As telecommunications giant MTN continues implementing its Ambition 2025 strategy, it has entered into commercial agreements with Mastercard to support the acceleration and growth of the fintech business’s payments and remittance services.

MTN and Mastercard signed a memorandum of understanding for a minority investment by Mastercard into Group Fintech based on a total enterprise valuation of about $5.2-billion for the business on a cash and debt-free basis.

“Signing of the definitive investment agreements is expected to occur in the very near term as we approach finalisation of customary due diligence. The closing of the investment will be subject to customary closing conditions,” said MTN Group president and CEO Ralph Mupita in a statement outlining the groups’ interim financial results.

MTN has been working to identify and potentially introduce strategic minority investors into MTN Group Fintech, which delivered on the group’s rapid expansion plans during the six months ended June 30, 2023.

During the first half of 2023, the volume of transactions by 61-million Mobile Money (MoMo) customers, increased by 37% to 8.3-billion.

Overall, MTN Group reported that its earnings before interest, taxes, depreciation and amortisation (Ebitda), before one-off items, increased 12% to R49.4-billion, while its Ebitda margin decreased by 1.7 percentage points to 43.6%.

MTN’s profit before tax for the six months ended June decreased 1.4% to R18.3-billion.

Basic earnings a share increased 14.8% to 511c, while the reported headline earnings a share increased 7.1% to 542c.

“Adjusted headline earnings a share increased by 25% to 749c and adjusted return on equity expanded by one percentage point to 24.4%. These were in line with our medium-term guidance.

“We delivered a resilient performance in the first half of 2023 and made good strategic progress against a tough macro backdrop,” said Mupita, pointing out that this was achieved in a difficult operating environment marked by elevated inflation, weaker local currencies and regulatory developments across its 19 markets.

During the half-year under review, MTN’s group service revenue grew by 16.5% to R107.7-billion, driven by increases in revenue from data services of 24% and from fintech services of 22%. Revenue from voice services increased 6% in the period.

“At the end of June 2023, we had 292-million subscribers with whom we worked to create shared value. This subscriber base – 4% higher than the same period last year – benefited from lower data rates and improved access to broadband services,” he said.

The number of active data users increased by more than 7% to nearly 140-million, with a 19% increase in overall data traffic. The group also improved data affordability by reducing the average effective rate a megabyte by more than 22%.

“In South Africa, we were very encouraged by the improved network availability on the back of our power-resilience investment, resulting in a stronger second quarter of 2023 performance than the first quarter of 2023,” he said.

By the end of June, MTN South Africa’s network availability was more than 90% despite severe electricity shortages across the country.

“In Nigeria, we delivered a very strong operational result, having navigated the cash shortages in the first quarter of 2023 and increased inflation. The policy changes implemented in Nigeria in the second quarter of 2023 have short-term negative impacts, but we see these as being very constructive for the investment climate in the medium to longer term.”

Mupita said that a continued recovery in MTN South Africa’s performance in the second half of the year is expected; however, elevated inflation and foreign exchange volatility in key markets, particularly Nigeria, will likely place increased pressure on Ebitda margins and earnings into the second half.

“We have progressed our work to accelerate expense efficiencies and have identified R7-billion to R8-billion in additional efficiencies to be pursued over three years, from 2024 onwards.

“This is over and above the R1.5-billion we target for FY 2023. Executing on these additional expense efficiencies will support earnings, cashflow and return objectives aligned to our Ambition 2025 strategy and investment case.”

During the first six months of 2023, MTN deployed R17.2-billion in capital expenditure (capex).

However, the weakening of currencies in MTN’s markets against the US dollar is impacting capex, for which guidance for 2023 is revised up to R40.1-billion, based on current currency assumption and driven mostly by maintaining the investment in fourth-generation and fifth-generation rollout in Nigeria.

Capex intensity in the range of 15% to 18% is targeted over the medium-term.

“The group’s balance sheet remained strong, with all key metrics well within the limits of our loan covenants. As we manage the challenges in our operating environment, as well as the near-term impacts on our top-line and margins, we maintain our medium-term guidance.”