MTN Nigeria's 9M 2021 Result: Rising Revenue on the Back of Growing Leverage


Monday, December 06, 2021/03:00 pm / By Jariyat Bakare, Proshare Research Intern/ Header Image Credit: MTN Nigeria


MTN Nigeria's 9months 2021 unaudited results reflect resilience, as revenue and earnings rebound, majorly on the back of increased total debt stock. The gearing ratio shows that the bulk of the capital structure of the Telco is made up of debt. Analysts expected most companies to take advantage of the global liquidity glut, both local and international, to take on more debt and drive faster corporate growth.


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Key Highlight

  • Revenue rose by +23.62% from N975.76bn in 9month 2020 to N 1,206.26trn in 9month 2021
  • Cost of sales surged by +11.86% Y-on-Y from N179.21bn in 9month 2020 to N200.47bn in 9month 2021
  • Operating profit spiked by +36.27% from N307.01bn in 9month 2020 to N418.35bn in 9month 2021
  • Finance income slumped by -41.28% Year-on-Year (Y-on-Y) to N7.01bn in 9month 2021
  • Finance cost sunk by -3.12% from N107.36bn in 9month 2020 to N104.01bn in 9month 2021
  • Profit before tax accelerated Y-on-Y by +51.87% to N321.35bn in 9month 2021
  • Profit after tax grew Y-on-Y by +52.74% to N220.31bn in 9month 2021
  • Basic and diluted earnings per share rose by +52.61% of N10.82k in 9months 2021
  • Mobile subscribers declined by -7.5 million in 9month 2021 to 67.5m.
  • Active data users increased by +2.5million in 9months 2020 to 33.2m in 9months 2021
  • Total asset significantly grew Y-on-Y by +19.01% to N2,100.19trn in 9month 2021
  • Total debt dipped by -3.21% to N324.58bn in 9month 2021
  • Total equity significantly grew by +52.74% in 9month 2021

Rays of sunshine


Having maintained an upward trajectory growth, the mobile telecom recorded double-digit growth in its turnover. Sales revenue was up by +23.62% Y-on-Y attaining an all-time high digit of N1.2trillion in 9month 2021. Y-on-Y earnings generated from data business surged by +51.6%, SMS charges spiked by +301.57%, interconnect and roaming grew by +27.33%, revenue from voice grew by +9.23% while revenue from the sale of handset and accessories dipped by -2.36%.


Nevertheless, all business segments of the company improved in the period, MTN Nigeria Consumer business unit grew by +26.06%, enterprise business unit rose by +8.16% and wholesale business unit surged by +8.16% (see chart 1 below).


Chart 1: MTN Nigeria's YTD Revenue 9M 2018 - 9M 2021 (N'bn)

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Source: MTN Nigeria Financial Statement, Proshare Research


Profit before tax

The technology company's profit before tax spiked by +51.87% to N321.35bn in 9months 2021 compared to a -0.62% fall in 9 months 2020.


Finance income tumbled by -41.28% to N7.01bn in 9months 2021 as interest income on amortized cost investments fell by -33.33% Y-on-Y. Finance cost fell marginally by -3.12% in 9months 2021 (see chart 2 below).


Chart 2: MTN Nigeria's Profit Before Tax 9M 2018- 9M 2021 (N'bn)

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Source: MTN Nigeria Financial Statement, Proshare Research


Current Ratio

The nine-month result of the telecommunication company showed a +29.38% spike in current assets and a -3.21% dip in short-term liabilities, however, data shows that the telco can easily meet its short-term obligations.


With a high profitability ratio, the data seller saw current ratio swerve to 1.55 from 1.20 in 9months 2021, representing a +29.38% growth. Analysts believe that the higher the ratio the more capable it is in offsetting debt obligations (see chart 3 below).


Chart 3: MTN Nigeria's Current Ratio 9M 2019 - 9M 2021

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Source: MTN Nigeria Financial Statement, Proshare Research


Acid test ratio

Growth in the acid test ratio has made analysts believe that the company can use its quick asset to settle its short-term liabilities without including inventories.

However, inventories were up +359.36% in 9months 2021, acid test ratio surged by +32.35% in 9months 2021. The ratio stands at 1.56 in 9month 2021 (see chart 4 below).



Chart 4: MTN Nigeria's Acid Test Ratio 9M 2017 - 9M 2021

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Source: MTN Nigeria Financial Statement, Proshare Research

Asset Turnover Ratio

The hike in efficiency ratio was a result of the growth in revenue and asset. Total assets significantly grew by +19.10% from N1.76trn in 9month 2020 to N2.1trn in 9month 2021. Revenue also spiked by +23.62% in the same year.


This rise in asset turnover ratio reflects the efficiency of the company's assets in generating revenue (see chart 5 below).


Chart 5: MTN Nigeria's Asset Turnover Ratio 9M 2019 - 9M 2021

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Source: MTN Nigeria Financial Statement, Proshare Research



Leverage Ratio

The company's leverage ratio snudged down by -38.88% Y-on-Y from 2.86 in 9month 2020 to 1.75 in 9month 2021. Total debt dipped by -3.21% in 9month 2021 and equity spiked higher by +58.37%. However, the 9month 2021 financials of the technology company revealed that the company is heavily financed by debt (see chart 6 below).


Chart 6: MTN Nigeria's Leverage Ratio 9M 2019 - 9M 2021

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Source: MTN Nigeria Financial Statement, Proshare Research


Return on Equity

Return on equity fell in 9months 2021, the second consecutive decline between 2019 and 9months 2021. ROE fell by -3.56% ROE fell by 356base points to 118.45% from 122.82% in the 9months 2020.


Equity of the company significantly grew by +58.37% in 9month 2021 compared to +29.54% in 9month 2021, net income also climbed by +52.74% in 9month 2021 (see chart 7 below).



Chart 7: MTN Nigeria's Return on Equity 9M 2019 - 9M 2021

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Source: MTN Nigeria Financial Statement, Proshare Research


With the company receiving an Approval-in-Principle (AIP) for a payment service bank (PSB) and final approval for the running of the business is expected, top and bottom-line earnings are projected to improve. This will also strengthen the company's position as a market leader.

According to the CEO Karl Toriola, the company anticipates a return to positive net additions in Q4 2021 as more of their acquisition centres are activated, while building on the momentum from Q3 to deliver a service revenue growth in Q4 2021.

Proshare Nigeria Pvt. Ltd.

 Proshare Nigeria Pvt. Ltd.


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Proshare Nigeria Pvt. Ltd.

Proshare Nigeria Pvt. Ltd.

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