Uganda’s telecommunication giant, MTN Uganda Limited has announced its financial results for the six months ended 30 June 2022.
The outgoing Chief Executive Officer (CEO), Wim Vanhelleputte says that despite the currency pressures on the economy characterised by increased inflationary, the company has been able to deliver a resilient half-year performance.
He says that the current higher fuel prices, rising domestic food crop prices due to dry weather conditions across the country, as well as persistent global production and supply chain challenges, have a significant impact on the spending power of their customers.
“Against this backdrop, we have sustained investment in our business with capex of UGX 201.7 billion in H1, which underpinned the resilience and quality of the network serving our customers. During the period, MTN Uganda was recognised as the Best Performing Data & Voice Network in Uganda, having attained the highest Network Performance Score for the past two consecutive years.”
MTN Uganda was also recognised as the Most Admired Brand in Uganda by Brand Africa 100 for the second year in a row. Brand Africa believes that developing successful brands in Africa will create jobs, fund Africa’s development and position Africa as an entrepreneurial, independent, and competitive continent.
Wim says that their investment, leading brand and continued execution of their commercial strategy has enabled the company to increase subscriber base by 8.9% to 16.3 million, and maintaining market leadership.
“Our active data subscriber base grew by 21.8% to 5.7 million enabled by the improved quality of network and data service to our customers. The growth in our data users and traffic was also boosted by increased 4G coverage, which reached 67.7% (up 15.4pp. YoY) population coverage as of 30 June 2022.”
In the half-year financial statement, he said that within their platforms, they grew fintech subscribers by 14.1% to 9.8 million.
“In line with our strategic priority to also accelerate advanced services in fintech, MTN Uganda has partnered with Jumo to offer micro loans on mobile money through our MoSente product. MoSente is a convenient service that enables MTN customers to access credit facilities.”
“The partnership will allow for more short-term borrowing options for customers in addition to our MoKash product (savings and lending) and MoMo Advance product (overdraft facility), both in partnership with NCBA bank,” he added.
He says the company’s solid commercial and strategic execution has enabled it to achieve double-digit service revenue growth of 10.0% in a difficult operating environment. “This is in line with our medium-term target, largely anchored on the strong performances of our data and mobile money revenue segments.”
He, however, says that they reported EBITDA of Ush 548.7 billion (up 7.2% YoY) with a 1.3pp decline in EBITDA margin to 50.2%, attributing it to increased operational costs, including additional costs related to separation of the mobile money subsidiary to operate as a fully independent company in line with the company’s ambition 2025 strategy.
In alignment with their goal to create shared value, Wim noted that they resumed 21 days of Y’ello Care campaign under the theme “Empowering communities to drive economic recovery” where the staff had the opportunity to upskill local communities focusing on digital skills training and digital job creation across the country.
“Amidst the operating challenges, we commit to executing our strategy to sustain service revenue growth in the low double-digits, as well as extract efficiencies to drive operating leverage and to support solid earnings, cash flows and returns profile over the medium term.”
Resilient results in a challenging trading environment
The report shows that service revenue recorded a resilient performance with a 10.0% increment underpinned by strong growth in our data and fintech revenue segments. “Our top line performance was further supported by an improvement in customer experience evidenced by the increase in our customer Net Promoter Score (+2.6pp) on a year-on-year basis.”
Voice revenue declined by 4.9% as a result of reduced spend by the subscribers, particularly rural client base, reflecting the macroeconomic pressures on customer’s spending power. Voice revenue growth was also impacted by the substitution effect of consumers’ structurally higher demand for data services.
Data revenue increased by 36.8%, supported by a 21.8% growth in active data users. The company has made significant progress in fibre to the home and business propositions and restructured our internet bundles to drive competitiveness. “Our home broadband revenues have doubled on a YoY basis and our reach has increased to approximately 66,500 users. The data contribution to service revenue increased to 21.9% (H1 2021: 17.6%).”
Fintech revenue grew by 20.5% as mobile money active subscribers increased by 14.1%. The company recorded an improved performance in advanced revenues attributed to strong growth of corporate payment services and remittances portfolios.
“Our total transaction value (excluding zero rated transactions) increased by 33.9% on a YoY basis to Ush 34.6 trillion. We also note an increase in our agents to 171k (+17.8%) and merchants to 82k (+132.7%), which have played an important role in the growth and scale of our fintech business. The fintech contribution to service revenue increased to 27.8% (H1 2021: 25.4%),” said the company.
