2,5 times. The group’s overall gearing moderated to 1,3x.
“We have made good progress to improve the holding company leverage bringing it within the medium-term guidance range we set out. Proceeds we receive from the asset realization program will support efforts to further reduce debt and de-lever the holding company balance sheet.” said group CFO Ralph Mupita. “We believe the holding company leverage is appropriate, and we can well manage the debt and deliver on our 500 cents progressive dividend policy in the future.” he added.
The company overcame several regulatory headwinds in 2018, the most material of which was the Central Bank Central Bank of Nigeria dispute on historical dividend repatriations. This was resolved and MTN announced in December 2018 that they had agreed to implement a notional reversal of the 2008 private placement and consequently made a resolution payment of $53 million. The group is committed to further enhancing its risk management and stakeholder management processes.
“We see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity,” said Shuter. “We are also extending our BRIGHT strategy to build MTN into a digital operator with a major focus on the fintech, digital, enterprise and wholesale business areas.”
“Key focus areas for 2019 are the launch of our own music streaming and instant messaging applications and extending MTN mobile money from 14 to 18 countries through launches in South Africa, Nigeria, Afghanistan and Sudan”
Considering the improved performance in 2018 and its growth plans, the group revised its guidance to investors upwards, targeting double-digit growth in service revenue, improved profit margins and capex efficiency and a new target to drive return on equity from 11% to over 20% in the next three to five years.
