A man passes an MTN board in Lagos, Nigeria. Picture: AFP/PIUS UTOMI EKPEI
A man passes an MTN board in Lagos, Nigeria. Picture: AFP/PIUS UTOMI EKPEI

Mobile money services in Nigeria could boost MTN’s valuation by R25 a share over time, JP Morgan says.

Nigeria’s central bank said last year it had agreed to allow network operators to apply for payment-service banking licences. MTN aims to launch its mobile money product in that market by July.

The West African state is MTN’s largest market — the operator had 58.2-million subscribers there at the end of December — but it is also its most troublesome. In 2018, Nigeria’s central bank ordered the network operator to return $8.1bn worth of dividends, while the country’s auditor-general said it owed $2bn in back-taxes.

The central bank issue has since been resolved, though it took its toll on MTN’s share price, which was at R92.92 on Monday, down 13% since the monetary authority made its demand in August 2018.

JP Morgan said in a research note that if MTN Nigeria’s mobile money revenues reached 20% of total revenues in the next five years, the US bank saw a R25-a-share “upside opportunity” for MTN Group. This was based on mobile money margins of 35%.

This represented an “attractive upside opportunity for MTN Nigeria, but may take time to scale”, JP Morgan said.

Vodacom’s Kenyan associate, Safaricom, launched M-Pesa in 2007. By financial year 2011, the service contributed more than 10% of group revenues, and by 2015, it made up 20% of sales, the bank noted.

MTN generated R7.8bn from fintech, or mobile money, in 2018, up almost 50% from a year before.

Fintech now accounts for about 5.8% of group revenues, from 2% in 2016.

“For this to be a 10% revenue contributor over the medium term, the company would need to generate around R16bn on our forecasts,” JP Morgan said.

Assuming average revenues per user of $1.50 for the service, that would imply an active mobile money subscriber base of about 60-million, from 27-million at the end of December.

“We forecast a medium-term subscriber base of almost 175-million, excluding SA and Iran. This implies mobile money penetration of just over one third — seemingly very achievable.”

MTN CEO Rob Shuter said last week that Nigeria’s “addressable unbanked adult population” was between 40-million and 60-million people.

In SA, where mobile money has failed to take off before, the operator planned to launch a pilot project in SA at the end of March.

This time around, the service would target rural communities that were still reliant on cash and where large segments of the population were still unbanked, Shuter said.

“We’re not trying to compete with the digital banks or the commercial banks. We are not in the same game as the Discovery, Tyme or Bank Zero. For us, the competition is cash, and if we beat cash, then everybody wins.”

MTN also planned to deploy the service in Afghanistan and Sudan in the second half of 2019, he said.


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