MTN suspends dividends as it struggles to sweep out debts

The mobile network operator plans to resume dividend payments this year and may declare special dividends too.

MTN has suspended its final dividend for 2020 as it pushes ahead with plans to reduce debt. That’s despite the group reporting strong results for the year as it grew its subscriber base by 11%.

Releasing its annual results, the mobile network operator said the conditions behind holding back on an interim dividend last June hadn’t materially improved by the end of the year, leading to its decision. These included the timing of proceeds from its asset realisation programme (APR), the impact of Covid-19 on its business and challenges in repatriating dividends from its business in Nigeria due to foreign currency shortages. Last year, it “upstreamed” the equivalent of R286 million from Nigeria, with about R4.2 billion yet to be repatriated by the end of December.

Still, it expects to resume dividend payments for its 2021 financial year with a payment of at least 260c per share, as well as possible special dividends or share buybacks if it performs better than expected this year and ends up with excess cash.

The board has decided to suspend the dividends in light of some uncertainties that we face particularly around cash upstreaming but more importantly our desire to deleverage the balance sheet faster,” CEO Ralph Mupita said in a presentation to investors. “”If some of the uncertainties play out more positively, it will consider returning any excess cash either through special dividends or share buybacks, whichever is more value accretive for shareholders.”
The company plans to raise R25 billion from the sale of non-core assets over the next few years so it can reduce its debt. Although its planned divestments from its IHS Towers operations had been delayed due to Covid-19, it said it made encouraging progress in its ARP. Following the disposal of its ATC Ghana and ATC Uganda tower joint ventures, it sold its 18.9% stake in online retailer Jumia for R2.3 billion and sold an 8% shareholding in MTN Zambia for R178 million. Last month, it disposed of its 20% stake in Belgacom International Carrier Services SA (BICS) to Belgian telecoms firm Proximus, receiving net cash proceeds of R1.8 billion. The disposals helped it cut debt at a holding company level by R12 billion to R43.3 billion.

Despite challenging trading conditions, Mupita said the group added 28.8 million more subscribers last year, taking its total subscriber base to almost 280 million. It added 19 million active data users and 11.7 million MoMo (mobile money) users, while the number of active merchants accepting its MoMo propositions more than doubled to 440,000.

Group service revenue increased by 20% over the 12 months to end-December and was 12% higher at R170 billion in constant currency terms. Voice revenue rose 4.8% despite voice traffic coming under pressure, particularly during the height of the Covid-19 lockdown. However, that had the opposite effect on data revenue, which expanded by 31% as traffic more than doubled due to higher levels of online demand as more consumers worked and studied from home. By then end of December, MTN had 114.3 million active data users after adding 19 million more over the course of the year. It grew Fintech revenue by 24% due to the increase in MoMo users and its move into insurance through its aYo joint venture.

For the year, earnings before interest, tax-depreciation, and amortisation (EBITDA) grew by 22%, before adjusting for once-off items. Earnings per share increased by 87% to 946c and headline earnings per share (HEPS) jumped 60% to 749c. It said non-operational impacts stripped 128c from HEPS.

The solid operational result was supported by the pleasing growth in our larger operations as well as a broad-based improvement across all our regions,” Mupita said. “In the larger operations, MTN South Africa (MTN SA) sustained the turnaround in its core business units while MTN Nigeria and MTN Ghana continued to deliver solid overall performances with double-digit service revenue growth in both markets.”
With the group exiting its operations in the Middle East to focus on its pan-Africa strategy, it said it completed a comprehensive strategy review in the final quarter of last year and had set a new ‘Ambition 2025’ strategy, under which it planned to structurally separate its infrastructure assets and platforms, such as fintech, to reveal value and attract 3rd-party capital and partnerships into these businesses, over the medium-term.

Going forward, we believe that our revised strategy, Ambition 2025, will position the business to capture the exciting opportunities across our markets and our medium-term guidance has been enhanced to reflect this accelerating growth outlook,” Mupita said. “To support this, we plan to invest approximately R29.1 billion in our network, fintech and digital services platforms in 2021.”
MTN’s shares closed 2% down at R74.37 yesterday.

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