MTN Group Limited (MTN) Earnings Call Transcript & Summary

Ladies and gentlemen, we have the pleasure in welcoming you to our 27th Annual General Meeting, AGM, of the shareholders of MTN Group Ltd. Here we refer it to as the company. Thank you for taking the time to be here today. It is always good to have our shareholders attending our AGM. We have not moved the meeting in-person yet. We still have to keep up with this tradition until the conditions change. As a consequence of the impact of COVID-19 pandemic, we, as the Board of MTN, express our deepest condolences to the families of those who perished as a result of the pandemic. As we suffered the same fate as MTN, as we lost employes. As a result of the restriction placed on public gatherings, the meetings were disconnected through an electronic participation as provided for by the company's memorandum of incorporation. And in terms of the provisions of the of the company's Act 71 of 2008. I'm pleased to introduce the members [indiscernible] Ms. Sindi Mabaso-Koyana, Mr. Vincent Rague, Mr. Lamido Sanusi, Mr. Stan Miller, Mr. Nkululeko Sowazi, Mr. Ralph Mupita, [indiscernible], Mr. Paul Hanratty, Ms. Nosipho Molope and the group company secretary Thobeka Sishuba-Bonoyi. I also wish to extend apologies for [indiscernible] and his another [indiscernible]. I also extend a warm welcome to our group executives, transfer secretaries, external legal advisers, our sponsors and external auditors who have joined us today. Shareholders can refer to Page 7 of the notice, which contains a picture and biography of all directors. Today presents an opportunity to interact with the Board and pose questions that you would like to know about the overall management and performance of the company within the limited time that we have. All questions and comments will be addressed during the question-and-answer session later in the meeting. To enable you to do so, we will show a video tutorial of how the platform works. The tutorial was sent with a link to all shareholders registered to attend and those with proxies. [Operator Instructions] Video -- the results of the poll will be announced before the close of the formal business of the meeting. This allows shareholders an opportunity to vote on the resolutions during the proceedings during the ordinary business of the meeting. Let me get to quorum. I should advise that 14 members are present at this meeting either personally or by proxy, representing [ 2,993,620 ] ordinary shares in the company. I should advise that holding proxies in net [indiscernible] of representation in respect of [ 153,821,564 ] ordinary shares. As the necessary quorum is present, I declare this meeting duly constituted. The notice convening this meeting is sent out in the notice of the AGM booklet, has been sent to all registered shareholders as of the record date of Thursday, 14 April 2022. And I shall take the notice as read. Should there be any objections to this procedure, please use the messaging tab to post any written objection or use the [indiscernible] microphone link that can be found on the home page. If there are no objections, I will proceed with the ordinary business of the meeting. Before we transact with the ordinary business of the meeting, I confirm that the company has ensured that all provisions of the Companies Act, JSE listings, requirements, memorandum of incorporation, as well as company policies in relation to this meeting and the resolution being passed at this meeting have been attached. In order to reflect more accurately the views of our all members and to comply with the best practice, we will be conducting the voting on all resolutions proposed at this meeting [indiscernible]. Shareholders who have logged into the platform with your prearranged usernames and passwords, which should unable you to submit your votes electronically during the meeting. You would have received a shareholders' user guide that explains how the voting platform works. For those shareholders that have previously submitted proxies, these proxies will be considered and no further action is required from you. It is necessary to appoint a scrutineer of the process of the poll. I nominate a representative of the transfer secretaries Computershare to scrutinize the voting process here, represented by [indiscernible]. I would also like to request that a representative of the external auditors of the company certify that the results at the end of the meeting. Are there any questions or objections to this procedure? Please use the messaging tab to post any written objections. Please [indiscernible] microphone link that can be found on the home tab.

Chair, there are no objections at the moment.

