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MTN : A CLEAR MARKET AND INDUSTRY LEADER

The exploits of MTN in the last few years ,no doubt , are extra-ordinary. But this may not be farfetched. The telecom giant’s skillful ability to position itself strategically while minimizing the impacts of deleterious external environment , leveraging internal resources and competencies as well as tailoring these with the expectations and influences of its stakeholders remains its unique selling point . More importantly ,its uncanny ability to translate its strategic choices to actions has continued to deliver the bulk

THE FUNDAMENTALS ,THE FIGURES

MTN Nigeria is the most profitable company in Nigeria (based on public records) and also the second most capitalized company on the Exchange.  No doubt ,MTN remains a formidable company in Nigeria with strong profit and revenue machines .These machines have continued to deliver a towering market strength  , making  it  the first listed company on the Nigerian Exchange Limited (NGX) to record a revenue of N1trn MTN Nigeria and its total market value is in trillions. 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 

 By this feat ,it remains a clear market and industry leader . MTNN Plc is the  second -highest in market value on the Nigerian Exchange Limited (NGX), right behind Dangote Cement Plc.  Currently , it is the leading stock with over one trillion Naira (SWOOT) in turnover.MTNN Plc share price, at the end of the trading week, closed at N187.00 per share, to appreciate by 7.20%, taking its market capitalization to N3.81 trillion at the end of the five trading sessions of the week. The communications company, a competitor with Airtel Nig Plc, has a total market capitalization of N3.81 trillion, N217 billion higher than Airtel Africa’s current market value.

  The MTN group had last week concluded the sale of 575 million units of its Nigerian subsidiary shares to retail investors at a fixed price of N169 per share with an incentive of 1 free share per every 20 units of shares purchased, subject to the condition to hold for 12 months.

 2020  :A Milestone  Year

Its earnings and revenue have continued to grow in leaps and bounds.  In a ground-breaking full-year turnover in the financial year of 2020, the telecom giant’s revenue expanded by 15.1% year-to-year to N1.3 trillion , the highest ever recorded by a Nigerian listed entity. The strong revenue growth was basically due to its data-led segment as sales from the segment expanded by an impressive 51.5% Year to while Year while Voice sales rose relatively by 5.6% year to year as the global switch to data-enabled communication subsisted

2021 Financial Performance : Better Hope On Horizon

 MTN’s  2021 financial year ,no doubt ,promises to be juicier  .As at 30 July 2021MTN Nigeria Communications Plc (MTN Nigeria) . its revenue was up by 24.1% to N790.3 billion; Earnings before interest, tax, depreciation, and amortisation (EBITDA) grew by 27.6% to N417.2 billion; EBITDA margin improved by 1.4 percentage points (pp) to 52.7% ; Capital expenditure was up by 39.1% to N186.4 billion as Dividend per share came up 30% to N4.55 kobo . The company released its Q3 2021 financial result, reflecting a 22.89% growth in revenue for the period, while profit after tax grew significantly by 58.99% from N49.36 billion in Q3 2020 to N78.48 billion in the current period.

 This telecom giant   9months’ results  show  a  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%.

Moreover , 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%

 Its 9month 2021 result shows double-digit revenue growth, despite a difficult macroeconomic environment . Revenue rose by +23.62% from N975.76bn in 9month 2020 to N 1,206.26trn in 9month 2021 ; by market capitalizations it worth over one trillion Naira ; As at the time it declared its 9month results, its market value stands at ₦3.8t

Trailing 12 months (TTM) Value 

From the perspective of the  Trailing 12 months (TTM)  its  key profitability statistics from the latest earnings report on indicate its revenue ,gross profit and earnings currently stand at N1.58t, N1.02 t and N281.29b .Trailing 12 months (TTM) is a term used to describe the past 12 consecutive months of a company’s performance data, . In the equity research space, some analysts report earnings quarterly, while others do so annually. But investors who seek daily information about stock prices and other current data may look to TTMs as more relevant measures, because they’re more current, and they are seasonally adjusted. MTN is now on track to achieve its double-digit revenue growth plan this year as it is now up 5.4 percent from the N365.2bn of the previous quarter. The double-digit growth is happening on the back of tumultuous three months of SIM card registration bans and government mandates for all Nigerians to register to obtain their NIN and link the numbers to their SIM Cards.

