MTN Group increased its subscriber base by 16 million in 2018 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 percent constant currency increase in service revenue to ZAR 125.4 billion, the company said. The group said it met all its medium-term targets, reducing its holding company leverage and accelerating service revenue growth, driven by the implementation of its BRIGHT strategy. It also announced plans for asset disposals and raised its target for service revenue growth in the coming years.

EBITDA rose more than 15 percent, and the margin improved to 35.9 percent from 35.4 percent, thanks to underlying improvement in South Africa and Nigeria. Reported headline earnings per share (HEPS) increased to 337 cents from 182 cents in 2017. Adjusting for one-off items, HEPS would have been ZAR 5.65 per share. A final dividend of ZAR 3.25 was declared, down from ZAR 4.50 a year earlier, as expected.

Asset sales
MTN said it 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 ZAR 40 billion tied up in the value of the e-commerce and tower company investments and announced that they are not viewed as long-term strategic assets of the group and will be monetised over time. The group has committed in the portfolio review to realise more than ZAR 15 billion over the next three years, excluding any proceeds from its ZAR 23 billion position in towers group IHS.

The operator also announced that it would be disposing of its 53 percent stake in Botswana operator Mascom for USD 300 million, equal to 6.1x EBITDA. The other shareholder in Mascom, Econet Wireless will acquire the stake. The lack of control of the operator and MTN branding meant that the group is not able to execute on its BRIGHT strategy there.

MTN also confirmed plans to list MTN Nigeria on the stock market in the first half of the year. This will first be a listing by introduction followed later by a public offering. Over time, local ownership of the company is expected to grow to 35 percent.

Improved targets
MTN’s leverage came down to 2.3 times at end-2018 from 2.9 times in June and within the target range of 2.0-2.5x. The group’s overall gearing moderated to 1.3x.

MTN said it overcame several regulatory headwinds in 2018, the most material of which was the Central Bank of Nigeria dispute on historical dividend repatriations. This was resolved and MTN announced in December 2018 that an agreement to implement a notional reversal of the 2008 private placement and consequently made a resolution payment of USD 53 million.

The group said it is committed to further enhancing its risk management and stakeholder management processes. Considering the improved performance in 2018 and its growth plans, MTN revised its mid-term guidance upwards, targeting double-digit growth in service revenue at constant currencies rather than upper-single-digit growth. This is driven by double-digit growth from MTN Nigeria and mid-single-digit. MTN also aims to continue to expand the EBITDA margin in the next 3-5 years.

The improving revenue growth, margins and capex intensity are anticipated to drive significant improvements in group returns. MTN expects the adjusted ROE to improve from 11.5 percent in 2018 to over 20 percent over the medium term. While the board remains committed to growth of 10-20 percent in the dividend going forward, MTN said this is likely to be towards the lower end of the range in 2019.


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