We'll now proceed to the business of the meeting and voting. You will see all resolutions that are being tabled at this AGM on the screen now. We have 20 ordinary resolutions and 14 special resolution to be considered at this AGM. Special resolution #1 has been individually separated and split into 37 individual resolutions. We will now open the voting when all resolutions to be vote on at this meeting before we proceed with the rest of the business of this meeting. Kindly indicate your responses on your devices by selecting the appropriate choice you wish to make for each resolution. The voting will stay open until the end of the formal proceeding, and at this point, I will declare the voting closed on all resolutions and then announce the results of all the resolutions. We will now, in the interim, continue with the rest of the business of the meeting while voting happens. I now call upon the Group President and CEO, Ralph Mupita, to give us an update on the business.

Thank you, Chair, and extending my warm welcome to all the shareholders who joined us on this virtual platform for the second year running. What I intend to do in the next 8 to 10 minutes maximum is to give you a view on the strategy and how we're progressing with it. Talk to a bit of a recap on the quarter 1 financial highlights to remind shareholders what our priorities are for the calendar year 2022. Then cover some of the key salient points really around the outlook, what we -- how we see the year to go, and a little bit into 2023; and then come back to the points around our medium-term guidance. Moving to the next slide. If I just start with a recap on the strategy. Since November 2020, we have been executing on what we now frame as the Ambition 2025 strategy, which is a strategy that rests on 4 pillars: building the largest and most valuable platforms, driving industry-leading connectivity operations, creating shared value and accelerating portfolio transformation. These elements, in the aggregate, really are driving 3 things. We think we are well positioned to capture superior growth within the markets that we operate in. Given the level of digital and financial inclusion, we see our markets in growth territory and growth certainly over the medium term. For the company deleveraging in particular of the holdco balance sheet is an important and strategic priorities, and we have been looking -- the faster deleveraging, particularly noting the dollar liabilities that we have at the holdco level. And the third aspect of the strategy we simplified is really looking at unlocking value. We remain of the view that the company has inherently a lot more value than is growing through the share price of the company. But obviously, as a management team and as a company, we need to reveal that to shareholders by how we perform. So this is a strategy that we've been executing. And as I said, it's just basically a recap of the detail that we have provided to shareholders last year at the Capital Markets Day and covered in some detail the very specific and the various targets that we have. Moving to the next slide. Just a recap on quarter 1, which is now behind us. But I think in the quarter 1 results, you will see quite a lot of the trends. If we can move to the next slide, please, operator? So these are results that you should be familiar with. We take a view that under the operating conditions, these were a solid set of results. When we saw the subscriber base beginning to rebuild as we started having strong connections, particularly in Nigeria, where the SIM registration process had been stalled pretty much in the first half of last year. So we saw good subscriber base growth in the last quarter in Nigeria, which came through again in the first quarter of this year. So overall, across the business, subscriber growth now over 276 million subscribers. And within that mix, we're seeing very good growth in data subscribers, up 13% to over 125 million. And the Mobile Money business, we sometimes talk about is, fintech, growing very strongly, over 25% to just under 59 million subscribers. So that the key drivers of future value looking very strong. On service revenue and profitability. Again, we saw very good growth there within our guidance range, just under, it's 16% constant currency basis of the group service revenue. We were able to eke out as a function of both the expense efficiency program that we have as well as driving operating leverage, we're able to see our EBITDA margin up 2.2 percentage points. And so that's the Nigeria, as pretty much 2/3 of the business, economically continuing to grow the service revenues in line with guidance and ensuring that we are growing profitability as we look at the EBITDA margin expansion. On the balance sheet side, we are again encouraged by the progress that we're seeing in the balance sheet at the group level at 0.3x. And we do have medium-term guidance around holdco leverage, which is at 0.9x against a guidance of 1.5x or a little lower. So we are progressing very well, also, within the balance sheet. And would have provided also shareholders with information of the liquidity profile of the company and both the cash resources of the group and facilities that are committed that we have access to, give us a very strong liquidity position in current challenged global macro conditions. Moving on to the next slide. In terms of our 2022 priorities, these are the priorities that we shared in the context of our full year results in March. So nothing has changed. We're still focused on ensuring that our 2 largest markets grow in line with our medium-term guidance. We talk about accelerating the growth, given the opportunities that we see. A