Mtn Nigeria Communications Plc · NSENG:MTNN

Mtn Nigeria Communications — Investor Presentation (March 2020)

45 slides from Mtn Nigeria Communications's investor presentation, March 2020

1. Slide 1: Investor Presentation

   Investor Presentation March 2020 Sensitivity: Internal

2. Slide 2: Agenda

   Agenda 1 Operational Review 2 Strategic Review 3 Financial Update 4 Looking Ahead 2

3. Slide 3: Operational Review

   Operational Review

4. Slide 4: Leading mobile operator in Nigeria

   Leading mobile operator in Nigeria Largest Mobile Operator 64.3 #1 25.2 49% million NPS million Market subscribers share by Active revenue (2) data users 44% 78% 39% 42% Source: WCIS 4G Population 3G population Data Smartphone coverage coverage penetration penetration Largest fibre network coverage

5. Slide 5: Strong Position in Attractive Market

   Strong Position in Attractive Market MTN Nigeria is the clear market leader Leader in the Nigerian Telecoms Market with a Strong Competitive Advantage across all Segments Undisputed Market Leader MTNN - Subscriber and ARPU leader Subscriber Market Share in 2019A #4 Player ARPU (NGN) 1,519 1,000 1,00

6. Slide 6: Exciting Market Opportunity

   Exciting Market Opportunity Young population & mobile penetration and data usage upside Largest Telecoms Market in Africa Historical (15A-20A CAGR) Forecast (20A-25E CAGR) Mobile subscribers in millions, 2019A Penetration Median Age 90% 191% 94% 103% 79% c.20 million population 19 20 28 41 increase

7. Slide 7: Well-positioned for the Long-term

   Well-positioned for the Long-term Unmatched nationwide coverage and high quality network Leading Mobile Network Kano Coverage by Population 1 2 3 4G Coverage (44%)  Most expansive network coverage amongst peers 3G Coverage (78%) Best Coverage Abuja 2G Coverage (88%)  Best network quality with high

8. Slide 8: Leading Commercial Proposition

   Leading Commercial Proposition Leading commercial proposition allows MTNN to attract customers across all segments and focus on high value segment Largest Distribution Network Nationwide Leading Brand in Africa Multichannel Customer Service Largest Physical Distribution MTN USSD & MyMTN App Call Cen

9. Slide 9: Balanced Structure with Versatile Team

   Balanced Structure with Versatile Team Chief Finance Officer Executive: Human Resources Combined telco experience of Modupe Kadri Esther Akinnukawe over 200 years Joined MTN: 2007 Joined MTN: 2012 Years of telco experience: 12 Years of telco experience: 7 Deep local expertise and Company Secretary G

10. Slide 10: Key Milestones

    Key Milestones Key Highlights & Challenges in 2019 ▲ Launched very affordable smart ▲ Obtained approval to utilize ▲ Paid first dividend as a ▲ Conducted trial of 5G technology feature phones to drive data 800MHz spectrum public company usage ▲ Launched MusicTime ▲ Rolled out 4G+ services in Lagos,

11. Slide 11: Operational Highlights

    Operational Highlights Strong performance supported by voice and data growth Subscribers Investment Growth drivers +6.1 million to 64.3 million N208.3 billion capex, +7.6% total subscribers, up 10.5% up 13.1% voice traffic +6.5 million to 25.2 million 17.8% capex intensity +37.6% active data users,

12. Slide 12: Regulatory Update

    Regulatory Update Attorney General of the Federation (AGF) matter on The AGF withdrew the alleged US$2bn revenue indebtedness and transferred the matter the adequacy of taxes and duties paid to the relevant tax and customs authorities. We have therefore discontinued the legal action against the AGF

13. Slide 13: Recent Developments

    Recent Developments Covid-19 and fall in Oil Price Impact on MTN Nigeria  Covid-19 impact on Chinese economy with drag on world  Shorter-term commercial impact economy  Mitigating supply chain risk for network devices and SIMs  Dampens activity with fear factor restricting mobility  Implementin

14. Slide 14: Strategic Review

    I H lt Strategic Review

15. Slide 15: Building a Digital Operator

    Building a Digital Operator The evolving telco The digital player MTN Nigeria The Digital Operator Digital Voice Data Enterprise Wholesale Rich media, content VAS & mobile advertising, MusicTime and Ayoba Digital, Data and Fintech Outpacing Voice and Other Segments The fintech player (Q4 2019 YoY Se

16. Slide 16: Unlocking Opportunities Across the Curves

    Unlocking Opportunities Across the 6 Curves the consumer, enterprise and wholesale market segments Consumer Positioning Rapid scale Accelerating Broadening Accelerating Sustaining VOICE DIGITAL on a FINTECH on DATA as next ENTERPRISE WHOLESALE growth sustainable expanding agent wave of growth ecosys

