MTN Group shares soared by 18.1% on Thursday after Africa’s biggest wireless carrier started a R15-billion disposal plan to shore up the balance sheet.
The company agreed to sell its 53% stake in Botswana’s Mascom to Econet Wireless Zimbabwe for US$300-million (about R4.3-billion), the Johannesburg-based company said in a statement on Thursday.
Other businesses now on the market include e-commerce services, which include Nigerian online retailer Jumia Technologies and Travelstart.co.za. MTN is also looking to sell its interest in IHS Towers, the company said.
The news comes a year after CEO Rob Shuter announced a review of MTN’s then-22 markets across the Middle East and Africa to evaluate ways of simplifying the business and focus on the highest-earning countries.
South Africa, Nigeria, Iran, Ghana and Uganda account for more than 84% of earnings, while some of the others, such as South Sudan and Syria, have been ravaged by conflict. MTN sold its Cyprus unit for €260-million last year.
“We are simplifying the group, we are reducing risk, and improving returns,” Shuter said in a phone interview. “That will generate some returns that will be helpful for our gearing and other priorities.”
MTN reported the strategy alongside 2018 adjusted earnings per share, excluding some items, of R3.37. That compared with a company guidance of R3.28 to R3.46. The firm also raised its medium-term service revenue guidance to double-digit percentage figures from upper single digits. Dividend growth will be in the 10-20% range, though for 2019 the payout will probably be at the lower end.
The full-year year dividend was R5/share, while subscriber numbers increased to 233 million across 21 countries.
More from MTN: MTN increases its subscriber base by 16 million to 233 million customers
MTN Group has increased its subscriber base by 16 million to 233 million customers across 21 markets in Africa and the Middle East. This is according to the Group’s financial results for the year ended December 2018 published today.
The number of active data users also increased by 10 million to 79 million and the active mobile money subscriber base rose to 27 million. This strong commercial momentum drove a 10,7% constant currency increase in service revenue to R125,4 billion.
“The service revenue growth rate achieved is ahead of both prior year and our guidance and – more importantly – is above the average rate of inflation in our markets, which means we are delivering real growth in service revenue,” said Rob Shuter, MTN’s group president and CEO.
Group Ebitda rose more than 15% and reported headline earnings per share (HEPS) increased to 337 cents from 182 cents in 2017. Adjusting for once-off items HEPS would have been 565 cents per share. The total full year dividend of 500 cents is well covered and a final dividend of 325 cents has been declared.
MTN has conducted an extensive review of its portfolio to reduce risk, improve returns and simplify MTN. This review covered not only its subsidiary companies but also its associates and its investments in e-commerce investments and tower companies. The group has R40 billion tied up in the value of the e-commerce and tower company investments and has announced that they are not viewed as long-term strategic assets of the group and will be monetised over time.
The group has committed to the portfolio review realising more than R15 billion over the next 3 years excluding any proceeds from its R23 billion position in IHS.
Pursuant to this it announced that it would be disposing of its associate in Botswana, Mascom, for $300 million where its lack of control position and MTN branding meant that the group is not able to execute on its BRIGHT strategy.
The group stabilised its gearing, bringing the holding company leverage down to 2,3 times at December 2018 from 2,9 times at June 2018 and within the target range of 2,0 to 2,5 times. The group’s overall gearing moderated to 1,3x.
“We have made good progress to improve the holding company leverage bringing it within the medium-term guidance range we set out. Proceeds we receive from the asset realization program will support efforts to further reduce debt and de-lever the holding company balance sheet.” said group CFO Ralph Mupita. “We believe the holding company leverage is appropriate, and we can well manage the debt and deliver on our 500 cents progressive dividend policy in the future.” he added.
The company overcame several regulatory headwinds in 2018, the most material of which was the Central Bank Central Bank of Nigeria dispute on historical dividend repatriations. This was resolved and MTN announced in December 2018 that they had agreed to implement a notional reversal of the 2008 private placement and consequently made a resolution payment of $53 million. The group is committed to further enhancing its risk management and stakeholder management processes.
“We see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity,” said Shuter. “We are also extending our BRIGHT strategy to build MTN into a digital operator with a major focus on the fintech, digital, enterprise and wholesale business areas.”
“Key focus areas for 2019 are the launch of our own music streaming and instant messaging applications and extending MTN mobile money from 14 to 18 countries through launches in South Africa, Nigeria, Afghanistan and Sudan”
Considering the improved performance in 2018 and its growth plans, the group revised its guidance to investors upwards, targeting double-digit growth in service revenue, improved profit margins and capex efficiency and a new target to drive return on equity from 11% to over 20% in the next three to five years.