MTN’S N1.1 TRILLION PROFIT IS A ONE-ENGINE PLANE: THE WEAKNESSES IT CAN NO LONGER HIDE

Forget the fireworks over N1.165 trillion profit, N2.624 trillion EBITDA, N4.613 trillion revenue and 94.7 million subscribers — MTN Nigeria’s 9M 2026 results are a masterclass in distraction, where a deafening data boom is deliberately cranked up to drown out the sound of two engines failing mid-flight: fintech revenue has not just dipped, it has imploded 58.1% in Q3 to N20.3 billion, with each MoMo user now worth 33% less at N3,385 a month, while voice, once the empire, is flatlining at N1,755 ARPU despite 9.3 million new SIMs, leaving MTN as a one-engine plane burning expensive dollar-linked depreciation at N631.9 billion to stay airborne, and calling it a 25-year triumph.

Fintech revenue has collapsed 25.9 percent year-on-year to N97.5 billion from N131.6 billion, and in the third quarter alone collapsed 58.1 percent to N20.3 billion from N48.4 billion. It is the only segment in the entire group that is shrinking, and the rate of decline is accelerating. MoMo monthly active users are 3.2 million versus 2.9 million, up 11.6 percent, which looks like growth until you calculate what each user pays. N97.5 billion divided by 3.2 million users over nine months equals N3,385 per month, down from N5,042 a year ago, down 33 percent. Users are up but monetization is broken. Fintech was supposed to be MTN’s second engine, the techco story that justifies a higher valuation multiple than a pure telco. Today it is 2.1 percent of revenue versus 3.5 percent last year. Annualized, Q3 fintech is N81 billion, less than what MTN made in 2022. Deposit held for MoMo customers jumped 345 percent to N43.8 billion from N9.8 billion, so cash is sitting in the system, but MTN cannot turn it into revenue. That is structural, not cyclical, driven by CBN transfer caps, bank competition, and regulatory price controls.

Voice is the second engine that has stopped. Voice revenue is N1.496 trillion versus N1.347 trillion, up 11.1 percent, Q3 up 9.3 percent versus data up 31.4 percent. Voice is now 32.4 percent of total revenue versus 36.1 percent a year ago. Voice ARPU is N1,496 billion divided by 94.7 million divided by nine, which is N1,755 per month, flat in nominal terms and negative in real terms against inflation of 25 to 30 percent. Subscribers grew 10.9 percent to 94.7 million, 9.3 million net adds, but voice grew 11.1 percent, which is zero real ARPU growth. The new subscribers are low-value rural SIMs for incoming calls. Cost of sales is up 12.6 percent to N566.5 billion, commissions up 24.3 percent to N214.3 billion, advertisements up 73.3 percent to N56.4 billion, starter packs up 24 percent to N43.6 billion, employee costs up 96.5 percent to N186.7 billion, impairment losses up 767 percent to N23.8 billion. MTN is spending more to acquire customers who pay less. 94.7 million subscribers minus 57.2 million active data users leaves 37.5 million voice-only SIMs, 39.6 percent of the base, that after 25 years of data push still do not use data. That is not an opportunity, it is a ceiling.

The threats that nearly killed MTN in 2023-2024 have not gone away, they have changed form. Net foreign exchange gain is N80.1 billion versus N55.6 billion last year, up 44.2 percent, and net finance costs are down 25.3 percent to N277 billion from N370.9 billion, which looks like balance sheet repair. But Q3 FX gain fell 28 percent to N43.8 billion from N60.8 billion last year, signaling naira volatility is back. Right-of-use assets are N1.820 trillion and lease liabilities are N2.459 trillion, N2.109 trillion non-current plus N350.6 billion current, both dollar-linked. Depreciation of property and equipment is up 54.8 percent to N340.2 billion from N219.9 billion, right-of-use up 14.1 percent to N219.4 billion, total depreciation and amortization up 32.6 percent to N631.9 billion from N476.5 billion, growing faster than revenue at 23.6 percent. Capex cash spent on property and equipment is N1.003 trillion versus N539 billion last year, up 86 percent, Q3 capex ex-leases up 69.1 percent. 2027 depreciation will be even higher. EBITDA margin of 56.9 percent is impressive, but EBIT after depreciation is 43.2 percent. The gap will widen if revenue slows. Taxation is up 67.6 percent to N630.4 billion from N376.2 billion versus profit before tax up 59.4 percent to N1.795 trillion from N1.126 trillion, effective tax rate up to 35.1 percent from 33.4 percent, Q3 tax up 45.9 percent versus PBT up 39.6 percent, current tax payable doubled to N710.2 billion from N355.1 billion, cash tax paid N295.3 billion versus N21.5 billion last year, up 1,272 percent. The government is taking the incremental margin.

