MTN Nigeria recently hit a major milestone as the first mobile network operator in Africa to be accorded some significant upgrade from the Global Credit Ratings (GCR). The GCR upgraded the national scale long-term rating of the recently concluded N110 billion series 1 senior unsecured bond to AAA with a stable outlook: representing the highest possible long-term and short-term ratings on GCR’s national rating scale.
The telecoms company also made an announcement of the decision to sell 14% of shares, and let in close to 2 million retail investors. Coming within the same month, it almost sounds too good to be true and is causing serious buzzes of excitement in the corporate space. The Telecoms company appears ready to prove by its results that it did not become the largest (by subscriber base) by accident, but deliberate decisions and actions.
Before the recent announcements, MTN Nigeria has been considered a choice stock pick on the grounds of its capital gains and dividends history. This recent news will now be a major boost to the company’s profile and reputation.
Better customer service – The 2025 strategy
Commenting on the strategy for the next three years, Chief executive officer, MTN Nigeria, Karl Toriola, talked about the company’s expansion plans, and a possible investment of 1.5 to 1.7 billion US dollars in its rural network over the next three years.
“There are significant opportunities in Nigeria, in the rural areas and that is one of the key national agendas – to bring a lot more people into the connectivity space. We will be widening our rural coverage expansion, with specific solutions designed to provide service in a cost effective manner to rural populations in a manner that they can afford” Toriola said.
He emphasised that for the brand, the focus is always going to be on customer service and service quality, even as the company deploys an estimated N640 billion into broadband acceleration and rural network development over the next three years.
Towards financial inclusion
The telecoms giant also recorded a strong growth in profit in its 2020 results, and consolidated on that in Q1 2021 with a growth in Net profit margin from 15.7 percent in the same period last year and from 15.2 percent at the end of 2020 operations to 19.4 percent at the end of March 2021.
With a huge subscriber base and such strong balance sheets, MTN Nigeria is ready to play a key role in helping the country attain the 80% financial inclusion which was earlier targeted for 2020.
Reports show that MTN Nigeria aided over 1.6billion naira worth of financial transactions via its Unstructured Supplementary Services Data (USSD) channels in 2020 alone, an indication of how critical a role the company could play in reaching the unbanked in Nigeria. Its 2025 strategy to stretch its rural network farther also makes for a perfect sync with the digital penetration and financial inclusion agenda.
Speaking in the Arise TV interview, Toriola said “it is up to the CBN to assess and decide what the role of telecom operators, particularly MTN Nigeria having a large subscriber base, in the agenda of financial inclusion. We would like to contribute through the Payment Service Banks (PSB) or any other channel that may be made available by the CBN but we trust their judgement in that. PSB remains front and central to our strategy but we will work according to the CBN decision”.
This looks to be a win-win situation as MTN Nigeria already has a large distribution network which can help the financial services system to reach the unbanked, and ultimately see a growth of the deposit banks.
Opening the doors to retail investors
As at the time of MTN listing on the Nigerian bourse, the management had promised to increase retail ownership in the company when there is an appropriate market condition for the offer. It would appear that the time has finally arrived. MTN Mauritius (MTN Group) holds c. 82% of the firm’s outstanding shares, while c.18.0% is held by Institutional Investors, an arrangement that does not allow ‘day-play’ on the stock.
The telecoms giant is about to change this, reducing the holding of the MTN Group to approximately 65-70% and opening its ‘doors’ to about 2 million retail investors.
“It has always been a part of our plan to diversify a great extent of the shareholding in MTN Nigeria through a selldown of the holdings of MTN group. Our focus in this secondary offer is going to be around the retail market. We would like, with the support of Nigerians, to be the most actively owned company by Nigerians. Our target broadly speaking is about 2 million retail shareholders in the short to medium term,” Toriola explained in the interview.
This means that MTN Nigeria will be letting go of 14.0% of its group shareholding to retail investors.