Mtn Nigeria Communications Plc · NSENG:MTNN
Mtn Nigeria Communications — Q1 2019 Earnings Presentation
51 slides from Mtn Nigeria Communications's earnings presentation, 2019
Slide 1: MTN Nigeria Q1 2019 Analyst Presentation
MTN Nigeria Q1 2019 Analyst Presentation everywhere you go born
Slide 2: Disclaimer
> Disclaimer This presentation has been prepared by MTN Group ("MTN") and MTN Nigeria Communications Plc or a successor entity (the “Company”, and together with its direct and indirect subsidiaries, the Group’) to provide an overview of the Group. “Presentation” means this document, its contents or
Slide 3: Disclaimer | continued
© Disclaimer | continued The presentation includes market share and industry data obtained by MTN and the Company from industry publications and surveys and internal surveys. MTN and the Company may not have access to the facts and assumptions underlying the numerical data, market data and other inf
Slide 4: Agenda
> Agenda Porn) Time mutes Agenda reste a Na 08:30-09:00 30 Tea & Coffee All 09:00-09:15 15 Welcome and introduction of Speakers Ferdi Moolman 5 09:15-09:30 15 Strong position in the right market Ferdi Moolman 12 09:30-10:00 30 Exciting demographic opportunity Ferdi Moolman 16 10:00-10:15 15 Corporat
Slide 5: Welcome and Introduction of Speakers
Welcome and Introduction of Speakers
Slide 6: Largest mobile operator in Nigeria
Largest mobile operator in Nigeria market share by subscribers revenue in Nigerian telecoms market since launch active data users with mix of local & international expertise
Slide 7:
Slide 8: Responsibility Million
Responsibility 20 Million Nigerians live in places where MTN is the sole provider of communication Connecting 850+ Large Corporates, 100+ Public Sector & 800,000+ Small businesses with greater reach & efficiency Enabling over 1 Billion rapid & expedient transactions via USSD in 2018 Supporting finan
Slide 9: Management Team | balanced structure with versatile team
> Management Team | balanced structure with versatile Feam Chief Executive Officer Ferdi Moolman Joined MTN: 2001 Years of telco experience: 18 Introduced to focus on governance, effective stakeholder management and operational Focus in times of crises 70 3epBP: Direct report to CEO Chief Finance Of
Slide 10: Today's speakers
> Today's speakers ‘a be MTN Nigeria CEO MTN Nigeria COO MTN Nigeria CFO Executive, Corporate Relations Chief Technical Officer * Appointed in 2015 . * Formerly CFO of MTN . Nigeria * Former CFO and COO . of MTN Irancell * Joined the company in 2001 . * Previously held senior management positions .
Slide 11: MTN Nigeria's investment case
MTN Nigeria's investment case + Largest African economy + Largest telecoms market in Africa * Leading mobile network * Demographics drive revenue * Efficiencies improve margins * Smart capex moderates investment * Positive momentum with accelerating growth and performance improvement source Enhancin
Slide 12: Strong position in the right market
Strong posirion in the right market
Slide 13: Nigeria South Africa Egypt
1,419 1,366 423 368 329 249 269 212 204 200 175 118 110 58 Nigeria South Africa Egypt Algeria Morocco China India USA Indonesia Brazil Pakistan Nigeria Ehiopia SA 163 92 100 69 50 Nigeria Egypt South Africa Ethiopia Algeria Source: World Bank, Worldometers, Pyramid, EIU, CIA Factbook
Slide 14: Source: Company Filings, NCC, WCIS and Pyramid. Notes: (1) Modernised definition of active subscribers
11% 22% 50% 17% 40% 38% 38% 38% 27% 27% 27% 27% Source: Company Filings, NCC, WCIS and Pyramid. Notes: (1) Modernised definition of active subscribers is more conservative than old one: exclusion of Incoming SMS, Incoming ONNET Calls and Airtime refill from RGS Definition. (2) Includes 3G and 4G
Slide 15: Nigerian telecoms competitive landscape
> Strong position in the right marke | Nigerian telecoms competitive landscape i >~ Landscape * Nigeria is a value seeking market; * Stable voice tariff due to price Floor; * Competition shifted to data; * Rollover of unused data * 2nd level confirmation for activation of VAS and data bundles + Mark
Slide 16: Exciting demographic opportunity
Exciting demographic opportunilry
Slide 17: 2014A 2018A 2023E
• 3.1% 3.0% 91.8% 77.7% 78.8% • 2.1% 2.0% 1.5% 0.9% 0.5% 0.3% 2014A 2018A 2023E 2018A 250,000 200,000 150,000 100,000 50,000 - 40.0% 60.0% 80.0% 100.0% 120.0% 140.0% 160.0% 180.0% 200.0% Mobile Penetration (%)
Slide 18: Penetration growth driven by rural expansion
> Exciting demographic opportunity | penetration growth driven by rural expansion ... Rural areas are currently significantly underpenetrated by mobile voice Despite most of the Nigerian population living in rural areas... and data access, which creates significant opportunities For growth Total Pop