Commenting on the results, MTN Nigeria CEO Karl Toriola said:“In the first half of 2021, we made good progress strengthening the resilience of the business, managing the impact of the COVID-19 pandemic and enhancing support to our people, customers and other stakeholders. Our progress towards achieving greater business resilience is reflected in the upgrade by Global Credit Ratings (GCR) of our national scale long-term issuer rating to AAA and affirmation of our national scale short-term rating of A1+ with a stable outlook. This puts MTN Nigeria on the highest possible GCR scale

 DRIVERS

What drives this telecom’s giant strides in spite of the deleterious environment ? MTN exploited its strengths and opportunities  ,minimized its weaknesses and translated the industry threats to strength to further beef up its competitive advantages .   One of these is its size advantage, a critical success factor behind its dominion over its competitors. The network enjoys large economic of scale which leads to increased profits, generating a higher return on capital investment and providing businesses with the platform to grow. Economies of scale are an important concept for any business in any industry and represent the cost-savings and competitive advantages larger businesses have over smaller ones.

This manifests clearly in its market share . MTN holds the largest share of the mobile market, accounting for 44% of total mobile subscribers, followed by Globacom, with 21%, Airtel, with 20% and Etisalat, with 15%, according to the NCC. A growing number of Nigerians access the internet via their mobile phones, which is helping to improve this operator revenues

The telecom giant is equally leveraging on its strong brand value because the “net economic benefit the brand owner is achieving by licensing the brand in the open market is overwhelming .”.MTN remains the Africa’s most valuable brand . For the second year in a row, MTN Group, has been named the most valuable African brand in the Brand Finance Africa 150 rankings, which assigned the group a brand value of $2.7 billion – $1.0 billion above the next most valuable brand.A report on the 2021 survey’s findings states that, “the telecoms giant dominates on home soil too, this year holding onto its decade-long reign as South Africa’s most valuable brand.”

This laudable latest accolades and position ,according to MTN Group Chief Executive Officer, Mr Ralph Mupita were achieved thanks to the hard work of MTN workers across the continent and their commitment to bringing to everyone in 17 African markets the benefits of a modern connected life.“We are both humbled and inspired by the confidence our customers and broader stakeholders continue to place in the MTN brand. At the core, a brand is about exceeding promises, expectations and delivering true value,” Mupita said.

MINIMIZING POTENTIALS WEAKNESSES

Two major potential challenges confronting any telecom outfit are disruptions in the network and easy switch between competitors. But paradoxically MTN is translating these weaknesses into strengths

Disruption in network is usually a big headache for telecom companies in Nigeria . Sometimes , some parts of the country have been unreachable on networks ; sometimes, customers are able to access the internet, but may not be able to make calls due to network downtime . But MTN’s quick response to situations is what drives customers loyalty ; services are restored within a few minutes .This is where the difference is made among the players

Easy switch between competitors

Shifts in the marketplace can often be a powerful dynamic that no one wants to acknowledge; businesses face the challenge of losing existing customers to a competitor. However, there is always a solution to any problem . MTN has strongly maintained its customers loyalty with services loaded and laden with convenience, competitive prices and values ; its customers are treated with kindness, empathy and human touch . Often a root cause for switching is that some human being at the client felt ignored, disappointed or missed a real human connection. But for MTN , its customers are treated with strong empathy and made to get good value for their money .The company has a tradition of resolving their problems efficiently and without jumping through hoops , without allowing the brand getting stale and not providing the value it once delivered , acting human and making them feel appreciated and valued .All these have continued to have powerful effects on its brand .

Opportunity

MTN’s wide range of products ,the growing mobile and internet market across the globe and fast expanding digital market are its fortune drivers that keep it ahead in the competitive battle . MTN Nigeria Communications PLC provides wireless telecommunication services. The Company offers roaming, Internet, bills payment, device financing, data management, SIM registration, and other related services. MTN Nigeria Communications serves customers in Nigeria.

