MTN might not be the oldest Nigerian company, but it has proven that 20 years is all it needed to earn its stance as the second largest company by market capitalization on the NGX, the leading operator by market share, and the largest company by revenue. Over the course of the period, it has gone from painting all 36 states of the nation yellow, to being the first to offer free midnight calls to its uber-active users, and it is ultimately on course to being a part of Africa’s digital boom.
To mark its success and set out on the ambitious objective of having the largest retail shareholder base of any company in Nigeria, MTN Group over the past weeks had set out to sell up to 575,000,000 shares in the company (MTN Nigeria) thereby reducing its shareholding from 78.83% to 65% over time. As an incentive to ensure the participation of retail investors, the 20-year-old giant had also offered 1 free share for every 20 shares purchased. The incentive is open to retail investors who buy and hold the shares allotted to them for at least 12 months, post the allotment date. The question on every investor’s lips has however been, “why?”
Overview of financial performance
If there’s anything MTN’s 9-month result in Q3 was able to show, it is that increasing its revenue is far from the problem. Comparative to its Q3 2020, the group recorded a 24% increase in revenue from N976 billion to a whopping N1.2 trillion. This growth was attributed to a 23.7% increase in service revenue, a 51.5% growth in data revenue, as well as a 10.6% increase in voice revenue. Transaction volume in 9M 2021 rose by more than three times to 93.3 million, led by an active subscriber base of 6.6 million, up 97.0% YoY. While it too had faced its own perils particularly as a result of net losses in its subscriber base as a result of the revised NIN-Sim guidelines, the growth in both voice and data revenue was driven by increases in voice and data usage per subscriber.
Needless to say, the increasing demand for access to the internet in today’s digital world is evident. In Q3 alone, the company also witnessed significant growth in its profit after tax by 58.99% from N49.36 billion in Q3 2020 to N78.48 billion in the current period. But while its operations are nothing short of stellar, investors certainly need to see the returns they deserve, and a dividend yield of circa 6% in today’s economy is not that shiny light they need to see. Year to date, the stock has grown by around 10% and while this isn’t also the best growth story, MTN wants you to believe in them just as hard as they believe in themselves.
Ambition 2025 and its strategic intent
MTN’s biggest sell is its aggressive drive towards milking the digital economy in Nigeria. While it had 3 million active users on Ayoba – which rose by a whopping 295.6% to 5.8 million as of September 2021, the company’s projections for its Ambition 2025 goals are huge.
“We are looking at very rapid growth in both Ayoba and Momo users to 36 million and 40 million respectively, driving our digital and fintech propositions for Nigerian consumers. By 2025 we should have more than doubled our active data users to 80 million and have 5 million home broadband users from our current 500,000.”
Ambition 2025 is the framework through which MTN wants to continue to grow and position itself as a leading digital solutions company to drive financial inclusion in Nigeria. To this end, the company is putting its money where its mouth is by investing in 4G network expansion, covering new areas for increased financial inclusion, investment in fintech platforms, fibre infrastructure expansion and more. The objective is to build the largest and most valuable digital platforms and they certainly have the cash and subscriber base to pull it off.
With the Nigerian economy expanding and its teeming youth population, MTN’s vast coverage too serves as a possible advantage to look forward to. Regarding the ways its new status as a player in the banking space would influence this equation, only time will tell. What we do know that MTN is staking its cash behind its laudable ambitions and this capital raising move is part of the myriad of steps they have taken towards this goal.
So, in deciding whether to buy its shares or not, a truer question is “what do investors stand to lose?” The simple fact that the Nigerian stock market has cheap stocks compared to developed economies is enough reason to bet on this. There honestly is more to gain by obtaining its shares at this discount of 10% after Monday’s trading session. With the additional incentive of 1 free share for every 20 shares purchased, investors certainly have an excellent opportunity to get in on the action when they still can.