Four years ago, Nigeria’s telecommunications market was like an albatross around MTN’s neck as the company had several costly run-ins with the country’s regulators. 

MTN was slapped with an initial fine of $5.2-billion (later reduced to $1.6-billion) in 2016 for failing to disconnect about 5.1 million mobile subscribers as Nigerian authorities were cracking down on unregistered SIM cards in the country that could be used for nefarious purposes such as terrorist activity. 

In 2020, MTN settled a long-standing tax dispute with Nigerian authorities relating to dividend repatriation in breach of foreign exchange rules, agreeing to pay a $53-million fine. Nigerian authorities were accused of unfairly shaking down foreign companies and seeking to extract cash from them because the country’s oil-reliant economy was in the doldrums due to falling oil prices. 

These fines are enough to scare any investor and push them to disinvest from any country. But MTN remained committed to Nigeria and even recently doubled down on its investments in the country’s nascent financial technology (fintech) industry, especially the arena of mobile money.   

This has paid off, judging from the performance of MTN’s Nigeria operations — with every metric of profitability and financial health heading in the right direction.  

MTN Nigeria’s service revenue for the year to 31 December 2021 grew by 22.9% to  ₦1.6-trillion (R60-billion), while profit after tax over the same period grew by 46% to ₦298.7-billion (R11.2-billion). Even shareholders were rewarded with a handsome dividend as MTN increased their payouts by nearly 40% to ₦8.57 per share.

Nigeria is an important market for MTN as it accounts for about a third of the telecommunications group’s annual core profit.  

MTN’s share price on the JSE rose by as much as 10% on Monday after it informed investors about the performance of its Nigerian operations. Its share price closed at a near seven-year high of R192.12, adding R28-billion to its market value of R357.4-billion.  

MTN’s fintech investment  

MTN Nigeria’s service revenue (revenue generated from offering customers services) is still being driven by voice and data services. But the most intriguing part of MTN Nigeria’s results is that its new mobile money business is becoming a serious component of revenue generation.  

In August 2019, MTN launched a mobile money transfer service called MoMo (an acronym for mobile money) in Nigeria, Uganda and Ghana, targeting consumers who don’t have access to formal banking services. MTN Nigeria’s MoMo service has garnered 9.4 million active users since launching in August 2019 and added 4.8 million users during its latest reporting period.  

MTN has a goal of generating about 20% of its group revenue over the medium term from fintech services. It currently generates less than 10% of group revenue from its nascent fintech business.  

MTN Nigeria said the growth and uptake of its MoMo service provide the foundation for the company to offer consumers a full range of fintech services — beyond mobile money transfers to include taking deposits, offering insurance cover, and term loans. MTN wants to use its telecommunications infrastructure to ultimately become a de facto bank.  

To launch a full suite of banking services (including lending to consumers) in Nigeria for example, MTN requires a final licence from the country’s financial regulator. MTN only has a temporary licence and is gunning for a final one, which market watchers said will be a game changer because the company will compete with Vodacom and Safaricom in the rest of Africa. 

Vodacom and Safaricom operate a fintech business called M-Pesa, which has enjoyed immense success in Kenya, Tanzania, Mozambique, Lesotho, Ghana and Democratic Republic of the Congo. Consumers in these markets don’t have much access to formal banking facilities.  

Thumbs up from market watchers  

Karl Gevers of Benguela Global Fund Managers said: “Nigeria has a huge user base and a big portion of its population is unbanked [consumers who don’t have access to formal banking facilities]. There are big opportunities in the fintech space for MTN in Nigeria. That’s why there is some excitement about MTN expanding more services to Nigeria.”  

MTN is realising that services such as voice might be on the decline due to, among other factors, intensified intervention by regulators. This is already happening in Nigeria.

While MTN Nigeria’s money transfer has enjoyed remarkable growth, its mobile subscriber base fell by 10.6%, or eight million, due to regulatory restrictions on new SIM sales and activations. Companies like MTN are required to register and verify users, and regularly update the registration records of every SIM owner in Nigeria.

In December 2020, the Nigerian Communications Commission ordered all mobile network operators in the country to register their customers or risk losing their licences. DM/BM

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