MTN shares jumped 10% in morning trading in Johannesburg on Monday after it reported “solid” interim results and said its fintech business had been valued at US$5.2-billion (R99-billion).

CEO Ralph Mupita said the group achieved a “solid performance in a challenging operating environment” in the first half of the year up to 30 June 2023.

Data traffic and fintech transaction volumes were up by 18.5% (35% excluding joint ventures) and 37.3%, respectively, enabled by ongoing investment in networks and platforms.

In the first half, the group deployed R17.2-billion in capex, for a capex intensity of 15.2% – within the medium-term target range of 15-18%.

The group delivered service revenue growth of 15.1%*, up slightly on a year ago and in line with medium-term guidance.

Ebitda, or earnings before interest, tax, depreciation and amortisation – a measure of operating performance – increased by 13.5%*, with an Ebitda margin of 44%* (first half of 2022: 44.5%*) as elevated inflation and foreign exchange rate depreciation continued to place upward pressure on costs. (*Reported in constant currency after accounting for pro forma adjustments.)

In particular, the business navigated the effects of Nigerian reforms, which placed an additional short-term burden on consumers and businesses.

Read: MTN fintech business valued at R99-billion as Mastercard eyes stake

“These impacts were partially mitigated through the ongoing progress of our expense-efficiency programme, which achieved sustainable cost savings of R702-million in the period,” MTN said.

‘Headroom’

Group net debt to Ebitda of 0.4 times as at 30 June 2023 (31 December 2022: 0.3x) remained within the group’s loans covenant limit of 2.5x. The holding company’s leverage increased to 1.5x (31 December 2022: 0.8x) due mainly to the rand’s depreciation against the dollar and the election of the scrip dividend options from MTN Nigeria and MTN Ghana for the 2022 dividend payments – which negatively affected the amount of cash “upstreamed” to the group.

“We maintained a positive liquidity position, with headroom of R40.9-billion as at 30 June 2023,” Mupita said.

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The group upstreamed cash totalling R4.2-billion from its operating companies in the reporting period. Over and above this, R1.4-billion of localisation proceeds were repatriated from MTN Nigeria (R1.2-billion) and MTN Ghana (R200-million) in the period.

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MTN and Mastercard, meanwhile, have signed a memorandum of understanding, which provides for a minority investment by Mastercard into MTN’s fintech based on a total enterprise valuation of about $5.2-billion on a cash- and debt-free basis.

“Signing of the definitive investment agreements is expected to occur in the very near term as finalisation of customary due diligence approaches,” MTN said.