MTN Group Limited (MTN) Earnings Call Transcript

Ladies and gentlemen, I have the pleasure in welcoming you to our 29th Annual General Meeting of the shareholders of MTN Group Limited. Thank you for taking time to be here with us today. It is always a great pleasure to have our shareholders attending the AGM. Our AGM will be held entirely in electronic format as note by section 63 to day of the Companies Act of 2008, following the success of our previous natural AGMs, we have worked extensively to ensure that we follow a similar rigorous procedure for this AGM. We are certain that electronic participation will continue to provide us an opportunity to engage constructively allowing participants to interact with us from anywhere in the world, making it both easy, efficient and effective. I'm pleased to introduce the members of the Board who are present today Ms. Noluthando Gosa, Dr. Shaygan Kheradpir Ms. Nickey Newton-King, Ms. Sindi Mabaso-Koyana, Mr. Stan Miller, Ms. Nosipho Molope, Dr. Khotso Mokhele, Ms. Tsholo Molefe, Mr. Ralph Mupita, Mr. Tim Pennington, Mr. Vincent Rague and Mr. Nkululeko Sowazi. We have [indiscernible] from Mr. Lamido Sanusi. The group company secretary Ms. Thobeka Bonoyi. I also extend a warm welcome to our group executives, transfer sectors, external legal advisers, our sponsors and the external auditors who have joined us today. Shareholders can refer to Pages 11 to 12 of the notice of the AGM, which contains a picture and biography of all the directors. Today is an opportunity to interact with the Board about the overall management and performance of the company. Where possible, we ask that this be within the limited time we have. Shareholders' questions and comments pertaining to the proceedings of the meeting today will be addressed during the question-and-answer session later in the meeting. To enable you to ask questions, a video will be played to guide shareholders on how the platform works. The tutorial was sent with the link to all shareholders registered to attend this process. [Presentation]

Now that has been played, the voting process is open to the effect that shareholders can vote and will be able to amend their vote on the cost of the meeting. Following the conclusion of the Q&A session, voting will be closed. The voting process is open to that. In fact, the shareholders can vote and amend their vote during the cost of their meeting and following the confusion of the Q&A, voting will be closed. This allows shareholders an opportunity to vote on resolutions during the proceedings. The results of the votes will be shared thereafter. We shall now proceed with the ordinary business of the meeting. Having regard to the quorum I should advise that 15 members are present at this meeting, either personally or by proxy, representing 152,392 ordinary shares being 0.01% of the ordinary sales in the company. I should also advise that I am holding proxies and letters of representation in respect of 1,560,147,689 ordinary shares being 82.8% of shares in the company. As the necessary quorum is present, I declare this meeting duly constituted. The notice convening this meeting, as set out in the notice of the AGM booklet has been sent to all listed shareholders as at the record date of 19th April 2024. And as I take the notice as read. Before we transact with the ordinary business of the meeting, I confirm that the company has ensured that all the provisions of the company's act to JSE listings requirements, memorandum of incorporation as well as company's policies in relation to this meeting and resolutions being passed at this meeting above have been adhered to. In order to reflect more accurately the views of all members and to comply with the best practice, we will be conducting the voting on all the resolutions proposed at this meeting by way of a poll. Shareholders would have lost into the platform with our pre-arranged user name and password, which will enable you to submit your votes electronically during the meeting. You would have received shareholders user guide that explains how the voting platform works. For those shareholders that have previously submitted proxies, these proxies will be implemented and no further action is required. At this point, I appoint a representative of transfer sectors, Compushare to scrutinize the voting process represented by [indiscernible] and would also like to request that a representative of the external auditors of the company certified the results. And I confirm that a representative is in the meeting. We will now proceed to the business of the meeting and voting. You will see all resolutions that are being tabled at this AGM on the screen now. We have 19 ordinary resolutions and 3 special resolutions to be considered at this stage. Special resolution #1 has been individually separated and split into 34 individual resolutions. We will now open the voting on all resolutions to be voted on at this meeting. [Voting]

The voting will stay open until the end of the formal proceedings. At this point, I will declare voting closed on all resolutions and then announce the results of all the resolutions. Kindly indicate your votes by selecting on your voting platform, the appropriate choice to make on each of the resolution. We will now continue with the rest of the business of this meeting. I now call upon the Group President and CEO, Ralph Mupita, to give us an update on the business.

