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Spotlight On MTN, World’s 15th-Largest Mobile Firm By Subscribers

Spotlight On MTN, World’s 15th-Largest Mobile Firm By Subscribers

Sam Kovacs is a student at HEC Montreal, a business school affiliated with the University of Montreal.

He learned about MTN Group when he participated in — and won — a stock pitch competition earlier this year. He shared his analysis of the company on SeekingAlpha, a crowd-sourced content service for financial markets.

This is a portion of what Kovacs learned about MTN, the Johannesburg-based telecommunications group whose user base is growing fast in many markets, and whose stock is still recovering, he said, from an unjustified correction.

MTN is the world’s 15th-largest mobile telecommunications company measured by subscribers as of Sept. 19, 2014, according to GSM.

From SeekingAlpha. Story by Sam Kovacs.

MTN Group is a telecommunications leader in emerging markets and is based in Johannesburg, operating in more than 22 countries across Africa and the Middle East. At the end of the first quarter, they had more than 227 million subscribers. Their operations spread out across five segments:

  • Revenue from voice subscriptions, which contributed to 61.2 percent of revenue in 2014.
  • Revenue from data, which contributed 18.7 percent of revenue in 2014. This segment increased 22.8 percent year over year and is an interesting growth vector for the company.
  • Financial services, through mobile money, which is growing at a fast rate. The amount of users increased 50 percent in 2014 to attain 22 million users. Unlike in North America, mobile money is a thriving business in Africa. Consumers use their phones to pay for everyday goods and services rather than relying on checks, cash or banks.
  • Digital services, which will allow for many synergies with the core business through an interest in two major Internet provider companies in Africa and the Middle East.
  • In IT, MTN is becoming the provider of choice in Africa for companies of all sizes with 47 data centers throughout the continent.

Geographical segmentation

MTN Group is divided into four operating companies to which I have added MTN Irancell’s revenue. This seemed appropriate considering MTN group owns 49 percent of the operation.

  • MTN South Africa contributed 38.92 billion rand ($3.23 billion) to the group’s revenues in 2014 (28 million subscribers).
  • MTN Nigeria contributed 54 billion rand ($4.48 billion) to the group in 2014 (59.9 million subscribers).
  • MTN large cluster Opco, composed of Ghana, Cameroon, Uganda, Syria, Sudan and Ivory Coast, contributed 31.2 billion rand ($2.59 billion) to the group’s revenue in 2014.
  • MTN small cluster Opco, which focuses on frontier markets such as Afghanistan, Yemen, Botswana, Zambia, Congo, Rwanda, etc., contributed 22.39 billion rand ($1.85 billion) to the group’s revenue in 2014.
  • Finally, MTN IranCell contributed 11.63 billion rand ($966 million) which don’t show up on the balance sheet because of GAAP (44 million subscribers).

Management

MTN Group’s board is composed of long timers such as CEO Raymond Dabengwa who has been at the helm of the company since 2001. Zunaid Bulbulia who was part of MTN’s founding team has been COO of the group since August 2014. Before that, he was CEO of MTN South Africa. The board is multicultural which is a good thing for a company operating in so many segments.

I have reason to believe that the management’s interests are aligned with shareholders as we have seen with the commitment to increasing the dividend year over year.

Read more at SeekingAlpha.