EFCC raif of MTN Nigeria

Telecom Giant, MTN Nigeria, released its 2019 first quarter results ahead of its planned listing on the Nigerian Stock Exchange later this week. For most discerning investors, the indices that popped out were astonishing. Here are some;

MTN Major Indicators
  • Return on Equity – 90%, meaning MTN makes N90 for every N100 of its cash (net debt) invested.
  • Return on Asset – 17%, meaning it makes N17 for every N100 of assets (equity plus debt) invested. Basically, MTN borrows debt at mouth watery interest rates and makes incredible profits of it.
  • Dividend Payout – It pays out 80% of its profits as dividends. This continues to keep its Net Assets (equity low) ensuring it maintains high ROEs.
  • Market shareMTN also claims it owns 50% of Nigeria’s GSM market by revenue. Not entirely a surprise when you consider its 61 million-plus subscribers and high average revenue per user.

These indices are incredible by any standard and one any business should be proud of. In addition to these numbers, MTN also reported double-digit growth in its data and voice revenues. Voice is growing at 14%, Fintech and data at 60% compounded annually respectively. One downside, however, is its digital revenue contracting by 42% compounded annually.

Digital Revenue – This is made up of revenues from its Value Added Services business (those intrusive text messages you get selling one stuff or the other to you). It also includes e-commerce and mobile advertising business. MTN has tried different models over the years hoping it can leverage on its customer base to monetize across several revenue streams.

Not catching on- The models seem to be faltering for a number of reasons best known to them. What we do know is that these businesses rely vastly on b2b (business to business) models rather than selling directly to consumers (which MTN is very good at). Though some aspect of VAS requires consumers to pay, improved technology for streaming products and chat messaging group has stunted growth.

Lost opportunityMTN may also have lost out on the streaming business which it would have supported with its data capabilities. The likes of Apple and Disney already consider this as the next frontier in the internet of things. Had MTN supported streaming of Nigerian music and videos online rather than via VAS, perhaps it would have been better off here.

What next- MTN claims its retooling this revenue line by “Redesigned VAS subscription model • Local content • Smart feature phone launch”. Is it a game changer?


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