MTN Uganda maintained a positive growth momentum in the first nine months of 2023, on account of solid commercial execution and improved performance of the current macroeconomic environment. Inflation in the period further abated to an average of 3.3% compared to 9.0% in the same period last year supported by a reduction in food and imported inflation. The receding inflationary pressures led to a downward revision of the key lending rate by 50bps to 9.5%. A combination of these macro factors and increased oil-driven foreign direct investment supported stability of the Uganda shilling gaining 2.5% year-on-year.
We invested a total of UGX 289.6 billion in the period in alignment with our strategic goal to build the largest and most valuable business platforms. Following the recent spectrum allocation in July 2023, we were awarded an additional 4G and new 5G spectrum under the 700MHz, 2600MHz, and 2300MHz which we successfully deployed in the third quarter. We are pleased to note that MTN Uganda was the first telco to launch the 5G network
with 37 sites up in Q3. We also increased our 4G population coverage to 83.7% (+6.4pp) with sites all over the country in line with our NTO License
geographical coverage mandate. MTN Uganda received the fastest network speed awards for the three quarters of this year by Ookla attesting to our
infrastructure investment efforts.
To optimise usage of the new spectrum acquired, we accelerated our efforts on smartphone adoption through our improved device financing proposition, mutually beneficial partnerships with phone manufacturers, and new partnerships with local smartphone assemblers to reduce the cost of smartphone acquisition. These consolidated efforts translated to an increase in smartphone penetration to 36.6% (+3.9pp) and driving 27.5% growth in smartphone users.
We continued to invest in our customers through continued product innovation and improved service delivery through the setup of over 360 additional
service points this year to provide a best-in-class customer experience. This in turn improved our customer Net Promoter Score (NPS) and supported
growth in our market leadership position, with customers up by 13.9% to 19.0 million.
Our service revenue increased by 15.2%, driven by a strong performance of both the GSM and fintech business. We contained cost growth, helped by improving macro trends and expense efficiencies, and drove an expansion in EBITDA by 15.6%. This was achieved despite higher network operating costs as a result of the prior CPI-peg in the towerco contracts, with our EBITDA margin held steady at 50.6%.
During the third quarter, we partnered with the government of Uganda creating the inaugural Uganda – South Africa Investment and Trade Summit to strengthen bilateral investment opportunities in key priority areas including ICT, agriculture, agro-processing, mining, tourism, and manufacturing. We are pleased to support Uganda’s economic progress and to showcase the country as a viable investment destination.
In October 2023, we celebrated 25 years of operations in Uganda. We would like to thank all our stakeholders including our customers, our staff, our shareholders, our regulators and the Government of Uganda for creating a viable environment for us to conduct business. We reiterate our unwavering
commitment to you knowing that ‘Together we remain unstoppable’.
As we navigate the final quarter of the year, we remain focused on our Ambition 2025 goal to deliver leading digital solutions, as we transition from a telecommunications company to a technology company to enable us to provide dynamic and meaningful solutions to meet our customers’ needs in a fast-changing world.
Operational Review: Improving macro-supporting revenue growth momentum
Overall service revenue increased by 15.2%, driven by solid commercial execution across all revenue lines.
Voice revenue continued to grow strongly, with double-digit growth of 10.4% supported by increased adoption of our attractive bundle offering and aggressive subscriber growth initiatives. The strong revenue growth was helped by the improving macroeconomic conditions and better weather patterns, which tend to largely impact our customer base in the upcountry markets where we are dominant. Our revamped regional structure strategy has continued to yield positive results with 937k subscribers added to our base in Q3.
Voice contribution to service revenue reduced slightly to 44.7% (9M 22: 45.0%) with increased contributions from higher growth segments, which is in line with our medium-term strategy.
Data revenue maintained its growth momentum at 22.0% supported by incremental improvements in our network quality and data value packages. As a result, our active data users grew by 23.0% to 7.5 million, while our MB per active user increased in tandem by 20%. We sustained our investment in 4G leading to an increase in 4G population coverage to 83.7% (9M 22: 77.4%) and new investments in 5G technology with 37 sites set up in high-usage clusters focused primarily on our home broad band and enterprise proposition. The improved user experience resulted in 51.0% growth in data traffic, with 70.8% carried on 4G (9M 22: 61.2%).
