Interoperability Likely to Impact MTN’s Projected Revenue Despite Envisaged Oversubscribed IPO

MTN Ghana is raising an IPO on May 29 2018 in a bid to raise about $787 million. MTN plans to list a 35% stake on Ghana’s bourse valuing the unit at $2.2 billion. This was part of arrangements made when the company acquired the 4G license in 2015.

Why investors will scramble for it

MTN is the largest telecommunications company in the country. It has the largest subscription number of 16.2 million subscribers. It also leads the sector in mobile money subscription with 7.4 million active users. It has repeatedly posted profits year on year with the 2017 figures at GH¢ 238 million.
It is also the leading telecommunications company with 327,929 subscribers serving on the 4G spectrum. This represents a 77.7% market share of the 4G subscribers.

The company’s total revenue jumped to GH¢ 3.4 billion in 2017, as compared to GH¢ 2.77 billion revenue recorded in 2016. Strong service revenue growth of 29.3% year on year was also recorded in the first quarter of 2018, led by a 51.5% increase in data revenue.

MTN is the market leader in terms of mobile money. The overwhelming subscribers on its platform has allowed MTN to control the Mobile Money market in Ghana and had made it difficult for users of Vodafone Cash and Airtel Money or TIGO Cash to send money to users on their platforms. It could be said that out of every 10 mobile money users in Ghana at least 5 of them were MTN subscribers, users on other networks were therefore pressured to acquire MTN Sims and move to the network in order to enable them send funds via mobile money to MTN users and make transactions more convenient; this contributed to the growing subscriber base of the Telco and accounted for 15% of the company’s revenue in the first quarter of 2018. 

The mobile money interoperability which is in force now changes that trend. In fact data from GhIPPS reveals that after a week of rolling out the interoperability, Vodafone Cash gained the most; the interoperability platform recorded over 22,919 successful transfers, and more than half of that 13,504 was on the Vodafone Cash platform. The total for the first six days stood at a little over GH¢ 1.8 million and Vodafone alone recorded GH¢ 1.17 million representing some 65% of the total. So clearly, the mobile money interoperability could cause a slight decline in MTN's subscriber base as well as active mobile money users, and this is likely to affect MTN's projections with regards to revenue and profits declared to shareholders by the close of the year.

We at Goodman AMC envisage this MTN IPO to be oversubscribed and will be one of the successful IPOs on the Ghana Stock Exchange.

 By Isma-il Sulaiman & Bernard Boachie-Danquah
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Image Credit: Waldo Swiegers/Bloomberg

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