Like Microsoft, Like MTN?

Like Microsoft, Like MTN?

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MTN Nigeria (MTNN) last week (Thursday) crossed another major milestone on its journey to provide telecoms services to millions of Nigerians since its entry in 2001, with a listing on the Nigerian Stock Exchange (NSE).

Valued at N2.16 trillion ($6 billion) , at the close of trading on Friday, MTNN is now the second largest company listed on the NSE, overtaking the likes of Nestle, Nigerian Breweries and Guaranty Trust Bank (GTB).

Demand for the shares has been robust and the stock has gained some 20 percent in just two trading days.

It is not hard to see why investors are bullish on the stock.

MTN Nigeria reported solid first quarter (Q1), 2019 numbers, with service revenue increasing by 13.4 percent year on year (YoY), led by a 32.4 percent increase in data revenue and a 12.7 percent increase in voice revenue.

Growth in data revenue was supported by an increase in smartphone penetration, improved network quality and a 9.1 percent increase quarter on quarter (QoQ) in active data subscribers to 20.4 million people.

Total subscribers increased by 3.6 percent to 60.3 million, between December 2018 and March 2019, while EBITDA margins hit 53.3 percent.

Later, on the night (of the listing), there was a dinner party where shareholders, investment bankers, the MTNN Chairman Pascal Dozie, the CEO Ferdi Moolman, members of the board, the Chief Operating Officer, MTN Execs, GM’s, dignitaries and many others in attendance, gathered to celebrate a truly historic occasion.

However it is easy to forget that just a few months ago this listing was nearly made impossible by accusations from the Central Bank of Nigeria’s office that MTN Group Ltd., illegally withdrew $8.1 billion from the country and an order was issued to repay the sum.

The Attorney General of the Federation, not to be left out of the show, also alleged that MTN was owing $2 billion in back taxes, demanding instant payment.

MTN has had other run ins with Nigerian regulators, including a huge fine of $5.2 billion imposed by the Nigerian Communications Commission (NCC) for allegedly failing to meet a deadline to disconnect 5.1 million unregistered subscribers.

MTN Nigeria settled for about $1 billion but its profitability took a hit and growth slowed after it cleaned up its subscriber numbers.

However despite all the recent troubles MTN has continued to execute excellently, and growth is accelerating once more.

The success of MTN Nigeria reminds one of Microsoft (MSFT), which recently overtook Apple to become the world’s most valuable company, when its valuation crossed the $1 trillion mark last month.

Like MTN, Microsoft is a large mature company (whose best years were thought to have been long gone) that continues to grow fast.

Microsoft was famously in the crosshairs of anti-trust regulators in the U.S, over the browser wars, and it almost got broken up by the Clinton administration.

Failed products like Zune, the windows phone, Bing (the search engine) writing off $7.6 billion from the purchase of Nokia Corp., combined with the decline of Windows, which achieved a market share of more than 90 percent at its peak, led analysts such as Jim Cramer (of CNBCs Mad Money fame), to derisively nickname the company ‘Mister Softy.’

The company’s turnaround under new CEO Satya Nadella involved cutting funding to Windows and building a huge cloud computing business—with about $34 billion in revenue over the past year—putting it ahead of Google and making progress in key areas against the dominant player, Amazon Web Services.

Today, MTN is also quietly building up its cloud capacity, in the process blurring the lines between being a telecoms company and a Technology Company.

Going forward the growth of MTNN is expected to be powered by Voice, Data, Rich Media Services, Mobile money (E- Commerce), Enterprise (Business to Business), and wholesale.

The opportunity in Voice is still particularly striking, for such a seemingly mature Telco.

Today some 20 million people in Nigeria live in places where MTN is the sole provider, and management believes there is still growth in voice.

The firm was awarded a Super-Agent license on an approval in principle basis, while it has applied for a Payment service Banking (PSB) license from the CBN.

All these point to another major growth phase about to kick off for MTNN and I predict that in 18 months or less MTN just like Microsoft (MSFT), will leapfrog Dangote Cement to become Nigeria’s largest listed Company.

Beyond that there is a lesson to be learnt in MTNN success in terms of strong corporate governance, sound management teams, a competent regulator (the NCC) that shepherded the sector especially at inception, and capitalism and free markets.

The MTNN listing has already minted numerous (liquid) Naira billionaires, even as the firm effectively provides a vital service to millions of Nigerians.

Compare this to the billions of dollars in value destruction wrought by the defunct NITEL, which had the whole of Nigeria to itself but could not muster the ability to provide the population with Telecommunications services or make a profit while doing so.

To the MTNN listing I proffer a toast; God Bless Nigeria, God Bless Capitalism and God Bless MTN!



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