Slide 19: Morocco Kenya South Africa
84% 99% 104% 95% 93% 47% 75% 47% 16% 15% 6% 4% 0% 87% 89% 89% 81% 69% 72% 58% 57% 48% Nigeria Morocco Kenya South Africa Algeria Mexico Jordan France Belgium
Slide 20: Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18
1,803 52% 53% 52% 844 26% 250 18.7 20.4 29.6 17.2 25.2 14.8 14.9 22.6 24.0 23.3 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19
Slide 21: Fintech and digital present a key opportunity
> Exciting demographic opportuniry | Fintech and digital present a key opportunity porn) Low Penetration of Banking Services Strong growth potential of Fintech / Digital content and services 99.6m Addressable Market (Adult Population) 62.7m Banked Population Growth #1 in Digital Potential + Optimism
Slide 22: MTNN revenue growth drivers over five years
+...? +...? +...? +...? MTNN Revenue Today Nigeria Population Increase Nigeria Mobile Penetration Increase in # of Data Users Mobile Data Usage per User Price Upside Digital Upside MTNN Revenue in 5 Years (2018A) Increase Increase (Full Potential)
Slide 23: Corporate Governance & Regulation
Corporate Governance & Regulation
Slide 24: Regulator-led operating environment
> Regulator-led operating environment Regulators al National Broadcasting Commission & REGULATORY COMMISSION CENTRAL BANK OF NIGERIA Other Operators @ *Mairtet g Industry Bodies ay ALT@N [sizon] mobile Tier Il InfraCos ISPs Clearing Houses VAS Aggregators Tntorcollulay” wilicee = Spectrangt €. D HHS
Slide 25: Regulatory developments
> Regulatory developments Obtained approval to NCC approved use 700MHz spectrum disconnection of MNOs Obtained approval to ' An! Events ! acquired from the NBC and Clearinghouses For esaGeonhbasssinm | + Issuance of H for telecommunication failure to settle acquired From Visafone | Regulatory Framew
Slide 26: Technology & Network Excellence
a hnol Technology o' 4, & NeFwork Excellence ’ 4
Slide 27: Network | unmatched nationwide coverage
> Network | unmatched nationwide coverage Leading Mobile Network Coverage by Population Network NPS The Largest Fibre Networks in Nigeria (On-land Fibre in km vs. Competition) Best Coverage in the country) >25,800 10,869 arcourt om - ) 6,314 @ 4,300 gy (2) @ 4G Coverage 24% @ 3G Coverage 71% @ 2G Co
Slide 28: Coverage Optimization | Rural coverage
= Coverage Optimization | Rural! coverage inge 3-5km (terrain ndent). 2TRX to 6TRX / 3.7K 11012 5288" 1500 12 to 20 metre towers 2018 2019 2020 Efficient increase in 3G @) 271 coverage and quality with less sites 2018 2020 Telecom Infra Project(TIP) Facebook partnership Collaborations with OPEN RAN
Slide 29: Attractive return profile
Attractive return profile Note: Q1 2019 numbers are unaudited
Slide 30: Financial snapshot
» Financial snapshot (NGN bn) Total Revenue Quarterly Total Revenue 2016 2017 2018 Ql 2018 Q2 2018 Q3 2018 Q4 2018 Ql 2019 Growth © -2% > 12% > 17% > (14.5%) 19.9%) 18.5%) 16.6% 13.2% 794 887 1039 249 256 259 275 282 i EBITDA ara “e ~ => 44.2% 104 114 112 123 150 nicer, D> > <-> <a> a> isi asa tio "
Slide 31: • • • • • • • • • • • • • •
• • • • • • • • • • • • • • • • • • • • • • • • • • • • • •
Slide 32: Total revenue
Total revenue Total Revenue Split (NGN bn) Other Ml Fintech Ml Digital Ml Data [voice 794 887 1,039 CAGR;: 14% 3944 37 a2? 3493 80 108 58 2016 2017 2018 CAGR Other 4.3% 4.2% 4.2% 14% Fintech 1.6% 2.4% 2.8% 50% Digital 10.1% 6.8% 2.6% -42% Data 7.3% 12.2% 14.9% 64% Voice 76.7% 74.4% 75.4% 13% Source:
Slide 33: Cost base summary
© Cost base summary Cost of Sales 41% Operating Expenses 59% ‘Source: Company information, Interconnect Dealer Commissions Digital / Fintech Costs Regulatory Fees and Levies Other Site Lease Rental, Utilities and Fuel Maintenance Professional Fees Salaries, Staff Costs and Training Marketing Other M
Slide 34: Cost breakdown | cost of sales
© Cost breakdown | cost of sales Cost of Sales Split “enon [_Reerve WEEE coves] cosnriow [ coptotstrctvre | Gross mornin 78ST BOB e008 LOK Increased interconnect cost due to: 184 199 50 54 ; ; 184 = growth in subscriber base 4 - Increased uptake of customer value 12 8 23 prepositions 19 G 17 8 3 a 6
Slide 35: Cost breakdown | operating expenses (Opex)
~ Cost breakdown | operating expenses (Opex) (NN bn Lo). Le eee ey ae ae aa — os Ll 254 356 390 + Lower Opex due fo the adoption of IFRS 16 25 95 78 (change in accounting treatment of lease 30 17 rental) i 30 an is 7 + On IAS 17 basis, opex was N104.0 billion, Other 3 representing 9.3% growth, which
