Thursday, May 30, 2019 02:33 PM / By
FBNQuest Research
MTN Nigeria
in pole position to tap mobile subscriber growth
With around 173 million
subscribers, Nigeria’s mobile penetration has reached a peak of 91%. However,
viewed from the context of African peers such as Kenya and South Africa with
penetration levels of 100% and 173% respectively, and unique mobile subscribers,
the country’s penetration level still has room for expansion. MTN Nigeria’s
unrivalled network infrastructure and coverage put it in pole position to
benefit from net additions to the sector’s subscriber base which is expected to
grow to 203 million by 2023.
Improving
macro conditions positive for voice and data traffic
We expect Nigeria’s GDP to
grow by 2.6% in 2019E and a further 2.8% in 2020E. We believe that improving
macroeconomic conditions (underpinned by both non-oil and oil) will help
rebuild household wallets and translate to growth in data and voice traffic for
network operators.
Data on the
rise, voice in slowdown
Although we expect the
growth in voice revenue to decelerate to high-single-digits in the medium term
as mobile penetration reaches saturation levels, we expect the strong growth in
data revenue to more than compensate. We see data’s share of revenue increasing
to c.20% by 2021, driven by high-teens to 20% average annual growth over the
same period. However, with the imminent commencement of operations of payment
service banks, we see upside risks to our data growth forecasts. In the medium
term, MTNN’s data growth could mirror Safaricom’s 40%+ y/y growth.
Pull back in
shares presents an opportunity
We value MTNN shares at
N148.7 per share based on a discounted cash flow (DCF) model. Although the
shares rallied strongly after listing to a peak of N149.0, they have shed
-11.0% since. Our price target implies a 2019E EV/EBITDA multiple of 5.1x or a
10% discount to the 5.7x multiple that emerging and frontier market peers are
trading on. At current levels, the shares are trading on 2019E EV/EBITDA and
P/E multiples of 4.6x and 14.0x respectively. Our price target implies a 12%
upside potential. As such, we rate the shares Neutral. The main risks to our
thesis include a deterioration of the regulatory landscape, a weaker
macroeconomic environment and pricing pressure from competition.
Download
Full PDF Report Here – MTN Initiation Report

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$10.1b Demand
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Engage CBN Over $8.1b Fine; Factually Incorrect Premises Highlighted
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IBTC Notifies of Regulatory Fine in Relation to MTN - Proshare Aug
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share price drops by 10% - Proshare
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- Stabilization
Mechanism: Sticking Half Way through the Line
- MTN Nigeria
– Interim Financials For H1 2018 - Proshare Aug 14, 2018

