MTN Nigeria held an Analyst conference yesterday ahead of its planned listing by
introduction on the Nigerian Stock Exchange (NSE). While we anticipated that there would be discussions on the shareholding structure of the firm pre and post-listing, the listing price, possibility of an IPO in H2 2019, the conference centred on the nature of the firm’s business, their corporate governance framework, the investment case for the company alongside its growth prospects.
While management was silent on issues around the planned listing by introduction, they
however, tried to soothe analysts concerns on the regulatory issues the firm has with the
Nigerian Communications Commission (NCC), Central Bank of Nigeria and the Attorney General of the Federal Republic of Nigeria (AGF) whilst also stressing the measures put in place to strengthen corporate governance framework – the establishment of the office of Chief Risk & Compliance /Internal Audit, Executive Corporate Relations and Chief Operating Officer.
The Key takeaways we gathered from the presentation include;
Market Share: The firm has the largest market share (c.38.9%) in terms of subscriber base and contributes c.50% to the total revenue generated in the industry.
Its Dividend Policy: The firm has an attractive dividend policy with a medium-term target of distributing 80% of distributable profit to shareholders subject to board discretion. The dividend payment will, however, take into consideration the firm’s cash projections, business outlook, investment plans, capital market conditions, tax regulations and funding facility covenants. Strong historical profitability ratios; ROE of 85-89%, ROIC of 80%-90% and ROAA of 16%- 17%.
Net Debt to EBITDA: MTN Nigeria has historically maintained moderate leverage; Net Debt to EBITDA of 0.40x. The compelling investment case for the firm is hinged on four strategic pillars viz; Strong position in the right market, Exciting demographic opportunity, Attractive return profile and its strategic positioning in the industry to unlocking long term benefits.
The growth story of the firm will be sustained by continued investment in data and digital
services, leading to improvement in data experience through 4G coverage expansion and
growing digital services adoption particularly in the rural areas.
Regarding the N330bn the firm agreed to pay to NCC, management noted that N275bn has
been paid as of end of Q1 2019, leaving a balance of N55bn that will be paid in Q2 2019.
MTN also noted that it had reached an out of court settlement with the CBN on the
US$8.1bn alleged illegal repatriation of funds. On the pending issue with the AGF over
alleged unpaid duties and taxes between 2007 and 2017, MTN noted that the case has been adjourned to 26 June 2019 for the trial of the substantive case.