17. Slide 17: Sustaining Voice Growth

    Sustaining VOICE Growth 2019 Voice Revenue Key Drivers  Wide network coverage and availability +8.4% N848.3bn to  Easier access to recharge  Low penetration supports subscriber growth about 31million Nigerian excluded from telecoms services  Subscriber growth driving voice revenue YoY  30%-50%

18. Slide 18: Accelerating Data as Next Wave of Growth

    Accelerating DATA as Next Wave of Growth Key Drivers 2019 Data Revenue  Data price revamp at end of Q2 2019  Extended 4G coverage following the unlocking of 800MHz +42.4% N219.9bn to  Introduction of smart feature phones  Consumer education, seamless access and experience  Service bundling YoY

19. Slide 19: Positioning Digital on a Sustainable Growth Path

    Positioning DIGITAL on a Sustainable Growth Path 2019 Digital Revenue Key Drivers  Improved customer journey and experience on value-added services following the completion of VAS optimization exercise in Q3 2018 -77.1% N4.6bn1 to  Increasing data adoption  Increasing awareness of digital service

20. Slide 20: Rapid Scale Fintech on Expanding Agent Network

    Rapid Scale FINTECH on Expanding Agent Network 2019 Fintech Revenue Key Drivers  Low level of banking penetration 23.3% N35.2bn to  Limited traditional banks footprint in rural areas  Large cash economy  Synergies with growing digital services  Synchronised products distribution and channels ac

21. Slide 21: Broadening Enterprise Ecosystem

    Broadening ENTERPRISE Ecosystem 2019 Enterprise Revenue Key Drivers  Enterprise is mobile centric 20.3% N132.8bn1 to  Unserved large SME market  Low level of ICT adoption  Increasing focus on core activities  Fragmented service providers YoY 28.2% 20.8% 20.1% 14.1% Growth  Enhanced partner eco

22. Slide 22: Accelerating Wholesale Business

    Accelerating WHOLESALE Business 2019 Wholesale Revenue Key Drivers  Huge capacity demand 45.2% N46.0bn1 to  Satellite to fibre migration  Managed MPLS needs  Fast growth in digital services  Increasing need to invest in infrastructure efficiently YoY 68.1% 66.7% 39.3% 16.8% Growth 11.6 11.5 11.

23. Slide 23: Financial Update

    Financial Update

24. Slide 24: Financial Highlights

    Financial Highlights Double-digit service revenue growth on track with our medium-term target Service Voice Data Opex Revenue + 8.4% + 42.4% - 21.4% + 12.6% - 4.4%(1) N321.1bn N1,167.5bn N848.3bn N219.9bn N426.6bn(1) EBITDA EBITDA Margin Free Cash Flow EPS + 45.2% + 12.1pp +51.4% + 38.9% +20.9%(1) +

25. Slide 25: Performance Summary

    Performance Summary Voice and data drive strong revenue growth, margin expansion with operational leverage Service revenue Expenses EBITDA and Capex (NGN bn) 12.6% (NGN bn) 6.3% (NGN bn) 41.8% 44.8% 53.9% EBITDA Margin 1,167.5 17.7% 17.8% 21.5% Capex Intensity 645.4 47.4 607.4 629.9 EBITDA 1,036.9 1

26. Slide 26: Total Revenue

    Total Revenue Double-digit revenue growth in line with our medium term guidance Total Revenue Split Understanding Revenue Growth Commentary YoY Growth 11.6% 17.4% 12.6%  Improved network coverage and availability 1,169.8 49.7 48.2 12.1 2018 Revenue 1039.1 countrywide 1,039.1 5.5 35.2 (NGN bn) 34.0

27. Slide 27: Cost Breakdown: Cost of Sales

    Cost Breakdown Cost of sales Cost of Sales Split Understanding Cost of Sales (NGN bn)  Gross margin remains relatively flat, at 81.3% in Gross 79.2% 81.1% 81.3% 2019 margin 218.8  Increased interconnect cost due to: 198.9 18.7 184 8.4 13.3 26.2 – Growth in subscriber base 23.1 10.1 19.3 1.9 8.3 6.

28. Slide 28: Cost Breakdown: Operating Expenses

    Cost Breakdown Operating expenses (Opex) Opex Understanding Opex intensity 40.2% 39.3% 27.5%  Lower opex due to the adoption of IFRS 16 Opex Split 356.1 408.5(1) 321.1(2) (change in accounting treatment of lease rental), (NGN bn) representing a decline of 21.4% 44.2  On IAS 17 basis, opex was N426

29. Slide 29: EBITDA

    EBITDA Revenue driving growth +45.2% (N'b) 105.50 629.9 130.62 524.42 433.89 16.20 3.75 6.57 9.62 36.35 EBITDA FY18 Salaries & SIM Cards & Interconnect Lease Rental Others Revenue EBITDA FY'19 IFRS 16 EBITDA FY19 Actual IAS 17 Staff Costs Device Cost COS Actual IAS 17 Ajustment Actual IFRS 16 29

