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MTN eyes Q2 to spin off lucrative Fintech business

By , Africa editor
Africa , South Africa , 09 Mar 2022
MTN Group president and chief executive officer Ralph Mupita.
MTN Group president and chief executive officer Ralph Mupita.

MTN Group has set the second quarter of 2022 financial year as the deadline to spin off its lucrative Fintech business, while the fibre unit will be unbundled a few months later.

Ralph Mupita, MTN Group CEO, who is leading the telco’s audacious plan to create a Fintech operating company, revealed the details today, saying the work to separate the two is progressing.

Mupita initially outlined MTN’s strategy in June last year, saying the structural separation of Fintech and fibre units was key to the group’s Ambitious 2025 plan.

“We are already a big business and what we are observing is that these businesses have their own unique financial and operational risk profiles to a traditional telco. So we are saying we need these businesses strategically to be much more focused. We will be leveraging the assets and capabilities of the traditional telco business and providing an ability to accelerate and grow,” he said at the time.

Fast forward to today, Mupita provided guidance on the matter, as MTN Group released details of its financial performance for 2021.

“The work to structurally separate the Fintech business is progressing well and now aimed for completion by the end of Q2 2022. We were pleased to have secured the approval in principle for a Payment Services Banking licence in Nigeria in November 2021. The structural separation of the fibre business is also underway and is targeted to be completed in 2023.”

Accelerating data, Fintech services

Turning to the group’s performance in the year, which was anchored by accelerating data and Fintech services, Mupita says MTN Group reported strong financial, operational and sustainability results in 2021 in a tough macro environment.

These, he says, were delivered through strong strategic execution and sustained commercial momentum across 19 markets.

Mupita explains: “We adapted to the extraordinary circumstances brought about by the COVID-19 pandemic and started shaping the MTN of the future through the execution of Ambition 2025. The performance was underpinned by pleasing growth in our larger operating companies, operating leverage and the benefits of our expense efficiency programme.”

For the year, in constant-currency terms, the group’s service revenue grew by 18.3% to R171.8 billion; earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 23.7% to R80.8 billion; and the EBITDA margin expanded by 2.2 percentage points to 44.5%.

The MTN board declared a final dividend of 300 cents per share.

Also, headline earnings per share adjusted for non-operational items increased by 26.6%; return on equity expanded by 2.6 percentage points to 19.6%; and organic operating cashflow accelerated by 35.2% to R38.3 billion.

Detailing the performance MTN’s new cash cow, Fintech, Mupita says revenue from the unit rose by 30.9% in the year.

The number of active Mobile Money (MoMo) users also increased by 10.4 million to 56.8 million compared to December 2020, generating a monthly average revenue per user of $1.3 (R19).

The value of MoMo transactions was up by 56.8% to $239.4 billion and 10 billion transactions were processed, up 41.1% year-on-year (YoY).

In Nigeria, MTN’s most rewarding market, Mupita says: “We added 374 000 agents to end the year with approximately 770 000 registered MoMo agents. We were pleased to secure an approval in principle for a Payment Services Banking licence in Nigeria.

“We progressed efforts to scale the payments platform. The number of active merchants accepting MoMo payments was up 78.3% YoY at 785 147 and the total value of MoMo merchant payments (gross merchandise value) expanded by 66.5% to $13.3 billion. The total value of remittances grew by 56.3% to $2.3 billion at 31 December 2021.”

In banktech space, Mupita notes that MTN facilitated a total loan value of $1.1 billion, a 47.4% YoY increase.

“Within insurtech, our aYo insurance business had more than 16.1 million registered policyholders and 6.3 million active policies (up 5.6% YoY). In total, Ayo generated $8 million (R128.1 million) in service revenue and $12.5million (R198 million) in premium income.”

Digital revenue boom

Turning to other key metrics in the period, MTN’s digital revenue increased by 22.8%, supported by the greater uptake of its Ayoba service, the instant messaging super app, which reached 11.6 million monthly active users’ milestone as at 31 December 2021.

MTN Group Enterprise revenue increased by 13.4%, supported by growth in MTN SA, which delivered growth of 16.8%, benefiting from increased data usage through work-from-home solutions.

Additionally, Mupita says, the group’s focus on connectivity operations produced solid voice and data revenue growth.

In the year, voice revenue increased by 5.2%, which, he says, was enabled by a 3.3% growth in voice traffic.

“Well-executed customer value management initiatives and segmented customer propositions continued to support voice growth,” says Mupita.

MTN Group data revenue also expanded by 36.5% in the period, on the back of a 53.3% increase in data usage (to 6.4GB per user per month).

According to Mupita: “Although initially triggered by the effects of the pandemic, the higher demand for online work, education, social interaction and entertainment were sustained in 2021. As at 31 December 2021, we had 122 million active data users, up 11.1 million.”

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