Thank you, Chair, and good afternoon to all shareholders and stakeholders joining us for this AGM. Let me provide you with an update on our operating context, our Q1 trading update as well as the priorities that we have for the year that lies ahead. Moving on to the next slide on our operating context. There are several factors that have impacted how we've operated and many of these factors, I believe, are ones that are familiar to you. Inflation, the currencies, regulatory developments, energy power and geopolitical conditions have been the major macro backdrop issues that we've had to navigate. If I focus on just 3 of them, I think the major one has been inflation, and I think it's been encouraging to see that although inflation remains elevated, it has started to trend down when we look at it relative to prior periods. On the currencies, the major issue that we faced, obviously, has been exchange rates in our markets devaluing against the dollar. Specifically, the narrow has developed since the period end of 2023, which was occasioned by the liberalization of exchange rates in Nigeria, and I'll come back to that. That has been a key factor in our operating context. On the geopolitical and social side, I think 2 main call-outs. We still continue to see geopolitical challenges across some of our markets, particularly those ones that are close to the Sahel. And in particular, we've seen the Sudan civil war continue as it's anniversaried. It is now over 12 months that civil war has been ongoing. Just moving on to our Q1 financial results within that operating context, just to highlight a few areas. We're pleased that we're still continuing to see operational and commercial momentum across our business, growing subscribers up to now 288 million and seeing very good traffic patterns within our data network as well as fintech transaction volumes. We saw data traffic growing at 36% year-on-year, and fintech transaction volumes grew at 18%. On the revenue side, constant currency revenue was up 11.3%, driven by the 2 main drivers of growth, which is data where we saw data growing at 20% and fintech beginning to accelerate and delivering a growth of 25% in the period. On the earnings side, some pressure we've seen on the margin, really driven by Nigeria, where we've seen the currency depreciation and network costs elevated, and we saw our EBITDA margin down 2.5% in the period. We are, however, continuing to remain focused on driving expense efficiencies. We have an expense efficiency target of ZAR 7 billion to ZAR 8 billion over the next 3 years and delivered ZAR 430 million during that period. On the balance sheet side, we saw cash upstreaming. Seasonally, we have lower cash streamlining in the first half. We still feel confident that we will see the cash upstreaming that we have communicated to the market that we anticipate in the year. And on the balance sheet strength side, we're still seeing the group net debt is 0.5%, and the Holdco leverage slightly above our target range of 1.5x at 1.7x. So under the macro conditions, a very solid set of results in the first quarter. Just moving on to the next slide. Over -- in the near term, we're very focused on resolving the negative equity position that we have in Nigeria. Shareholders will have seen with the Nigeria EGM that was taken up on the 30th of April. But we have a 5-point plan that we're looking to execute over the near term. The first is engaging with regulatory authorities around the tariff increase. This is an industry-wide initiative, not only at and these engagements are ongoing. The second is focusing on margin recovery and the expense efficiency initiatives are important in that regard. Then on CapEx, we have a reduced CapEx, but not to the extent that we would see, it's impacting the network quality. We still feel very comfortable that we have sufficient spectrum radio planning to ensure we maintain our network leadership position. We've continued to reduce the USDA exposures, closing out letters of credit. These would have been 243-odd at the end of last year and have quite come down quite substantially. And the final one here is continue to review our tower lease contracts, particularly the ones with IHS and those discussions are ongoing. Just moving to our priorities for the year and which we communicated with our Q1 trading update, these are really around, firstly, sustaining operational momentum underlying structural growth opportunities that we see across our business remain compelling, and we want to sustain this momentum for South Africa, a focus really on prepaid. The network investment that we've made has paid off the network availability has been restored and our network leadership position has also been reestablished. So we're really encouraged by those efforts in South Africa. And in Nigeria, as I mentioned, the priority there is to resolve the negative equity position across our platforms, the priorities if I'll pick up on a couple, the first one is really around the fintech ecosystem. You'll have seen that we saw really good growth off a low base, though, of our brand services, which we are looking to accelerate and leverage the partnership with Mastercard particularly around payments, e-commerce and remittances. We're also looking to progress the work around our fiber [indiscernible] and we're focused on the East to West link that will help us improve capacity as well as latency and resilience over the medium term. On expense and capital efficiency, as I mentioned, we have our expense efficiency program, which we're executing against. And we are looking to have a focus on our take contracts, the Nigerians being in particular. And then finally, on the balance sheet, continuing to focus on cash flow streaming and managing the debt profile, looking to reduce dollar-denominated debt and focus at the Holdco level on more ZAR debt. Finally, before I hand over to the Chairman, if we look at the final slide on our medium-term guidance. Our medium-term guidance has been largely the same. I would highlight 2 areas: Nigeria. We have given a single year guidance. We were looking at service revenue high 20s to low 30s as we navigate the current conditions. And that is before any type of increase and also on fintech, we've changed the guidance also to high 20s to low 30s. With those remarks, thank you, and I'll pass back to the Chairman.

Thank you, Ralph. We will now proceed to the presentation of audited annual financial statements. Directors report, Audit Committee Report, Social Ethics and Sustainability Committee report. Consolidated audited annual statements of the company and its subsidiaries as approved by the Board of Directors of the company, including the director's report, the auditor's report and the external auditors report for the year ended 31 December 2023 have been distributed as required and are being presented to shareholders. Copies of the integrated report, which contains the upgrade diversion of the annual financial statement have also been distributed by registered post and by electronic means to shareholders present at this meeting. The Social Ethics and Sustainability Committee report, which details the activities of the quality for the year ended the 31st December 2023 has been distributed by registered post and by electronic means to shareholders and is presented to this meeting. All of these reports are also available on the company's website. Are there any questions regarding the business presentation, the annual financial statements and the report?

There are no hands check, and there are no questions coming too, Chair.