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MTN Uganda has remained resilient in the first nine months of 2022, navigating the prevailing tough macroeconomic conditions, to deliver double-digit service revenue growth in line with our medium-term guidance.
The telecommunication giant recorded 11.5% to Ush 1,667.3 billion service revenue growth in its unaudited results for the nine-month period ended 30 September 2022.
The company’s Chief Executive Officer, Sylvia Mulinge says that they invested a total of Ush276.7 billion in their network and systems, which has enabled double-digit performance.
“Our investment is also focused on our ESG objective of reducing greenhouse emissions and adopting renewable energy in line with our goal of a net-zero position by 2040.”
She also attributed the performance to the enhancement of their value proposition and customer value management (CVM) models which has improved the customer experience, which in turn boosted customer base by total net additions of 400k subscribers (to 16.7 million) and reduced churn in Q3.
“Along with the solid top line growth, our focused expense efficiency programme helped mitigate accelerating inflation in the macroeconomy to deliver EBITDA growth of 9.5%. The EBITDA margin of 50.7% reflected a slight improvement in momentum compared to H1, however it was down by 1.0pp YoY. This was largely associated with the costs of the fintech separation in H1 and higher network and fuel costs due to an acceleration in our site rollout.”
On the other hand, Ms. Mulinge noted that voice revenue declined by 2.3%, showing an improvement in momentum in Q3 (+3.5%) vs Q2 (-5.3%, YoY), broadly attributing it to the continued macroeconomic pressures, including inflation, impacting our customers’ spending power.
“The quarterly sequential improvement is due to the 400k increase in subscribers in Q3 as well as our enhanced CVM programme, which has driven some recovery in engagement and usage. In line with our strategy, the voice contribution to service revenue declined to 45.0% (9M 2021:51.4%) in favour of increased contributions from higher growth segments.”
Data revenue was up by 29.8%, on the back of the sustained growth in active data users by +28.8% to 6.1 million (net additions of 300k in Q3) as well as improved internet propositions and network quality. Mulinge says their aggressive investment in the 4G network led to an increase in their 4C population coverage to 77.4% (9M 21: 56.5% ). Data traffic on the network recorded an increase of 42.4%, of which 61.2% was carried on the 4G network (9M 21:50.2%).
Report also shows that the company’s home broadband revenues continue to grow strongly with increased uptake of Fibre and mobile WiFi cementing fibre to the home and business strategy. The data contribution to service revenue increased to 22.1% (9M 2021: 19.0%).
Fintech revenue grew by 23.2% as our MoMo active subscribers increased by 19.3% to 10.6 million (net additions of 809k in Q3).
On this, Mulinge notes “The strong growth in our base was boosted by the National Payments Systems Act of 2020 directive for all mobile money operators to pay quarterly interest to all existing account balances, which attracted more users into the ecosystem. Our revamped MoMo Pay drive, intended to increase cashless transactions and ease doing business for our customers, also aided fintech subscriber and transaction growth. Transaction value grew by 36.7% on a YoY basis to Ush 54.4 trillion.”
“Our initiatives also helped to refine our merchant and agent acquisition, which grew respectively by 90k (+108.6% ) and 169k (+2.4%) YoY. Also, in line with these efforts, our advanced revenue segment grew by 151% largely driven by a significant improvement in our payment services and bank interface portfolios. The fintech contribution to service revenue increased to 28.2% (9M 2021: 25.5%),” she added.
She says that higher adoption of their digital products and services contributed to the 60.6% growth in customer base, with increasing interest in the ayoba app services. “Our growing youth led subscriber base has led to significant revenue growth in our video streaming (+125.1%) and gaming services (+32.0%).”
EBITDA growth of 9.5% YoY was underpinned by the increased growth in service revenue and realised efficiencies through cost discipline and enhanced digitisation which limited the increase in operating costs to 14.0%. An EBITDA margin of 50.7% was delivered above the company’s medium-term target of 50%.
Capital expenditure (Capex) excluding right of use assets in the period was 20.0% higher at Ush 276.7 billion, as the company continues to aggressively expand 4G footprint.
“Our Capex intensity remained within target levels at 16.5%. Despite the challenging trading conditions and continued investment in our network, we recorded a healthy free cash flow of Ush 575.8 billion, up by 5.1%,” said Mulinge.
Depreciation and amortisation declined by 6.9% supported by base effects of the amortisation of the 2021 NTO licence renewal. However, Mulinge says the increase noted in the quarter is related to the increment in the right of use assets as a result of their accelerated Capex programme. She notes that their net finance costs increased by 16.6% due to the impact of increased Finance leases, depreciation of the shilling and higher interest rates affecting their debt positions.
As a result, profit after tax increased by 21.0% to Ush 292.7 billion, with an improved margin of 17.4% (+1.3pp), and as per the company’s dividend policy, the board has approved an interim dividend of Ush 5.4 per share to be paid by Thursday, 22 December 2022.
Ms. Mulinge says that there has been a combination of global factors including recent drought and a weaker shilling which have driven inflation to the highest level recorded in ten years.
Accordingly, this has had an impact on the company’s foreign-denominated positions and investment programmes as well as its customer spending power.
She noted that creating shared value remains a key focus for the and as a result, they continue to strengthen their partnerships in Uganda. This year, she says their focus has been on deepening co-operation with several cultural institutions all over the country in various projects covering youth programmes, health, education, and sports touching millions of Ugandans.
“Management is committed to building on the progress achieved by MTN Uganda thus far and steering the continued growth of the business through execution of the Ambition 2025 strategy and look forward to creating shared value for all our stakeholders,” she said in a statement.
She announced that in line with the Uganda Securities Exchange (USE) Trading Rules 2021, the ex-dividend date will be Monday, 28 November 2022. Accordingly, an investor who buys MTN Uganda shares on or before this date will be entitled to the interim dividend. Any investor buying MTN Uganda shares after Monday, 28 November2022 will not be entitled to the interim dividend declared for the period.
“The dividend will be transferred electronically to the bank accounts or mobile money wallets of shareholders.”
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Mobile subscribers increased by 9.2% to 16.7 million
Active data subscribers grew by 28.8% to 6.1 million
Active fintech users increased by 19.4% to 10.6 million
Data revenue grew by 29.8% to Ush 369.2 billion
Fintech revenue grew by 23.2% to Ush 470.4 billion
Earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 9.5% to
Earnings before interest, tax, depreciation, and amortization (EBITDA) grew by 9.5% to Ush 852.5 billion
EBITDA margin decreased by 1.0 percentage point (pp) to 50.7%
Capital expenditure, excluding right of use assets, increased by 20.0% to Ush 276.7 billion
Profit after tax (PAT) increased by 21.0% to Ush 292.7 billion Free cash flow increased by 5.1% to Ush 575.8 billion