MTN Nigeria says in the short term, it expects its margins to be impacted by the Nigerian Communications Commission (NCC’s) directive on NIN-SIM linkage, higher energy-related costs and investment required to launch MoMo Payment Service Bank. However, it has plans in place to mitigate the situation.

This is according to the operator’s unaudited results for the quarter ended 31 March 2022, released this week.

The company confirmed that mobile subscribers declined by 1.3 million to 70.2 million YoY, impacted by the regulatory restrictions on new SIM sales and activations.

MTN Nigeria CEO, Karl Toriola, said, “On the regulatory front, on 4 April 2022, the Nigerian Communications Commission (NCC) announced its decision not to extend the deadline for NINSIM linkage further, requiring all operators to restrict outgoing calls for subscribers whose SIMs were not associated with National Identity Numbers (NINs). We have complied with this directive and continue to support the Government’s efforts in their NIN enrolment process. As at 25 April 2022, approximately 60 million subscribers have submitted their NINs, representing about 85% of our subscriber base.”

Toriola added that although the company’s mobile subscriber base declined by 1.9% YoY from 71.5 million in March 2021 to 70.2 million, “we sustained the growth trajectory from Q4 2021 as we ramp up capacity for SIM registration and NIN enrolment. As a result, we added 1.7 million subscribers in Q1 2022. In addition, active data subscribers rose by 10.5% YoY to 35.9 million, with 1.6 million added in Q1 as we continued to drive data conversion from our new and existing subscriber base.”

He said, “In terms of how general traffic trends have evolved since the implementation of the directive, we have seen a drop off in traffic following our compliance with the directive. However, we have started to see a gradual recovery as the affected subscribers are reconnected to resume voice calls. Data revenue has continued a steady increase but has currently not fully compensated for the decline in voice revenue of restricted subscribers. Encouragingly, we have seen an acceleration in new connections.”

In presenting the results, the CEO acknowledged the effect of “geographic volatility” – specifically the war in Ukraine – on energy prices, broader inflation supply chains and consumer spending.

“We, therefore, anticipate that EBITDA margins for the full year will be slightly below our medium-term target range of 53% -55%, on current operating and economic assumptions. We have put in place interventions to moderate the impact of the NIN-SIM linkage regulation on both revenue and the subscriber base. This still has dependency on NIMC validation capacity. While limited incremental costs will be incurred to support NIMC’s NIN enrolment capacity, we expect muted impact on the 2022 outlook for top line,” Toriola continued.

MTN Nigeria continues to leverage growth in key revenue streams, including data, voice, Fintech and digital.

Voice revenue grew by 5.8%, data by 54.0%, Fintech by 46.5% and digital by 35.3%.

“… we were granted final approval for our MoMo Payment Service Bank (PSB) by the Central Bank of Nigeria (CBN). This will enable us to offer financial services in line with the CBN’s guidelines and support the government in fulfilling its agenda of driving financial inclusion in Nigeria … Our existing MoMo business provides a solid foundation for launching MoMo PSB and driving digital and financial inclusion in Nigeria. As at the end of March 2022, we had approximately 10.7 million active users and 166k active MoMo agents,” said Toriola.

“Having obtained the final approval for our MoMo PSB, which we expect to launch the business in Q2, we will leverage our agent network to accelerate the rollout of advanced services in our mission to drive digital and financial inclusion.”

Going forward the operator plans to commence the initial rollout of 5G services in six geopolitical zones once regulatory clearance is secured.

Toriola added, “In terms of strategic milestones, we concluded the first phase of a series of transactions to increase Nigerian ownership in MTN Nigeria, and we are delighted to have welcomed 126,720 retail investors to our shareholder base, many of whom are first-time investors. This includes Nigerian pension funds representing approximately 6.5 million Nigerian contributors. As at 31 March 2022, the number of retail shareholders had increased to approximately 139,000, demonstrating the advances in MTN’s localisation imperative. We also completed a group-wide brand refresh to position the business appropriately as we accelerate our growth and scale our platforms through our Ambition 2025 strategy.”

“In addition, we have fully paid for one lot of 100MHz in the 3.5GHz spectrum band and have been assigned the 3500 – 3600 MHz frequencies for 10 years. We will launch our 5G services once regulatory approval is obtained. We anticipate an increase in churn across the sector in Q3 as the industry potentially loses affected subscribers who may stop activity after initial restriction. We believe that mitigating actions will recover the base in line with our broad expectations for FY 2022. While the impact on short-term service revenue growth remains uncertain at this stage, we maintain our medium-term service revenue growth guidance of “at least 20%”.