One thing that is unique about MTN is its drive to devise its products to various degree of its customers requests, interests and tastes . You can purchase data from myMTN App even when you run out of data or you are outside data network coverage. There is a daily ‘zero-data access’ limit that allows the customer use myMTN App. When offline (out of data network coverage), customer will be defaulted to the myMTN Lite version. On the Lite version, when the customer clicks to buy Data or Airtime, the customer is redirected to the applicable USSD code to make purchase.

Roaming with your MTN line while traveling abroad allows you to stay in touch with family, business, and friends even when you are thousands of miles away from home. The goal of MTN is to make your roaming experience a pleasant one. MTN’s variety of roaming offers afford you attractive discounts during your trip with over 500 roaming partners in more than 150 countries and islands across the world, they provide the best deals.

MTN XtraCash is a service that allows eligible customers access short term micro credit loans via a USSD platform from their phones. This service will not be available to all customers it will be available ONLY to eligible prepaid customers who are Diamond Yello Account holders. And a customer can check if he/she is eligible by dialing *606# to access the Xtracash USSD menu. MoMo Agents offer financial services including opening accounts, cashdeposits, cash withdrawal, transfers Bill payment, air time and so much more. With MoMo Agents you can send money to your loved ones anywhere in Nigeria without having a bank account. The cost of sending money is N100 and to receive is also N100. For further information please contact MTN customer care 180

LTE (Long Term Evolution) is the 4th generation of telecommunications tech which delivers very high data speeds. With long term evolution, you can enjoy high definition Video Streaming, Video and voice calls, superfast downloads, online gaming e t c. LTE offers faster download and upload speeds that will considerably improve your internet experience. With LTE you can stream music and video, upload and download faster. You can essentially use your mobile or tablet like a fixed line internet connection.

MTN XtraByte is a service that allows eligible customers borrow data on credit when they run out of data while browsing and pay back on their next recharge. MTN XtraByte will be available ONLY to eligible prepaid customers. A customer can check if s/he is eligible by dialing the code, *606# and then select 1.

  Digital marketing, also called online marketing, is the promotion of brands to connect with potential customers using the internet and other forms of digital communication. This includes not only email, social media, and web-based advertising, but also text and multimedia messages as a marketing channel. The primary channels that digital marketers should focus on are:Email Marketing.Pay-per-click Advertising (PPC)Display Advertising.Social Media Marketing (SMM)Affiliate Marketing.Public Relations.Digital marketing can be broadly broken into 7 main categories including: Search Engine Optimization, Pay-per-Click, Social Media Marketing, Content Marketing, Email Marketing, Mobile Marketing, Marketing Analytics.Several factors are fueling this growth, including expanding coverage, increasingly sophisticated mobile-device functionality, sharply falling prices and fast-rising sales, a growing selection of smartphones and tablets on the market, and the development of new categories of devices such as wearables and connected home …10 Feb 2015The rising usage of mobile internet, will drive a growing number of consumers to switch to higher quality devices.

Mobile accounts for approximately half of web traffic worldwide. In the first quarter of 2021, mobile devices (excluding tablets) generated 54.8 percent of global website traffic, consistently hovering arou nd the 50 percent mark since the beginning of 2017.

THREATS

 Existing competitors

As an essential factor in the efficient working of markets, competition in an emerging economy such as Nigeria is central not only to the operation of the markets but also the efficient expansion of the market. Before now, government regarded the telecommunications market as a monopoly and perhaps, for this reason it was operated as such with NITEL having the monopoly of the industry. The industry was later liberalized and opened to competition. The impact of the competition policy in the industry is therefore too visible to be discounted. MTN has undoubtedly been on top of the game with its strategic choices that address the circumstances in which it is operating ,,generating the expected performance outcomes as well as its resources and competencies that deliver its strategies ..Most importantly , its strategic capability allows its resources to be deployed ,managed ,controlled optimally ; and in the case of people to be motivated to create competence in those activities and business processes needed to run the business

