Service revenue trends were faster off better Uganda, Nigeria and South Africa as network availability improved. While underlying service revenue improved from Q1, it was still below the mid-teen medium term guidance. However, the Group maintained its guidance, with full year’s capex (Rs28-33bn) expected to be down around 30% from last year off lower spend in Nigeria. HoldCo leverage had also improved to 1.6x this quarter with better upstreaming.
MTN Rwanda has reported a disappointing set of Q2 numbers. Service revenue and EBITDA trends continued to deteriorate as they continue to be impacted by the MTR cut and higher competition on price. Additionally, EBITDA continued to be impacted by the One Network Area initiative, handset subsidy and the local currency depreciating vs. the USD. As a result, management has cut FY24 guidance.
IHS Towers has reported a solid set of Q2 results. Organic top line growth has seen a strong acceleration, driven by Nigeria, while margins improved nicely too. There was no new news regarding the strategic review. However, the company made a key announcement last week about the contract renewals with MTN Nigeria (HERE).
Both MTN Nigeria and IHS Nigeria have announced the renewal and extension of all their MLAs in Nigeria, including new financial terms. This development is materially positive for both companies in our view. This means all MLAs in Africa between MTN and IHS have now been renewed and extended. Separately, MTN has also announced the exit from Guinea-Bissau.
Q1 was a solid quarter for the Sub-Saharan African operators, especially from a top line perspective. Airtel Africa continued to outperform peers overall. We continue to think that fundamentals for AAF and MTN are strong and deserve more attention. Valuations are compelling too.
The outperformer this quarter was China Tower, with stronger trends across the board. Indus continues to grow at a faster pace, but we think the market is too optimistic on Indus’ ability to turn this into cash as it is driven by single tenancy towers. In Indonesia the big news is that XL and Smartfren are in talks which has the potential to be significant for both TBIG and TOWR, and so despite better trends we downgrade price targets
IHS Towers has reported a slower quarter as expected. Top line performance was solid and came in ahead of expectations, but EBITDA growth was below expectations. Capex this quarter is well below historic levels as the company is now focused on cash generation and rebuilding the balance sheet. As a result, OpFCF margins improved.
MTN Rwanda has reported a slower set of Q1 numbers. Revenue and EBITDA continue to be impacted by the MTR cut and margins were also impacted by the One Network Area initiative and to a lesser extent by the depreciating RWF vs. the USD.
MTN Ghana has reported a good set of Q1 results. Service revenue growth accelerated and continued to grow well above inflation. EBITDA trends slowed but remain solid. Capex intensity was down vs. Q1 last year. Medium guidance for Service Revenue growth (“high twenties %”) has been reiterated. The macro is expected to remain challenging in 2024. However, there has been an encouraging slow down in inflation over Q1.
H2 was a better semester for the SA Telcos. Service revenue and EBITDA trends improved and capex – while still above historic levels – was contained. However, improvements were modest as the environment remains difficult and growth remains limited.
We hosted a small group zoom call with the IHS CFO, Steve Howden, and Head of IR, Colby Synesael yesterday. The company has had a torrid time over the last 2 years, but operationally has proven relatively resilient to intense pressure in our view. Our takeaway from the call was cautiously positive, though of course lots depends on Nigerian Macro.
MTN Rwanda has reported a solid set of Q4 numbers on an underlying basis (NSRe). Reported service revenue growth decelerated vs. Q3 impacted by the MTR cuts but EBITDA growth accelerated. Mid-term guidance for service revenue growth has been reiterated (“mid-teens service growth”) and the company targets a stable EBITDA margin.
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