MTN Uganda’s Profits Spike On Increased Subscribers

MTN Uganda announced its FY22 results reporting a 19.3% y-o-y growth in after-tax profits to UGX 406.1 BN. The performance was supported by an 11.1% y-o-y growth in service revenues to UGX 2.3 TN fueled by continued strong growth in the data and fintech segments.

The group’s overall mobile subscriber base increased by 9.3% y-o-y to 17.2 MN. EPS rose by 19.3% y-o-y to UGX 18.14 (FY21: UGX 15.20). The group’s directors have approved the payment of a final dividend of UGX 5.50 per share, which brings the total DPS to UGX 15.90 (FY21: UGX 14.99).

Book closure date: Thursday, 1st June 2023

Dividend payment date: Thursday, 22nd June 2023

Ex-dividend date: Monday, 19th June 2023

Data revenue rose by 24.0% y-o-y to UGX 511.3 BN underpinned by a 26.6% y-o-y rise in active data subscribers to 6.7 MN and an 11.8% y-o-y growth in data usage.

The growth in active data subscribers was spurred by a revamped device financing program which resulted in the addition of 1.2 MN smartphones, further increasing the group’s smartphone penetration to 35.0% (FY21: 30.8%).

The group’s 4G population coverage rose to 79.9% from 62.7% in FY21. The contribution of data revenue to service revenue rose to 22.6% from 20.2% in FY21.

Fintech revenue advanced by 24.9% y-o-y to UGX 656.1 BN, supported by a 10.6% y-o-y rise in active fintech subscribers to 11.0 MN.

According to the group, the growth in fintech revenue was also attributable to the doubling of the advanced revenue portfolio with key growths being realized across the payments, bank interface, and remittance lines.

Fintech revenues were also buoyed by an improvement in total transaction values (+39.8% y-o-y to UGX 92.3 TN) and transaction volumes (+27.8% y-o-y to 2.6 BN). The fintech contribution to service revenue rose to 29.0% from 25.7% in FY21.

Voice revenues declined marginally by 0.5% y-o-y to UGX 1.0 TN owing to persistent macroeconomic pressures which continued to affect customers’ spending power. However, voice revenues were up by 4.3% y-o-y in 2H22 helping to offset the 4.9% y-o-y decline witnessed in 1H22.

The improvement in voice revenues in 2H22 was attributable to improved network quality, a 9.3% y-o-y increase in overall subscribers, and price optimization strategies. The contribution of voice revenue to service revenue continued to decline further, easing to 44.2% from 49.3% in FY21.

Total expenses increased by 10.5% y-o-y to UGX 1.1 TN but owing to the stronger growth registered in total revenues (+11.0% y-o-y to KES 2.3 TN) the group’s EBITDA rose by 11.5% y-o-y to UGX 1.2 TN resulting in an EBITDA margin of 51.6% (FY21: 51.3%).

Depreciation and amortization costs declined by 3.4% y-o-y to UGX 407.1 BN (the previous year included a one-off amortization relating to the transitional license which was not present in FY22). Net finance costs increased by 24.7% y-o-y to KES 181.2 BN due to higher finance leases, depreciation of the Ugandan Shilling, and the effect of higher interest rates on debt obligations.

Owing to the accelerated site roll-out program (in response to forex and global supply chain risks), the group’s CAPEX grew by 22.5% y-o-y to UGX 331.0 BN. The CAPEX intensity stood at 14.5% (FY21: 13.2%).

Outlook: The group plans to continue investing in the network in order to support the demand for data services while also improving its partnerships with several mobile device companies to ramp up smartphone usage. In the fintech segment, the group plans to launch new products specifically targeted at improving growth in advanced services revenue. MTN Uganda is also engaging the Uganda Communications Commission in order to secure more spectrum allocation in the 700/800 MHz and 2,600 MHz bands. CAPEX intensity is expected to remain within the mid-teens.

MTN Uganda currently trading at a P/E multiple of 9.6x and a P/B multiple of 4.3x. Its ROE stands at 44.9% while its ROA stands at 10.2%.

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