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Y'hello Nigeria - MTNN to list on NSE

Y’hello Nigeria – MTNN to list on NSE                                                                  

After series of discussions, MTN is cementing plans to list its Nigerian Business (“MTNN”), which is estimated to be worth about $6 billion, on the Nigerian Stock Exchange by H2’18. The company has obtained shareholder approval for the listing and is in the process of seeking regulatory approvals. We believe listing of the largest telecommunications company in Nigeria on the domestic bourse is a game changer for the equity market and as such, assess preliminary details surrounding the issue.                   

A promise fulfilled; MTNN to raise capital via IPO in 2018                                                                           

In 2015, MTNN was levied an unprecedented fine of ₦1.04 trillion (an equivalent $5.2 billion as at the date of fine) by the NCC for non-compliance with a deadline to disconnect all non-registered sim cards in the country – 5.2 million unregistered SIM cards billed at ₦200,000 per subscriber. Following series of negotiations between MTNN and the Federal Government of Nigeria, a final resolution was reached wherein the fine was reduced to ₦330 billion (to be paid off over seven installments). Part of the settlement included a plan for MTNN to list its shares on the Nigerian Stock Exchange as soon as it became commercially and legally feasible. However, given weak investor sentiment in the equity market since 2015, (NSE broad index down 17% and 6% in 2015 and 2016 respectively), MTNN stalled the listing agreement in hopes of more “suitable market conditions”. Thus, given improving macroeconomic environment which has helped rejuvenate investor confidence in the Nigerian equity market, and spurred a 42% rise in the NSE All-Share Index in 2017, the Telco giant is in the market and ready to list its shares by H2’18.                                                                              

FY’17 Result shows stronger momentum as Data revenue leaps                                                                              

MTN Group recently released financial results for the year ended 31 December 2017 which showed an 11.6% y/y revenue growth in its Nigerian business to ₦885 billion (excluding the impact of currency volatility) – now contributing 27% of the Group’s Total revenue (FY’16: 32%). Costs (operating expenses and cost of sales) over the year however rose at a faster pace than revenue – up 27% y/y – with the strongest rise recorded in network costs - up 65% y/y. Overall, FY’17 EBITDA declined 7% y/y to ₦346 billion. Though MTN Group did not report FY’17 bottom line figure for its Nigerian subsidiary, we estimate a single digit y/y PAT decline in the period; noting the weak run rate already recorded as at H1’17 (PAT down 28% y/y as at H1’17).                                                                    

MTN Nigeria (MTNN) is a subsidiary of MTN Group South Africa (Africa’s biggest mobile phone operator) and the largest contributor to the group earnings – accounting for about 33% of its revenue (5-year average). According to the Nigerian Communications Commission (NCC), the telecommunications giant has a customer base of over 52 million subscribers, accounting for c.36% market share in the country.