Despite these weaknesses, MTN’s strengths are undeniable and explain why profit is still N1.165 trillion. Data revenue is N2.684 trillion versus N1.977 trillion, up 35.8 percent, now 58.2 percent of total revenue, service revenue up 23.7 percent to N4.586 trillion driven almost entirely by data, active data users up 12 percent to 57.2 million, 60.4 percent of base, data ARPU N5,213 per month. EBITDA is up 36.8 percent to N2.624 trillion versus revenue up 23.6 percent, margin up 5.5 percentage points to 56.9 percent, Q3 margin 58.7 percent, operating expenses up only 9.6 percent to N1.988 trillion versus revenue up 23.6 percent, flow-through 80 percent, N882 billion extra revenue generated N706 billion extra EBITDA. Operating profit up 38.2 percent to N1.992 trillion from N1.441 trillion. Cash generated from operations N2.874 trillion versus N1.965 trillion up 46.2 percent, net cash from operating N2.309 trillion versus N1.558 trillion up 48.2 percent, cash conversion 109.5 percent of EBITDA, free cash flow proxy N1.169 trillion versus PAT N1.165 trillion, 100 percent conversion. Equity restored to N843.9 billion from N548.7 billion in December 2025, up 53.8 percent, retained profit up 76.2 percent to N705.5 billion, borrowings down 36.8 percent to N333.3 billion from N527.6 billion, finance income up 148 percent to N82.5 billion from current investments up 103.8 percent to N330.7 billion.

The opportunities that these strengths create are real but are now harder to exploit because the weaknesses block them. Converting 50 percent of the 37.5 million voice-only subscribers at N5,213 ARPU would create N1.17 trillion annual incremental revenue, 25 percent upside, and even 25 percent conversion is N585 billion. Q3 margin 58.7 percent annualizes to N3.8 trillion EBITDA run-rate, if sustained on N5.5 trillion revenue in 2027, EBITDA is N3.19 trillion, each percentage point of margin is N46 billion. Fintech optionality is huge because the base is so low, if MoMo goes from 3.2 million to 10 million users at old ARPU of N5,000, fintech is N600 billion annual versus N130 billion now. Capex intensity ex-leases fell to 18.7 percent from 20.3 percent, total capex down 5 percent to N1.187 trillion despite revenue up 23.6 percent, indicating MTN is past peak investment and can harvest cash, pay down remaining N333 billion borrowings, cut finance costs further from N277 billion.

What they portend for the future is a company that has become a one-engine plane. 58.2 percent of revenue from data is double-edged. If NCC imposes a data price floor cut or Airtel and Globacom trigger a price war, data growth slows from 35.8 percent to 15 percent, total revenue growth collapses from 23.6 percent to around 12 percent, and margin expansion stalls because depreciation is fixed at N631.9 billion and rising. Fintech, which was supposed to be the hedge against telco regulation, is now a systemic weakness down 58.1 percent in Q3, and if it continues to shrink, MTN loses its techco narrative and valuation multiple drops. Cash at end is N381.2 billion versus N496.1 billion last year, down 21.4 percent, despite operating cash up 48.2 percent, because investing consumed N1.332 trillion up 58.3 percent and financing consumed N1.223 trillion up 158 percent due to dividend N859.6 billion versus zero last year plus tax paid N295 billion, plus lease repayment N158.5 billion. Free cash after dividend is negative N41 billion. Dividend resumption is unsustainable if capex stays above N1 trillion and tax stays at 35 percent. The N1.165 trillion profit hides that MTN does not fix weaknesses, it outgrows them with data, but data cannot outgrow everything forever.