After the publication of its annual report this week, the headlines focused on former chief executive Sifiso Dabengwa’s R23,7m “golden handshake” following his resignation in November amid the MTN Nigeria fine fallout. We also learnt that chairman Phuthuma Nhleko, who assumed executive responsibilities after Dabengwa’s departure, was paid R5m for just 53 days’ work (or, more correctly, 37 working days). Of course, there was the far bigger story of MTN aiming to repatriate at least US$1bn from its operations in Iran.

I argued in July last year that there’s a lot more in these documents than disclosure around executive remuneration.

Dabengwa’s wasn’t the only golden handshake
The collateral damage from the rather enormous regulatory problem in Nigeria meant the resignation (“mutual separation”) of country boss Michael Ikpoki, who was paid R17,3m as “compensation for loss of office”. In a footnote, it says this is for “severance, leave and lifestyle benefits”. Zunaid Bulbulia, who also left the group by “mutual separation”, was paid R13,3m. This compensation is described as “severance, restraint of trade and gratuity pay”. Bulbulia was one of the founding members of the business, and most recently was group chief operations executive (he had a 13-month stint as CEO of MTN South Africa in 2013/2014).

Only one in seven subscribers uses data
MTN has 32,4m “registered” data users across its group operations. This shows just how much opportunity there is to grow data usage (and smartphone penetration), given that its total subscriber base is 232,5m. Despite this relatively low penetration, data revenue is now nearly a quarter (23%) of its total, with this segment growing by 32,6% in 2015. Data traffic more than doubled in the year (+108,5%). The “effective data tariff” (price per megabyte) declined by 45% in US dollar terms. Key to it replacing the long-term erosion of voice revenue will be the extent to which it can drive data adoption among subscribers. Imagine if it can get that number to 50m in the next year!

It’s betting big on e-commerce
MTN owns 41,4% of its e-commerce joint venture, African Internet Holdings (AIH), together with Rocket Internet, Millicom and Orange (along with minorities Axa and Goldman Sachs). During 2015, it committed an additional €135m investment to increase its shareholding in a financing round. In 2014, it paid €168m for 33,3%. It also owns a stake in a similar joint venture, Middle East Internet Holdings (MEIH). There was a 34c/ share impact (loss) from these investments in 2015 (from a 7c/share loss in 2014). That equates to a R620m knock. It discloses an overall loss for AIH and MEIH in the year of R1,5bn. It says AIH “recorded” 2,3m customers and 4,4m transactions in the year.

Mobile Money is not that big
MTN says it increased the number of mobile money customers by 56% to 34,7m in the year. Nearly one in three of these subscribers is in Uganda (9,5m), which is not surprising given the regional boom in East Africa, thanks largely to Safaricom. Vodacom’s Tanzanian operation is seeing similar traction. Its next largest markets are Ghana (5,7m) and Nigeria (6,2m). The former is impressive, given its total subscriber base of 16,2m; the latter far less so (61,3m total subscribers). In South Africa, the number of mobile money users is 4,5m (13% of the base). It remains small relative to its operator business, at 17% of revenue in Uganda and 6% in both MTN Ghana and MTN Rwanda. Using these data points, mobile money is an R865m business in Uganda, a R474m one in Ghana and a R90m one in Rwanda. That’s nearly R1,5bn (generously, call it R2,5bn across the group). Not bad, but not massive in the context of about R160bn in total revenue (barely 1%; 2% if you’re generous).

Sustaining elevated levels of capex in South Africa
In 2015, MTN almost doubled capital expenditure in South Africa (from R5,7bn in 2014 to R10,1bn last year). It added 966 2G, 1 593 co-located 3G and 3 148 co-located 4G/LTE sites in the year, with the co-location of these sites a noticeable departure from its strategy. It spent almost as much on its network in South Africa as it did on Nigeria, Iran (49% share) and Ghana combined. This year, it aims to invest R7,9bn in its network, as it continues to recover from years of underinvestment.

Billion-rand currency swings
In its sensitivity analysis, MTN estimates what a 10% change in the three main currencies it’s exposed to will mean. A 10% weakening in the dollar/rand exchange rate from 31 December 2015 will mean a R1,3bn decrease in group profit before tax (the converse, for a 10% strengthening, also obviously applies). A 10% weakening in the dollar/naira exchange rate translates into a R862m decrease in profit before tax. But, a 10% weakening in the Iranian real/rand exchange rate means a R1bn increase in profit before tax. Given the currency moves in 2015, with broad weakness across the board in emerging markets, the effect of weakness (or strength) of either the naira or real is effectively double this year, when compared to a year prior. When it comes to conversions back into rand, a 10% move from levels as at 31 December equates to almost 10 times (!) the effect from a year earlier (R1.4bn vs R144,8m).

It got its Altech Autopage base for a steal
MTN paid R640m when it acquired its Altech Autopage subscriber base from Altron TMT (R30m less than the original R670m price, due to an adjustment based on the size and quality of the base at closing). Of this amount, R212m was goodwill. By comparison, it paid R1,2bn (nearly double!) for its Nashua Mobile subscriber base just a year earlier (of which R525m was goodwill). Sure, the Nashua base was perhaps better quality, but this shows the extent of the value destruction by Altron given its dilly-dallying on Autopage. Did a brave face cost Altron R1bn?

Smartphones, 3G numbers don’t quite add up
MTN says it has 51,9m 3G-enabled devices on its networks, but the number of smartphones in its four largest markets exceeds this number, at 52,2m (and this obviously excludes smartphones in its other operations, which sees fairly erratic disclosure). Based on the numbers we have, it wouldn’t be a stretch to see over 60m smartphones on MTN’s network. But, this would mean that about 10m of these devices are not 3G-enabled. Could there really be this many legacy devices (like BlackBerry Curve 8520s) in use. MTN’s largest markets for smartphones are Iran with 26,4m users (more than 57% of its total subscriber base); Nigeria with 15m (±25% penetration); South Africa with 7,6m (±25% penetration); and Ghana with 3,2m (±20% penetration).

Listings on the horizon in Nigeria and Ghana?
MTN says it “continued to evaluate opportunities and appropriate mechanisms to ensure broader local ownership, including in key markets such as Nigeria”. One school of thought is that a settlement with Nigerian authorities of its regulatory fine would include a commitment to list its local operations on the Nigerian Stock Exchange. However, MTN cautions that “market conditions and the operating environment need to be conducive before any listing is pursued”. It has 12 months to resolve its ownership structure in Ghana, given that operation “must have a minimum of 35% Ghanaian ownership in place by January 2017”. Listings, anyone?

Its tax affairs are complicated
MTN discloses that it paid R6bn in tax in South Africa during 2015. This includes corporate tax, indirect taxes, payroll taxes, operating licence (and regulatory — cough — that fine) fees, withholding taxes, property rates, transfer duties, as well as dividend tax, and is down from R6,3bn in the prior year. In total, the group paid R39,8bn in tax, with the R9,3bn provision for its regulatory fine in Nigeria behind the 31,7% year-on-year increase (exclude the provision and its tax “contribution” would have been flat for the year). In the context of the Base Erosion and Profit Shifting (Beps) programme being led by the OECD, finalised in 2015, it does flag that there’s “increased focus in the media and in the public domain on the tax and transfer pricing position of multinational enterprises … including MTN”. It also defends its 115 employees in Dubai (MTN International), which it says “some may argue is a tax haven”, and says these employees “perform a range of services including procurement, IT and financial services”.