30. Slide 30: Capital Expenditure Breakdown

    Capital Expenditure Breakdown Reducing intensity while maintaining investment in capital expenditure NGN bn FY19 Capex Allocation (%) Per IAS 17 Per IFRS 16 251.9 14% 11% 225.3 208.3 2% 184.2 17% 25.4% 21.5% 2% 17.7% 17.8% 70% 84% Network IT 2017 2018 2019 2019 (IFRS 16) Network IT Other Capex Capex

31. Slide 31: Cash flow

    Cash flow Strong cashflow position & working capital efficiencies (NGN bn) 629.9 (206.3) (68.1) (37.1) (26.0) (62.1) 120.3 (110.0) EBITDA FY19 Capex1 Lease liability Net Interest Paid3 Change in Net Income Tax Paid NCC Fine Levered FCF Actual IFRS 16 Interest Paid2 Working Capital Repayment Notes: (

32. Slide 32: Capital Structure Overview

    Capital Structure Overview (NGN bn) Overview and Financing Strategy Debt Evolution  MTNN has historically maintained moderate leverage; remains in a comfortable position Total 255 175 413 (1) relative to covenants on current FY19 metrics: Debt – Interest Coverage of 15.1x (excl. financial leases) a

33. Slide 33: Looking Ahead

    Looking Ahead

34. Slide 34: Investing for Sustainable Growth

    Investing for Sustainable Growth Voice Data Digital Fintech Enterprise Wholesale  Further targeted  Focus on LTE  Improve customer  Scale our agent  Deepen enterprise  Monetize existing segment value coverage journey and network penetration across infrastructure propositions experience differe

35. Slide 35: Enabling Broader Economic & Social Development

    Enabling Broader Economic & Social Development Carrier of carriers to 20 Million 1 Enabling over Invested over Each month, over N21 billion in 16million people 100+ ISPs, Nigerians live in Billion with no airtime Carriers & ICT places where MTN is rapid & expedient over 860 projects, connect with th

36. Slide 36: Medium-term Guidance

    Medium-term Guidance Service revenue Double-digit growth EBITDA margins Improving margins Capex intensity Reducing intensity Dividend At least 80% of distributable net income 36

37. Slide 37: MTN Nigeria Investment Case

    MTN Nigeria Investment Case Strong Exciting position in the demographic right market opportunity • Largest African economy • Fast growing youthful population • Largest telecoms market in Africa • Low data, fintech and digital adoption • Clear leader in mobile market • Large unbanked segment Clear st

38. Slide 38: Appendix

    Appendix

39. Slide 39: Impact of IFRS 16 adoption

    Impact of IFRS 16 adoption IAS 17 IFRS 16 Effect on December 2019 Income statement Operating lease on straight line  No operating leases costs in  N105.5 bn basis in EBITDA EBITDA  N56.8 bn  Depreciation on right of use asset  N68.1 bn  Interest expense on lease  -6.54% liability  Impact on

40. Slide 40: Attractive Return Profile

    Attractive Return Profile Driving growth and profitability Service Revenue Growth EBITDA Margin Expansion Strong Capex Investment (NGN bn) (NGN bn) (NGN bn) Growth 11.6% 17.4% 12.6% -9.2% 25.4% 45.2% (%) 79.2% 81.1% 81.3% 25.4% 41.8% 53.9% 17.7% 17.8% 39.0% 1,039 1,170 885 630 225 184 208 346 434 20

41. Slide 41: Highlights of Income Statement

    Highlights of Income Statement Growth 2019 2018 % of Gross % of Gross Note(s) % N 'mn Revenue N 'mn Revenue Revenue 12.6% 1,169,735 100.0% 1,039,118 99.8% Other income -95.6% 97 0.0% 2,225 0.2% Gross revenue 12.3% 1,169,832 100.0% 1,041,343 100.0% Direct network operating costs -20.8% -242,012 20.7%

42. Slide 42: Highlights of Financial Position

    Highlights of Financial Position 2019 2018 Growth N '000 N '000 % of Total % of Total Assets % N 'mn N 'mn Assets Assets Non-current assets 69.3% 1,263,107,084 82.8% 745,884,700 79.2% Current assets 34.0% 262,463,460 17.2% 195,854,920 20.8% Total Assets 62.0% 1,525,570,544 100.0% 941,739,620 100.0%

43. Slide 43: Thank You

    Thank You

44. Slide 44: Disclaimer

    Disclaimer THIS PRESENTATION AND ITS CONTENTS ARE CONFIDENTIAL AND ARE NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA, JAPAN, OR ANY JURISDICTION WHERE SUCH DISTRIBUTION IS UNLAWFUL. THIS PRESENTAT

45. Slide 45: Disclaimer (Continued)

    Disclaimer (Continued) Matters discussed in this document, at the presentation and any materials distributed in connection with the presentation may constitute or include forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by word

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