MTN Nigeria’s growth engine stalled in the second quarter, a reality that weighed heavily on the company’s share price in Johannesburg. After releasing its half-year results, MTN Group’s stock crashed more than 7% in morning trade, as investors focused on the deceleration rather than the headline profit figures. The results present two very different pictures: one of a triumphant financial recovery and another of a slowing business.
A slowdown in the second quarter
Service revenue climbed 25.9% for the half-year, hitting ₦3-trillion. Almost all of the momentum belongs to the first three months of the period. Revenue grew by 41.8% in the first quarter before slowing to 13.2% in the second. Data growth more than halved, dropping from 56.2% to 24.9%, while voice revenue managed only a 3.1% increase in the quarter.
The slowdown is partly expected. A 50% tariff increase was approved by the Nigerian Communications Commission in January, and MTN began passing it on in February. The 25.9% growth figure is measured against a pre-increase base, but the 13.2% growth in the second quarter is measured against a post-increase base. MTN’s medium-term guidance targets at least low-20% growth, which this latest figure falls short of.
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Fintech setbacks and legal rulings
The fintech division faced a severe hit during the suspension of its XtraTime product. In April, the Federal Competition and Consumer Protection Commission required airtime credit to be regulated, forcing MTN to shut down the service. Fintech revenue plummeted 72.4% in the quarter, falling from ₦47.1-billion to ₦13-billion. The removal of this product caused expected credit losses on trade receivables to jump from ₦2.98-billion to ₦15.97-billion, with another ₦3.2-billion written off.
Mobile money did well, with revenue up around 132%, but it could not make up for the hole left by XtraTime. Operations resumed in July after Optasia, a South African firm, restarted the platform. However, the regulatory environment is still contentious. A federal high court in Lagos upheld the regulator’s rules nine days before the results were released, though it ruled the commission has no power to license operators. An appeal was filed within 24 hours.
The financial turnaround is quite impressive, but the operational headwinds are noticeable. While the balance sheet has healed from a state of insolvency to a positive equity position of ₦930.6-billion, the core business is now growing at only 13%.
