MTN’s ‘new normal’ propels GSE’s growth

With COVID 19 restructuring the functioning of the Ghanaian economy, it was to be expected that MTN Ghana would innovate to improve customer experience and operational efficiency.

This was evident in the company’s fiscal 2021 financial performance results in the form of stronger assets and even better asset utilization.

MTN Ghana’s status as a family brand stems not just from its size compared to the rest of Ghanaian businesses, but more importantly from its ability to do new things, do old things in new ways, and make the two way much smarter than other companies. To do.

The National Communications Authority’s Significant Market Player (SMP) classification suggests that MTN’s greatest advantage in the market is its price competitiveness resulting from its dominance in market share, which its critics describe like predatory pricing while its admirers call it economies of scale.

GSE market volume

A critical analysis of the figures released by MTN in 2021 shows that the telecommunications company has had to deal with a slowdown in customer growth.

Ultimately, by increasing the use of its products and services on average by its customers, MTN was able to grow its gross revenue much faster than its customer base grew; and by boosting its already vaunted operational efficiency, its net income grew even faster, much to the delight of its shareholders, who include more retail investors than any other company in Ghana.

In fact, MTN added an additional million subscribers in 2021 to reach a total of 25.4 million by the end of the year. That was less than a quarter of the 4.6 million new subscribers it added in 2020.

However, the company still managed to increase its service revenue (which excludes SIM card sales and the sale of equipment such as telephone handsets) by 28.5% to GH¢7.7 billion.

Equally instructive, its Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) margin increased by 2.3% to 55%, signifying a larger gross profit margin than before, while net profits also rose sharply by 43.5% to reach GH¢2 billion.

Slowing subscriber numbers

Most of the slowdown in subscriber growth had been widely anticipated, particularly for the well-mature voice telephony market, which was also accompanied by slower revenue growth, from 8.1% in 2020 to 4.9% in 2021.

Nevertheless, voice telephony contributed GH¢2.6 billion to total revenue last year, driven by a slight increase in subscriber numbers, product improvements and innovations around customer value management.

There were also surprises. Growth in data subscribers has been a key driver of MTN’s growth alongside Mobile Money but in 2021, the net increase in the number of data customers was only 1.6 million, well below the 2.6 million net additions of customers in 2020, bringing the total number to 12.4 million active data [i] users.

Data revenue

Data revenue in 2021 nevertheless grew more than twice the pace of the previous year to reach 56.3%, compared to 21.3% in 2020, thus increasing data revenue from GH¢1,772 million to 2,769 million GH¢.

This was made possible by a combination of business interventions, network improvements, changes in consumer usage behavior, and an increase in smartphones on the network.

Indeed, the number of smartphones increased by 11.5% to 11.7 million, but more importantly, usage increased by 54.9% to 813,827 terabytes.

Here, growth has been split between businesses and individuals. MTN saw 31% growth in business revenue in 2021 as entrepreneurs and the business class turn to digitalization, a trend that has spread to SMEs.

It is instructive to note that last year, 10,000 new home connections were established on the MTN network using fiber to the home (FTTH), and the total number of Turbonet connected devices increased to 129,000, which which accounts for 53% of all connected devices in the home.

The slowdown in MoMo user growth has been even more marked, with just 400,000 net customer additions in 2021, compared to 1.5 million net additions the previous year, but just as with data, MTN has experienced faster revenue growth thanks to a slower customer. growth.

In 2021, MoMo’s revenue grew by 38.2%, much faster than the 32.2% growth achieved in 2020, allowing MoMo’s revenue to grow from GH¢1,268 million to GH¢1,734 million ¢.

Again, the growth in the use of advanced MoMo services allowed revenues to grow faster than the number of customers.

In 2021, MTN saw 56.3% growth in person-to-person transactions and advanced services.

This was further reflected in the growth of MoMo agents from 39,000 to 244,000 and an increase of 51,000 merchants to 223,000.

In total, in 2021, total revenue was GH¢7,723 million, up 28% from 2020 total revenue of GH¢6,033 million.

Profit before tax

Importantly, pre-tax profit grew almost twice as fast, by 44.4% to reach GH¢2,849 million compared to GH¢1,973 million the previous year, thanks to a 33.7% increase in l ‘EBIDTA at GH¢4,249 million.

The company’s financing position also improved, allowing net financing costs to fall by 18.3% to GH¢365 million.

Even more instructive, the 2021 performance suggests that a “new normal” has been reached by MTN in terms of its financial performance; the arrival of COVID 19 in 2020 dramatically accelerated the process of digitalization in Ghana, but has left industry analysts and investors uncertain about the sustainability of the resulting surge in revenues, which MTN and its major competitors have claimed. benefited that year.

The 2021 performance confirmed that while customer growth may not be sustained as the pandemic recedes, the clever design and deployment of MTN’s products and services are driving customers to use them with ever-increasing intensity.

Along with this, major improvements in operational and financial efficiencies have allowed net income to grow almost twice as fast as gross income.
Of course, it was very expensive In 2021 alone, MTN spent GH¢1,216 million in CAPEX for network expansion and upgrade, 15.7% more than the GH¢858 million in CAPEX spent in 2020.

Increases in EBIDTA and net profit margins prove it’s money well spent. Indeed, MTN shareholders do not need to be scholars to realize this.

For 2021, they enjoyed a 43.8% increase in both earnings per share and dividends per share to 16.3 pesewas and 11.5 pesewas respectively, a situation made even better for them by the generous target MTN’s 60% dividend payout ratio, which it still manages to regularly exceed.

Ultimately, the largest initial public offering ever on the Ghana Stock Exchange in 2018 also turns out to be the best.

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