JSE-listed telecommunications giant MTN is seeking out a greater share of the financial technology (fintech) market as the group extends its Bright strategy to build MTN into a digital operator.

Moving forward, a major focus for MTN will be on fintech, which includes Mobile Money (MoMo), insurance, airtime lending and ecommerce, as well as the digital, enterprise and wholesale business areas.

This comes as digital revenue decreased by 32.9% as a result of the ongoing VAS optimisation during the year ended December 3, 2018, while fintech revenue surged 46.8% to R7.8-billion and active MoMo users increased to 27-million subscribers across 14 markets.

“Both the liberalisation of the mobile financial services market in Nigeria, through the offering of Payment Services Bank licences, and the launch of MoMo in South Africa are expected to support an acceleration in our MoMo business in the next few years,” says MTN president and CEO Rob Shuter.

Fintech is expected to be a major new driver of value creation, as the company already has a large fintech base of 27-million customers, a ubiquitous USSD channel, repurposed mobile distribution and extensive data sets.

This is amid growth drivers such as low banking penetration, cash economies, airtime to emoney trends and increasingly enabling regulation.

“With our expanding population coverage and drive to accelerate smartphone adoption, we will take advantage of the material data and digital opportunity in our markets,” he says, adding that MTN’s large customer base, extensive networks and deep distribution will allow the group to drive opportunities in the areas.

Digital services are expected to drive new revenues and data adoption, with MTN focused on delivering its own services and platform, building music and messaging platforms, integrating MoMo and providing relevant, local content.

Further, with the markets in which MTN operates remaining underpenetrated in terms of mobile services, there is opportunity to lift the core voice business even further over the medium term, owing to Africa’s young and growing population.

“Robust growth in voice revenue, along with the continued expansion of data and the acceleration in wholesale revenue in the fourth quarter, supported overall service revenue growth,” he says.

In 2018, voice revenue increased 7.3%, underpinned by subscriber growth of 16-million customers to 233-million subscribers and the group’s targeted customer value management efforts, as well as the continued shift in Nigeria to voice as VAS offerings are optimised.

“Over the next few years, we see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity.”

Meanwhile, MTN, during 2018, made progress in resolving key regulatory challenges in markets including Benin, Cameroon and Nigeria.

“Managing regulatory issues and improving relationships and risk management remain key focus areas for the group, and we will continue to strengthen these areas in 2019,” Shuter notes.

In December, MTN Nigeria had successfully resolved the matter with the Central Bank of Nigeria related to the notional reversal of a 2008 private placement transaction; however, a tax dispute between MTN Nigeria and the attorney-general is yet to be resolved and is heading to the Nigerian courts on March 26.

“The audit committees of both MTN Nigeria and MTN have assessed the attorney-general’s claims and remain of the view that all taxes due have been paid, and, as such, no provision or contingent liabilities need to be raised. We will vigorously defend our position on this matter,” Shuter assures.

MTN Cameroon renegotiated its licence agreement as part of an addendum for the use of fourth-generation spectrum and MTN Benin concluded a memorandum of understanding with the government, in addition to concluding negotiations around future frequency fees.

MTN Uganda, which was granted an extension of its existing operating licence to allow for the conclusion of negotiations around the terms for the licence renewal, continues to engage extensively with the authorities over more recent developments in the market.

The reimposed US sanctions against Iran, however, continue to limit MTN’s ability to repatriate cash from MTN Irancell, including future dividends, and are placing pressure on the official exchange rate that is used to translate dividend and loan receivables, as well as the equity-accounted results of MTN Irancell.

Meanwhile, the completion of a portfolio optimisation and asset realisation programme, which aims to ensure an appropriate strategic and operational fit, considering demographics, regional synergies, control position and business and regulatory environments, is likely to realise at least R15-billion in asset realisations over the next three years, excluding any proceeds from IHS Towers.

The proceeds will be used to reduce holding company debt.

“We also reviewed our nonmobile assets, including our existing investments in tower companies and ecommerce ventures. While these are important and material investments where we need a tight commercial and operational integration with our mobile assets wherever possible, they are not viewed as long-term strategic holdings of the group.”

As part of a portfolio review, MTN in July signed an agreement to sell 100% of MTN Cyprus.

MTN’s 53% shareholding in Mascom Wireless Botswana has also been identified as noncore in light of its lack of a controlling position and its inability therefore to execute the MTN Bright strategy.

MTN has accepted an offer from Econet Wireless to acquire Mascom.

Meanwhile, MTN’s associate tower businesses include 49% holdings in both ATC Ghana and ATC Uganda.

“During the year, we saw a strong turnaround in the contribution from both tower businesses from a loss of R38-million in 2017 to a profit of R268-million in 2018. Our 29% investment in IHS was fair valued at R23.4-billion at the year-end,” Shuter says.

“Although towers is an important operational component of the business, the investments in the existing tower companies are not viewed as long-term strategic holdings of the group,” he adds.