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MTN Uganda’s performance in the first half of the year continued on a positive trend, supported by the overall momentum in economic growth. The Ugandan economy grew by 6.0% for the 2023/24 financial year with macro-economic indicators trending favourably in the six-month period.
Headline inflation moderated with an average of 3.4% (H1 23: 8.0%) underpinned by lower food inflation and improved exchange rate stability. The Uganda shilling appreciated by 2.0% against the US dollar in H1 24, driven by the recovery of trade receipts and continued monetary policy support. Against this backdrop, our strong commercial execution enabled us to deliver a pleasing set of results.
Service revenue grew strongly by 20.4% driven by resilience in both the connectivity and fintech businesses, underpinned by our growing loyal base of 20.7 million customers (up 14.6% YoY). Our extensive network investment and improved customer value proposition enhanced customer experience, culminating in the growth of our subscriber base and reduced churn.
MTN Uganda achieved first place in the latest net promoter score (NPS) assessment for Q2 2024, conducted by an independent third-party testing organisation. This achievement marks our lead for 14 consecutive quarters and attests to our continued customer satisfaction efforts.
To enhance the quality, capacity, and resilience of our network, we invested UGX 219.1 billion focused on 4G and 5G. Our 4G LTE population coverage increased to 87.8%, up 4.4pp while our 5G roll-out extended to 538 strategic sites with full coverage of the capital, Kampala. Our 2G and 3G population coverage also rose to 98.9% (+0.5pp) and 93.2% (+0.8pp) respectively as we extended connectivity across the country to ensure that all Ugandans enjoy the benefits of a modern connected life.
In fintech, our investment in H1 was geared towards advancing the ecosystem with a focus on creating a deeper appreciation of our advanced services and expansion of our core services. During Q1, we addressed our customers’ credit requirements by establishing a comprehensive loan suite⏤ Wesotinge in partnership with five financial institutions to meet both short and long-term liquidity requirements. In Q2, we focused on improving the financial flexibility of merchants and agents to ramp up cashless transaction usage. We introduced a short-term credit facility Merchant XtraStock and increased the number of cashpoints for agent top-ups to reduce the float gaps in the market. The improved liquidity in the trade helped to drive a 25.2% YoY expansion in transaction volumes to 2.0 billion.
Notably, during the quarter ended 30 June 2024, MTN Uganda Limited fulfilled its 20% listing obligation on the Uganda Securities Exchange, following the secondary sale offer of approximately 1.6bn ordinary shares in the Company.
The offer which recorded a 2.3x subscription, aligned with MTN’s objective to broaden Ugandan shareholding in the Company and provided an opportunity to Ugandan retail and professional investors, including our loyal customers, to own a stake in the Company and participate in its future growth. The successful offer expanded our shareholder base to 20,636 shareholders with a remarkable participation from local pension funds representing over two million indirect beneficiaries.
We are proud to have been the sole telecom partner in the first digital national population and household census held in May 2024. The census recorded a total of 45.9 million people with 50% below the age of 18. We are proud to have supported the government in this project which enabled timely collection, processing and dissemination of results.
In the spirit of creating shared value in our communities, in June our staff participated in 30 days of Y’ello Care in support of education for rural and remote communities. The implemented projects have supported over 4,450 direct beneficiaries who received revamped computer laboratories for digital literacy, clean water facilities, student accommodation rehabilitation and skills training on sustainable agricultural and healthcare practices.
We are encouraged by the increasing demand for our services as we continually position MTN as the brand of choice for our customers. We believe that the business is well-positioned to continue unlocking growth and our operating model remains agile to ensure margin resilience.
We thank all our stakeholders including our regulators and staff for their support in achieving this success and commit to meet our medium-term guidance targets in line with the Ambition 2025 strategy.
Operational Review: Strong half-year performance, solid recovery in data and fintech growth.
Voice revenue grew by 15.1% YoY driven by a sustained aggressive customer acquisition strategy coupled with a refreshed country-wide voice campaign in the period. Our improved all-network bundle packages have been well received as we continually address value and affordability propositions. We have also strategically invested in increasing our service touch points and network sites, particularly in the upcountry regions. These efforts have resulted in a 2.6 million growth in our base during the period.
The contribution of voice revenue to service revenue declined by 1.6pp to 41.6% (H1 23:43.6%) owing to the continued improvement of our data and fintech segments.
Data revenue accelerated by 28.6% boosted by a 26.8% growth in active data users to 8.8 million. Our two-pronged strategy of deepening smartphone penetration through device financing and strategic partnerships with device manufacturers have yielded a 5.9pp growth to 41.6%. We have continued to improve our data value proposition which has reduced churn and increased usage. Our average subscriber data consumption (MB per active subscriber) improved by 19.9% while total data traffic increased by 51.9% with 4G traffic accounting for over two-thirds of total data volume.
