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Monday, 14 August 2023 21:11

MTN delivers resilient H1 performance and to sell mobile money stake to Mastercard.

By Lehlohonolo Lehana.

Mobile operator MTN South Africa's power resilience investment helped the group deliver a solid performance for the first half of 2023, with group service revenue up by 15.1%, to R107.7 billion.

Revenue from data (26.9%), voice (6.6%) and fintech (11.5%) services is behind mobile operator's positive numbers over the period.

The cellular giant also saw a growth in its total subscribers which increased by 5.2% to 290.6 million.

CEO Ralph Mupita said the group achieved a "solid performance in a challenging operating environment" in the first half of the year up to 30 June 2023.

In the first half, the group deployed R17.2-billion in capex, for a capex intensity of 15.2% – within the medium-term target range of 15-18%.

The group delivered service revenue growth of 15.1%*, up slightly on a year ago and in line with medium-term guidance.

Ebitda, or earnings before interest, tax, depreciation and amortisation – a measure of operating performance – increased by 13.5%*, with an Ebitda margin of 44%* (first half of 2022: 44.5%*) as elevated inflation and foreign exchange rate depreciation continued to place upward pressure on costs. (*Reported in constant currency after accounting for pro forma adjustments.)

In particular, the business navigated the effects of Nigerian reforms, which placed an additional short-term burden on consumers and businesses.

These impacts were partially mitigated through the ongoing progress of our expense-efficiency programme, which achieved sustainable cost savings of R702-million in the period," MTN said.

Group net debt to Ebitda of 0.4 times as at 30 June 2023 (31 December 2022: 0.3x) remained within the group's loans covenant limit of 2.5x. The holding company's leverage increased to 1.5x (31 December 2022: 0.8x) due mainly to the rand’s depreciation against the dollar and the election of the scrip dividend options from MTN Nigeria and MTN Ghana for the 2022 dividend payments – which negatively affected the amount of cash "upstreamed" to the group.

"We maintained a positive liquidity position, with headroom of R40.9-billion as at 30 June 2023," Mupita said.

The group upstreamed cash totalling R4.2-billion from its operating companies in the reporting period. Over and above this, R1.4-billion of localisation proceeds were repatriated from MTN Nigeria (R1.2-billion) and MTN Ghana (R200-million) in the period.

MTN and Mastercard, meanwhile, have signed a memorandum of understanding, which provides for a minority investment by Mastercard into MTN's fintech based on a total enterprise valuation of about $5.2-billion on a cash- and debt-free basis.

For Mastercard, the deal will help deepen its presence on the continent in digital payments, which is viewed as a high margin, low capex and fast-growing business.

MTN has invested heavily in financial technology, cut back its exposure to the Middle East region and has managed to grow its market value by almost 5 times since the March 2020 crash.

Shares in MTN rose by almost 10% in early trade on Monday after it announced the deal with Mastercard, which values its fintech arm at $5.2 billion, around 40% of MTN's market value.