.Moreover ,MTN has created standards that have minimized fear of new entrant in the industry, another potential threat to its leadership MTN has achieved a proprietary position in its industry ; it has become an industry standard .The achievement of this position meant that other businesses have to conform to or relate to its established standard in order to prosper ; the architecture of the industry could only be built around its standard as it is a dominant player .This standard has become self-reinforcing

Technology

Technology is a key a parameter that drives telecom businesses. However, acquisition of technology is not necessarily a source of advantage but its exploitation is where advantage may be created. One thing that delivers and sustains MTN’s leadership advantage is its ability to acquire world-class technology and its strategic ability to deliver services in a way others can’t match faster and in a way that lowers its costs .Moreover, some analysts noted that MTN’s first mover advantage has kept it ahead in the industry too. The telecom companies around the world are facing a lot of challenges and threats in this era. New technologies like the Internet of Things (IoT), augmented reality (AR), virtual reality (VR), microservices and more necessitate that telecom providers realign their business strategies and restructure themselves as per the cloud era, in terms of operations, architecture and networks as well. Moreover, in order to gain a competitive edge, they need to focus on providing customized solutions to their customers and focus on developing long-term relationships with them

The telecommunication industry is going through a transformational phase of development – to acclimatize itself per the new technological and cloud trends. At the very outset, the focus was on the Communication Technology (CT) which marked the first wave of the information era. The second phase was the internet phase which started approximately around the year 2000. The industry realigned itself around horizontal solutions during this phase. It was the time of e-commerce and portals.

After 2006, the cloud began taking shape and this marked the third phase of transformation in the telecommunication industry. Come 2019 and we are in the midst of the era of cloud, where a new world of opportunities has opened up for the carriers. It is quite evident that this era is unstoppable and there is no escape.

REGULATION

THE regulatory atmosphere in Nigeria’s telecommunication sector may appear inconsistent and bullish in some aspects, particularly in the areas that affect business operations. However, the balance it creates between the government, operators and the users makes it the most unique in Africa.

In one breath the operators are crying that some of the decisions are affecting their operations, in another, the regulators are making excuses for the operators’ poor services, trying to figure out ways the government can create a more conducive playing field for their businesses.

For instance, the buzz word in the industry is that the $200m loss MTN posted in its last financial year was as a result of the unprecedented fine it incurred from the Nigerian Communications Commission, NCC. , MTN says it made $200 million loss in 2016, the company’s first big loss after suffering a huge fine in Nigeria and currency challenges in key markets. The Group, indicated that its financial results for 2016 reflect the most challenging year in the company’s 22-year history. This was after the company reported profits of 20.2 billion rand ($1.6 billion) before tax, the previous year.

PRICE WAR

Price war gets triggered only when the products are comparable with similar aspects as in the Nigerian telecom industry , the ensuring price cutting erodes profit margins and, in some cases, can lead to firms making losses and at risk of leaving the market. The fierce price war in telecom industry in Nigeria is prompted by the players move to gain share and market dominance in a market that is in a growth state .This continues to lead to price cutting and increase in investment expenses in advertising This strategy is high risk unless the resulting low margin is financed by products earning higher profit levels . However , MTN its relatively wider profit margins, substantial relative market share advantage that provides it with cost advantage through economic of scale and market power and its relative capacities and competencies that deliver low cost advantage have all given it an edge over its competitors in the price war . .The only threat to its victory is it tight cost structure engendered by high debt profile. Data price ‘war’ among telecoms operators allegedly is one of the major causes of poor service quality faced by Nigerian subscribers, especially in the download and upload of content. But while consumers have enjoyed the conflict and its attendant slash in prices, they have had to endure drop in quality and speed.

Leverage Ratio

 A threat confronting this telecom giant is its high degree of leverage .;  the 9month 2021 financials of the technology company revealed that the company is heavily financed by debt  However , this is coming  down on fast lane . 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%.      

The downward trend of its leverage ratio is reflected on its Return on equity; it  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.

 The downward trend of its leverage ratio may not be farfetched .  The 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  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

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

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