big focus for us by the end of the year is to complete the fintech structural separation and securing more strategic but minority partners to support the acceleration of this business that we think there is actually structural growth prospects in the medium term given the low level of financial inclusion across our markets. We will progress with initiatives to support the strengthening of the balance sheet and our own cash position with the asset realization program or the cash upstreaming initiatives, the portfolio transformation, in particular, executed the consolidated net assets. And so that progress is one that we we'll continue to update stakeholders on. And obviously, maintaining our network positions and ensuring that the capital we're allocating, and we are looking to allocate just over ZAR 34 billion equivalent of CapEx across our portfolios. We ensure that the core of our business, which is our networks, remain second to none. We have similar matters that we're working through that you are all familiar with that are complex litigation matters, and these are progressing and there's nothing at this particular meeting to report further than what we reported with the full year results. And we do continue with our efforts around ESG. We have a target, particularly around 2030, in terms of reduction both Scope 1, Scope 2 and Scope 3 emissions so we get to Net Zero by 2040. In terms of the outlook. Just going on to the next slide. With the year to go, there are a couple of headwinds and challenges that we see ahead. I guess on the challenging macro, it pretty much goes without saying every business is facing similarly more challenged macroeconomic environment occasion, not just by COVID, but the conflict that we now see within Ukraine, rising interest rates, rising inflation and a much stronger dollar putting pressure against currencies. Fiscal conditions in many of the markets we operate in, not globally, are tightening and thus putting pressure on emerging markets, our currencies in particular. Within our 3 largest markets, there are some very specific issues that we need to carefully navigate. Some of them in South Africa is really around the load-shedding and experiencing Level 2 to 4, quite systematically in the last couple of months, and we're arranging ourselves in ensuring that we have the network resilience. And we'll be pleased with the progress that we see around generators and battery deployments that we're looking to complete by August of this year to ensure that we keep the uptime of our network, the customer experience high. In Nigeria, obviously, we're navigating the new NCC directed around NIM linkages SIM. We did speak about the revenue impact. We are monitoring this very closely as we look at the data, particularly. In the last couple of weeks in May, we are encouraged around the verification process from [ NCC ]. Obviously, this is still too early to talk about matters and how we see this progressing. We will have a much clearer set of data points by the time we get to the half year results to communicate. But we do have a positive, which is the PSP now has been launched. We've been working on this PSP for several years and really pleased to be saying that we have launched commercially. I think we're on day 4 and day 5 now of commercial operations. So very early days, but it is a key accelerator for our fintech growth over the medium term. And in Ghana, we are navigating the early days of a new e-levy, which is applicable to all transactions -- electronic transactions, whether they be fintech or banktech, and these have been implemented since the 1st of May 2020. I think, on the outlook, I think the one thing that we remain of a strong view is that the demand structurally for higher data and fintech services remains over the medium term. And there are some short-term headwinds driven by some of the points that are out here. We still believe that, that structural story of low Internet adoption, low financial inclusion creates a growth opportunity for the MTN Group given the footprint and the size and scale of the business. And this points around our view on the growing of structural demand for data and fintech services. It encourages us, as we move to the next slide, to take a view on our medium-term guidance, which we have reaffirmed as with the Q1 trading update, service streaming at the group level of South Africa, Nigeria. How we see the acceleration of fintech platform, the holdco leverage, our progress of asset realization and the return improvement that we anticipate for the company over the medium term. Chair, I'll pause there and just thank shareholders for listening of that summary view of the performance of the company.

Thank you, Ralph. And we'll now proceed to the presentation of audited annual financial statements, Director's report, audit committee report, social, ethics and sustainability committee. Consolidated audited annual financial statements of its subsidiaries as approved by the Board of Directors of the company, including the Director's report, the audited report, the audit committee report and the external auditor's report for the year ended 31 December 2021, have been distributed as required and are being presented to the shareholders. Focus of the integrated report, which contain the [ division ] of the financial statements have also been distributed to shareholders present in this meeting. Social, ethics and sustainability committee, which details the activities of the committee for the year end of 31 December 2021, has been distributed to shareholders and presented in this meeting. Are there any questions regarding the business presentation, annual financial statements? I'll pause.

