MTN has removed the shine from a strong set of annual results by suspending its final dividend payment – after also withholding an interim dividend. While Covid-19 uncertainty played a part in its decision, it has also battled to repatriate (upstream) dividends from Nigeria, its biggest operation, and is still waiting for the proceeds from businesses it has sold as part of its ambitious plan to raise R25-billion over the next few years. 

The network operator, which operates in 21 countries across Africa and the Middle East, is intent on reducing debt at a holding company level, which fell to R43.3-billion last year, assisted by the proceeds of a number of asset sales. However, the pandemic held up some transactions, including the listing of IHS, the wireless tower operator in which it holds a 29% stake. 

Rather than appeasing shareholders with a payout now, it has committed to a dividend of at least 260c for its 2021 financial year, with the possibility of a special dividend or share buybacks if things turn out better than expected. 

“The board has decided to suspend the dividends in light of some uncertainties that we face, particularly around cash upstreaming, but, more importantly, our desire to deleverage the balance sheet faster,” CEO Ralph Mupita said in a presentation to investors. 

“If some of the uncertainties play out more positively, it will consider returning any excess cash either through special dividends or share buybacks, whichever is more value accretive for shareholders.” 

Despite Mupita’s assurances, Stephán Engelbrecht, fund manager at Anchor Capital, said the market would be disappointed in the decision not to pay a dividend and the lack of any progress in the sale of some non-core assets. 

“The market is eagerly awaiting some of these deals to realise as it can unlock significant value in the business and reduce the debt burden of the business. The listing and sale of MTN’s stake in IHS, in particular, is keenly awaited by the market,” Engelbrecht told Business Maverick. 

“The repatriation of operating cash from Nigeria has been an issue and concern for some time and although the market may be disappointed that nothing has been resolved on this front, we do not believe that market participants will be surprised by this. 

“On our valuation, the market is currently not placing any value on Nigeria so if or when MTN can start to repatriate money from Nigeria this can unlock significant value.”

Dividends aside, MTN had a cracking year, with a significantly stronger second half, particularly in South Africa. 

Despite challenging trading conditions, Mupita said the group added 28.8 million more subscribers last year, taking its total subscriber base to almost 280 million. It added 19 million active data users and 11.7 million MoMo (mobile money) users, while the number of active merchants accepting its MoMo propositions more than doubled to 440,000. 

Group service revenue increased by 20% over the 12 months to end-December and was 12% higher at R170-billion in constant currency terms. Voice revenue rose by 4.8% despite voice traffic coming under pressure, particularly during the height of the Covid-19 lockdown. However, that had the opposite effect on data revenue, which expanded by 31% as traffic more than doubled due to higher levels of online demand as more consumers worked and studied from home. By the end of December, MTN had 114.31 million active data users after adding 19-million more over the course of the year. It grew fintech revenue by 24% due to the increase in MoMo users and its move into insurance through the aYo joint venture. 

For the year, earnings before interest, tax-depreciation, and amortisation (ebitda) grew by 22%, before adjusting for once-off items. Earnings per share increased by 87% to 946c and headline earnings per share (Heps) jumped 60% to 749c. Non-operational impacts stripped 128c from Heps. 

“The results were operationally sound with most operating metrics moving in the right direction,” Engelbrecht said. 

“The decision not to pay a dividend did have the effect of reducing the net debt to Ebitda significantly and in the longer term this will de-risk the company materially. The company also set out a new and more conservative dividend policy. Although it may look disappointing at first glance, we believe that this policy will be more sustainable.” 

With the group exiting its operations in the Middle East to focus on its pan-Africa strategy, it said it completed a comprehensive strategy review in the final quarter of last year and had set a new “Ambition 2025” strategy, under which it planned to structurally separate its infrastructure assets and platforms, such as fintech, to reveal value and attract third-party capital and partnerships into these businesses, over the medium term.

“Going forward, we believe that our revised strategy, Ambition 2025, will position the business to capture the exciting opportunities across our markets, and our medium-term guidance has been enhanced to reflect this accelerating growth outlook,” Mupita said. 

In support of this, it plans to invest about R29.1-billion in its network, fintech and digital services platforms this year. 

“We are not willing to place any real value on the fintech investments,” said Engelbrecht. 

“We will have a wait-and-see approach on whether these initiatives will generate economic profits in the future.” DM/BM