Digital revenue increased by 9.9% driven by positive performance from the gaming services and more than two-fold growth in video streaming services (YoTV).
I&M Select Banking Sapphire Club wins “Best Innovation of the Year” at UMEAS 2025EBITDA was affected by a 13.2% growth in expenses largely attributed to network related leases (higher fuel prices accounted for Ush 7.4bn) as well as set-up costs related to the structural separation mobile money subsidiary and other once-off costs totalling Ush 7.7 billion. Nevertheless, EBITDA grew by 7.2% YoY and realised an EBITDA margin of 50.29%.
The company further reports its half-year performance as follows;
Our CAPEX investments have been deployed towards infrastructure modernisation to enhance efficiencies and align with our ESG goals on environmental sustainability. With the sustained increase in the demand for data, we increased our 4G sites by 55% to improve the quality of service, which has supported our customer growth. We have also increased our fibre footprint in strategic locations by 540km this year in alignment with our goal to “Own the Home” through differentiated value propositions, creating experiences at position MTN as the broadband service provider of choice.
The CAPEX growth of 30.7% YoY to Ush 201.7 billion is attributed to accelerated CAPEX in response to forex and global supply chain risks. It is also partially attributable to the base effects of a lower investment made the previous year. The increased investment impacted on our free cash flow, which declined by 3.0% YoY in H1. We expect free cash flow to improve into the second half of the year as capex abates. Accordingly, we anticipate that our capex intensity, which increased by 2.9pp to 18.4% in H1, to be lower by the end of FY 22.
Depreciation and amortisation decreased by 14.7% as the previous year position included a once-off amortisation adjustment relating to the transitional licence obligations (Ush 48 billion)
As a result, Profit After Tax increased by 48.1% YoY to Ush 193.6 billion, and in line with our dividend policy, the board has approved an interim dividend of Ush 5.0 per share to be paid at the end of September 2022
Outlook
MTN Uganda is not immune to the current macro environment and continues to face strong headwinds related to forex, increasing inflation, financing costs, diesel/petrol prices and the impact of global supply chain disruptions, these will obviously have more pressure on both our business and customers.
The spill over effects of the Russian-Ukrainian war and “zero COVID” policy in China have caused global supply chain disruptions. We remain committed to addressing these challenges through advance procurement and long-term planning for orders of devices and other equipment to mitigate against potential shortages and future price increases.
Engagements with the regulator are ongoing to secure more spectrum in the 700/800 MHz bands, which will enable more efficient investment to improve the coverage, capacity and quality of our network. The modernisation of our infrastructure should improve our service delivery to enhance our customer experience. Our commitment to meeting our customers’ needs remains, and we will continue to invest in our 4G network investment to drive increased population coverage as well as data connectivity and voice traffic. On our current planning and assumptions, we anticipate closing the FY 22 with a capex intensity closer to the mid-teens.
Under fintech, we continue to focus on driving financial inclusion in Uganda through growth in the active user base as well as engagement and activity. To support this, one of the key engagements with the regulators and other key stakeholders is the current 0.5% withdrawal tax which continues to adversely impact activity in the ecosystem, especially among our large-volume customers. Our work with fintech industry stakeholders, including comprehensive information and fraud awareness campaigns, will ensure that Financial inclusion in the country grows in a way that preserves the integrity and trust of the industry.
We are committed to the continued execution of our Ambition 2025 strategy to drive sustained growth, underpinned by investment in our network and platforms. We maintain our target to grow service revenue in the low double-digits over the medium-term.
Interim dividend recommendation
Notice is hereby given that the company’s directors have approved the payment of an interim dividend of Ush 5.0 per share (Ush 111.95 billion) for the six months ended 30 June 2022. This is subject to deduction of withholding taxes. The number of ordinary shares in issue at the date of this declaration is 22,389,044,239.
In compliance with the requirements of USE Listing Rules 2021, the salient dates relating to the payment of the dividend are as follows:
Book Closure Date Dividend Payment Date
Thursday, 1 September 2022 Friday, 30 September 2022
In line with the Uganda Securities Exchange (USE) Trading Rules 2021, the ex-dividend date will be Monday, 29 August 2022. Accordingly, an investor who buys MTN Uganda shares before this date will be entitled to the interim dividend. Any investor buying MTN Uganda shares after Monday, 29 August 2022 will not be entitled to the interim dividend declared for the period.
On Friday, 30 September 2022 the dividend will be transferred electronically to the bank accounts or mobile money wallets of shareholders.