No questions on those, Chair.

Thank you. Ladies and gentlemen, we'll now respond to questions from shareholders on the special and ordinary resolutions contained in the notice.

Chair, we have a question from [indiscernible], and his first question is, with regards to the audit committee appointments, resolutions 2.1 to 2.4, given the reportable irregularity identified by the external auditors, were the Directors, Mrs. Koyana, Molope, Gosa and Rague being seconded for the audit committee sufficiently evaluated for the suitability and continuing in this pivotal committee? And how are they being held to account for this oversight?

Can I then ask President and CEO respond to the question?

Yes. Thank you, Chair. The reported irregularity noted in our financial accounts has nothing to do with the audit committee members. It was to do with an executive committee member who signed the contract without the requisite of authority. So that reportable irregularity has nothing to do with the members of the committee. And we did take proactive action as a management team supported by the Board and the audit committee, to ensure that the reportable irregularity does not actually come through, which is what you'll see in our accounts. So I wanted to make sure that reported irregularity is not attached to [indiscernible] it's much more related to a member of the executive committee.

Chair, the next question is also from [indiscernible]. It is around the remuneration policy. Please advise on previous shareholder concerns or suggestions to review the LTI vesting term to be revised from 3 to 5 year to stand short-termism.

[indiscernible] to respond?

Thank you, Mr. Chairman. We currently have a policy that takes us to a 3-year vesting period. We -- all the issues that were raised by shareholders in the previous cycle, we dealt with and all those responses were included in this current integrated report. And we remain convinced that our current LTI policy is the appropriate one for the company.

Thank you. Any other questions?

Yes, Chair. There's another question from [indiscernible]. Remuneration implementation report is what it's around. And it is advised on what targets are set for team performance component as this is currently lumpy and vague. Can Remco advise on how Remco revised STI and LTI stretched targets to account for both the positive and negative effects of the COVID pandemic? The quantum of the CEO's current pay and its increase is unsustainable in normal conditions.

Again -- if I respond, Mr. Chairman. The current CEO compensation is as appropriately benchmarked basic pay and according to the short-term and long-term incentive schemes as approved by shareholders. And we, as a remuneration committee, are satisfied that when targets are approved by the committee, they are properly and duly considered, and we are confident that the stretches that are included in those targets are appropriate.

Are there further questions?

Chair, at the moment, there are no further questions.

Also note that we might not be able to go through all the question. If there are any questions arising, we'll respond and publish our responses on our website after the meeting if that is [indiscernible]. Thank you for your participation. I would like to remind shareholders who have not voted as yet to please cast your votes now. If you have [indiscernible] vote [indiscernible] submit your voting name by e-mail or SMS, please inform the moderator via the Q&A mechanism. [ Andre ], are there any shareholders who should still exercise their vote?

Chair, there are no more shareholders to exercise votes.

Ladies and gentlemen, we have reached the end of the voting proceedings, and I now declare the voting closed. We'll now proceed with displaying the results for each resolution, which has been tabled at this meeting. On the screen you have resolution -- from resolution 1.1 to resolution 3.3, and they are all carried. We also have, on the screen, ordinary resolution #3.4, the special resolution of 1.2, all carried. On the screen, you have special resolution 1.3, special resolution #1.12, all carried. On the screen, you have special resolution #1.15, special resolution 1.23, all carried. On the screen, you have resolution 1.24, resolution 1.34, all carried. On the screen, you have especial resolution #1.35, special resolution #5, all carried. Ladies and gentlemen, as for the business, the agenda has been dealt with. And now I formally close the procedures of the 27th Annual General Meeting of MTN Group Ltd. As that concludes our discussions, I'd like to take the opportunity, once more, to thank you again for your attendance and thank you to continue to obtain our results. Thank you.