On the mobile data front, efforts to accelerate smartphone adoption continue with penetration at 36.6% (+3.9pp) reinforced by increased uptake of the MTN Kabode flagship product and other smartphone sale partnerships following improvements in pricing and value proposition.
The data contribution to service revenue increased to 23.1% (9M 22: 22.1%).
Fintech revenue grew by 18.1% with notable growth in our basic revenues (P2P and money transfers) with increased acceptance of mobile money. Our fintech subscribers increased by 9.7% to 11.6 million (net additions of 709k in Q3). The improved QoQ customer growth is attributed to customer adoption of our MoMo
Pay platform, with merchants’ growth of 222% to 290k.
The adoption to cashless payments has driven our transaction value (including zero rated transaction) up by 57.7% to UGX 96.5 trillion (9M 22: UGX 65.7 trillion). Our advanced revenues grew steadily with a contribution of 24.6% (9M 22: 22.0%) to overall fintech revenue as we introduced new payment corridors in North America, Europe, and the Middle East to support our remittances portfolio. The fintech contribution to service revenue increased to 28.5% (9M 22: 28.2%).
Digital revenue grew by 130.0% supported by growth in our content value-added services and enterprise digital solutions open API (Application Programming Interface) as customers leverage MTN’s network assets to enrich their products and services.
EBITDA increased by 15.6% underscored by growth in service revenue and a combination of realised efficiencies through cost discipline and subsiding
inflationary pressures. The lower inflationary environment enabled stability in our EBITDA margin at 50.6%, albeit above our medium-term target of 50%.
Capex excluding RoU assets in the period grew by 4.7% to UGX 289.6 billion. In Q3, we intensively invested UGX 87.9 billion (+43.5% QoQ) focusing on 5G, fiber
deployment and network enhancements following new spectrum awarded in July. This heavy investment is in line with our strategic plan to deploy UGX 1 trillion in
the network over a three-year period ending in 2024. With increased revenues, our capex intensity further declined to 14.9%, within our target range.
Depreciation and amortisation grew by 7.4% due to increment in the right-of-use assets as a result of our accelerated capex programme in the year. Our net finance costs increased by 22.1% due to the impact of increased finance leases. The net debt to EBITDA (annualised) excluding leases was 1.0 times, signalling a stable financial position.
Profit after tax increased by 21.1% to UGX 354.4 billion, and as per our dividend policy, the board approved a second interim dividend of UGX 6.0 per share up from the UGX 5.4 that was declared the previous year.
OUTLOOK
According to the central bank, the economy has demonstrated resilience despite the challenging global environment with the growth estimate for the FY2022/23 at 5.3%, higher than 4.6% percent observed in FY2021/22. Stronger growth is projected this fiscal year supported by increased investments in the oil sector and recovery in consumption as purchasing power increases due to eased inflationary pressures. This is expected to auger well for our growth prospects as we progress with our Ambition 2025 strategy.
As we close the year, our focus remains on maintaining the growth momentum of our overall portfolio with attention to our new growth segments of home broadband, enterprise and digital. For our GSM business, our rigorous customer acquisition strategy and CVM initiatives around our voice propositions will be key to ensuring that we finish strong. On the data front, our focus is on optimising our 4G and 5G network with increased home and business activations and smartphone penetration to harness the wide investment in infrastructure and spectrum opportunity.
In fintech, we are consolidating our advanced revenue proposition, particularly in our banktech and insurtech portfolios through our numerous banking
partnerships and the Ayo partnership with Sanlam. Financial and digital inclusion remains very low in our country presenting massive opportunities to reach the
unbanked and uninsured population.
We remain guided by our value-based capital allocation strategy as we invest in our connectivity and platform businesses. We also continue to augment our capital
structure to ensure our balance sheet strength. Our funding and liquidity remain well-managed, supported by our cash flows and approved UGX-denominated
facilities to meet our financial obligations. We maintain our guidance of low double-digit service revenue growth, stable EBITDA margins above 50% and CapEx (IAS 17) intensity to remain in our target range of midteens per cent.