In Q2, our data revenue performance grew strongly by 34.8% YoY as our customers continue to enjoy faster through-puts and better connectivity as a result of the increased 4G LTE investment. Our home broadband strategy unfolded positively with a 130% growth in active subscribers amidst a highly competitive market. In the quarter, we introduced 4G and 5G speed-based fixed wireless packages to boost our proposition and increased our fibre network by 54.2% YoY to 12,102 km. Data revenue contribution to service revenue increased to 24.8% (H1 23: 23.2%).
Fintech revenue registered a 23.5% YoY growth with a strong performance in our mobile money business which grew by 25.7% (H1 23: 19.8%). Our solid revenue performance was driven by increased activity, with transaction volume up by 25.2% to 2.0 billion and transaction value up by 12.6% to UGX 69.4 trillion. The growth in transaction volume has been bolstered by higher merchant payments and P2P activity while our advanced revenues continue to benefit from the success of the Wesotinge loan campaign which has strengthened our Banktech revenue line.
Advanced revenue contribution increased to 28.2% (H123: 26.3%). Our merchants increased by 43.1% to 382k and agents by 24.9% to 202k Fintech revenue contribution to service revenues also increased to 29.4% (H1 23: 28.7%).
Digital revenue grew by 26.0% driven by of our content value-added services as we continually invest in our platforms to address the entertainment needs of our customers. Our super app ayoba registered a 34.6% YoY increase in subscribers to 1.9 million users in the period.
EBITDA grew by 22.4% YoY driven by strong revenue growth and operational efficiency in part supported by relatively low inflation and exchange rate stability. This performance enabled us to deliver a margin of 51.5%, a 0.9pp improvement YoY.
In Q2, we recorded faster growth in EBITDA at 25.3% secured by lower inflation in Q2 of 3.6% versus 6.4% in the same period last year.
Depreciation and amortization rose by 13.2% YoY driven by the higher network investments which impacted our lease costs.
Finance costs grew strongly particularly in Q2 in light of increased interest expenses on lease liabilities as a result of accelerated investment in the period. Our net debt to EBITDA is currently at 0.1x in compliance with our financial covenants and all our debt is fully localized as we manage exchange rate risk.
Profit after tax increased by 29.7% to UGX 295.7 billion, with an uplift in the PAT margin of 1.4pp to 19.4%. Capex (excluding leases) increased by 8.6% YoY as we densified our network footprint across the country. With our investments paying off with increased revenues, our capex intensity reduced by 1.5 pp to 14.4% in line with our medium-term target.
Outlook
The Ugandan economy is projected by the Bank of Uganda to continue a growth trend of 6.0-6.5% in the medium term with inflation in H2 24 expected to pick up moderately between 5.0-5.4% driven by increased consumer demand. We are cognizant of the downside risks to this outlook arising from potential global energy hikes and unfavourable weather conditions, which could impact food supply.
Additionally, persistent global inflation and higher interest rates could create volatility in the exchange rate.
As we look ahead, we are committed to delivering on our strategy while actively monitoring developments in our operating environment to ensure financial resilience and value creation for all our stakeholders.
Leveraging on our network investment, we commit to deliver reliable and affordable voice and data services to empower our loyal customer base. To sustain our commercial momentum in the second half, we will continue to partner, innovate and solution to meet an ever-evolving market as technology advances. Our investments particularly in 5G and 4G LTE should augment our customers’ user experience and reinforce the momentum we have achieved.
In fintech, we continue to focus on further enhancement of the liquidity requirements in the trade for our merchants and agents.
We are also monitoring the impact on our basic revenues following a directive from the Bank of Uganda in Q2 on mandatory verification of customers conducting mobile money transactions involving sums above UGX 1 million on both withdrawals and deposits. We are engaging our large value customer base through CVM and product innovation to protect our portfolio.
As we maximize our shareholder returns and enhance our financial resilience, we will continue to monitor our cost efficiencies through our expense efficiency program and optimise our capital investments for the remaining part of the year. With this, we maintain our medium-term guidance framework of delivering mid-teen service revenue growth, stable EBITDA margins above 50% and maintaining capex (excluding leases) intensity at mid-teen levels as we support our growth prospects.
Final dividend recommendation
Notice is hereby given that the Company’s directors have proposed the payment of the first dividend of UGX 6.6 per share (UGX 147,767,692,977) for the six months ended 30 June 2024. This is subject to the deduction of withholding taxes. The number of ordinary shares in issue at the date of this declaration is 22,389,044,239.
In compliance with the requirements of USE Listing Rules 2021, the salient dates relating to the payment of the dividend are as follows:
- Book Closure Date: Monday, 2 September 2024
- Dividend Payment Date: Friday, 20 September 2024
In line with the Uganda Securities Exchange (USE) Trading Rules 2021, the ex-dividend date will be Wednesday, 28 August 2024. Accordingly, an investor who buys MTN Uganda shares on or before this date will be entitled to the final dividend. Any investor buying MTN Uganda shares after Wednesday, 28 August 2024 will not be entitled to the final dividend declared for the period.
The dividend will be transferred electronically to the bank accounts or mobile money wallets.