Slide 36: Impact on Income Statement
» Impact on Income Statement porn) -Q12019 mPAT% MEBITDA % N3b (1%) LEASE RENTAL, DEPRECIATION, FINANCE COST & TAX IFRS 16 IAS 17 38
Slide 37: Capital expenditure breakdown
> Capiral expendirure breakdown Capital Expenditure (NGN bn) 7 22 5 5 37 0.5 m Other Capex <3 aT m Network 0.4 2016 2017 2018 Ql 2018 Ql 2019 Capex Mix (%) Network 78% 87% 81% 84% 95% IT 19% 10% 16% 14% 4% Other Capex 3% 3% 3% 2% 1% Source: Company information. Notes: Percentages may not fotal 100%
Slide 38: Free cash flow analysis
> Free cash flow analysis porn) 2016 2017 2018 Qi 2019 356 346 434 150 (165) (203) (211) (63) 191 143 223 87 > (72) (0) rn }) ~™ (29) (36) a7 (21) 0 a | @© — (80) (30) (110) (55) @) (oP) © ©) Levered FCF 60 (56) 72 (19) Source: Company information. Notes: (1) Excluding recognition and remeasurement
Slide 39: Capital structure overview
> Capiral structure overview (NGN bn) + MTNN has historically maintained moderate leverage; remains in a comfortable + MTNN has historically aimed to maximise dividends position relative to covenants on current metrics: + Inthe medium term, MTNN targets a dividend pay-out ratio of at least 80% of it
Slide 40: Well positioned for the long term
Well posiftioned For the long Ferm
Slide 41: The Bright Journey from Basics to Best
» The Bright Journey from Basics Fo Best Key priorities Best customer experience * Sustain #1 position in NPS across all categories * Optimize VAS subscription model to improve overall satisfaction * Educate Customers how best they can manage their subscriptions Just For You) irs Returns and Ignite
Slide 42: Extending BRIGHT Revenue Streams
> Extending BRIGHT Revenue Streams Looking ahead r i) OD R Pe | & Fl \B > () Best Returns and Ignite Growth Hearts Technology customer efficiency commercial through data and minds excellence experience focus performance and digital J Voice Data Enterprise | —> Digital Wholesale Fintech 42
Slide 43: Opportunity to be unlocked across the curves
> Opportunity fo be unlocked across the 6 curves porn) g > a % oer Curve 5 Wholesale (Fixed oor and mobile) Curve 4 Consumer mobile Digital data and Cc bil consumer fixed ‘onsumer mobile data voice, VAS and hardware 46
Slide 44: Nigeria voice is still growing
Pin Nigeria \/O!CE is still growing... fy, -— @,—-> Market growth Q1 2019 Result drivers +12.7% * Low penetration supports Voice revenue subscriber growth * Predominantly young population * Price elasticity potential still exists For voice Why MTN? 44 Best practice pricing & combo Bundles Ultra-rura
Slide 45: Data is our core medium-term growth driver
© DATA is our core medium-term growth driver... Market growth Q1 2019 Result drivers +31.5%" + Low data penetration Data revenue * Coverage is < 50% * Growing demand for data * Increased level of awareness * Pricing flexibility + Fast Adoption of Youth Why MTN? *Excludes fixed data fe} * CHASE Progr
Slide 46: Digital drives new revenues and data adoption
© DIGITAL drives new revenues and data adoption... porn) Market growth drivers -68.0% * Increasing data adoption * Launch own services + platform Digital revenue * Increasing awareness of digital * Music, Video, Gaming & messaging services build * OTT service gap * Local content aggregation & Partne
Slide 47: Fintech is a major driver of new value creation
P Fintechisa major driver of new value creation... Market growth Q1 2019 Result drivers +22.9% * Low level of banking penetration * Leverage Super Agent approval in Fintech revenue * Limited Traditional banks footprint principle and pursue final approval in rural areas * Obtain PSB approval * Large
Slide 48: Enterprise grow market share in high growth segment
> Enterprise grow market share in high growth segment ... porn) Market growth drivers +37.4% * Enterprise is mobile centric * Deepen enterprise penetration Enterprise revenue * Underserved SMEs across different markets * Deploy vertical solutions across * Unserved large SME market segments * Low lev
Slide 49: Wholesale leverage Pan-African infrastructure across Group
P Wholesale leverage Pan-African infrastructure across Group.. porn) Market growth Q1 2019 Result drivers +25.8% * Huge capacity demand wholesale revenue * Satellite to fibre migration * Managed MPLS needs * Fast growth in digital services Monetize existing infrastructure Localize Global Connect cap
Slide 50: Q&A
Slide 51: Investor Relations Contact
Investor Relations Contact: Chima Nwaokoma Snr. Manager, External Relations MTN Nigeria Communications Plc +234 803 200 0186 chimaobi.nwaokoma@min.com everywhere you go
MTN Nigeria Communications — Q1 2019 Earnings Presentation on 6ix