When it comes to Telcos in Africa, the performance of Mobile Telecommunications Limited (MTC) may be significantly underrated.
Despite economic headwinds in the past five years (including the COVID-19-Induced economic downturn, high inflation, and currency depreciation), MTC’s performance has been one of the strongest among telcos in Africa.
For example, EBITDA margins (a measure of profitability) have been consistently above 50%, with the only exception being in 2023, when it reached 49.5%. For comparison, South African-listed MTN and Vodacom reported EBITDA margins of 41.5% and 37.3%, respectively, in their most recent results.
MTC balance sheet reflects extremely low gearing giving capacity to fund business expansion and generate additional value shareholders.
The average debt-to-equity ratio for the telecoms industry is 1.15, which means that for every US$100 of capital a Telco has, it usually has US$115 in debt.
For context, in 2023, MTN Group had about R39 billion in finance costs, just under 20% of total revenue, whereas MTC only had N$21 million at about 0.7% of total revenue.
Evidently MTC has war chest not only to fund current and future growth but to also help to whether storms should they occur.
Despite a maturing market MTC has embarked on a comprehensive programme to exploit growth opportunities that are accretive to shareholder value. These efforts will also focus on not only protecting and growing the core of our business drivers but also moving to adjacencies including digital financial services, enterprise expansion, local and regional partnership opportunities and a wide portfolio of digital offerings.
As a significant market leader (84% market share) in a maturing market, MTC will derive more growth by increasing service usage than from new subscribers.
Mobile broadband and home broad band provide profound opportunities for growth. We expect double digit growth in the demand for data in the short to medium term. Coupled with digital service offerings, this will have positive impact on ARPU and revenue growth projections.
Mobile Financial services is an adjacent which can have significant impact in the evolution of a telco. In Sub- Saharan Africa region in 2023, mobile money grew by over 28% in transactional volume (up to 62bn transactions) and over 12 % in transactional volume (representing US$912bn in value).
MTC Maris will be major business growth driver for MTC in the next few years.
For example, Safaricom’s Mobile Financial Services business, MPESA, achieved a 12% annual growth rate between 2019 and 2023, more than four times faster than the rest of the business. MPESA now accounts for about 40% of total revenue.
Transitioning to more value-added services is critical as the MTC revenue mix will likely become more data-focused over time, which is often less profitable than voice, for example. Currently, MTC generates far less revenue from data than its regional peers. In the 2023 financial year, Econet in Zimbabwe had 33% of its revenue from data, and Airtel in Zambia had 45%. However, MTC revenue share from data was 18% for prepaid and 22% for postpaid.
The significant opportunity in mobile and fixed broadband (current data demand for data is growing at over 30% YoY) entails continuous heavy investment in the LTE, fixed wireless and fibre networks.
This expansion of its networks will ensure that MTC is able to meet future demand arising from the ubiquity of digital service offerings, digital content and the rise of the high data consuming Generation Z segments.
