MTN Group Limited (MTN) Earnings Call Transcript & Summary

Ladies and gentlemen, I have the pleasure in welcoming you to our 28th Annual General Meeting of the shareholders of MTN Group Limited. Here we refer it to as the company. Thank you for taking the time to be here with us. It is always a great pleasure to help our shareholders attending the AGM. Our AGM will be held entirely electronic format as permitted by Clause 63(2)(a) of the Companies Act of 2008. Following the success of our previous digital AGMs, we have worked extensively to ensure that we follow a similar rigorous procedures for this AGM. We are certain that electronic participation will continue to provide us with an opportunity to engage instructively, allowing participants to interact with us from anywhere in the world, making it both easy, efficient and effective. I'm pleased to introduce the members of the Board who are present today, Dr. Shaygan Kheradpir; Dr. Khotso Mokhele; Ms. Sindi Mabaso-Koyana; Mr. Tim Pennington; Mr. Nkululeko Sowazi; Mr. Vincent Rague; Mr. Lamido Sanusi; Mr. Stan Miller; Ms. Nosipho Molope; Ms. Noluthando Gosa; Ms. Nicky Newton-King; Mr. Ralph Mupita; and Ms. Tsholofelo Molefe; and the group company secretary, Thobeka Sishuba-Bonoyi. 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 11 of the notice, which contains a picture and biography of all directors. Today is an opportunity to interact with the board and ask them questions about the overall management and performance of the company within the limited time we have. All shareholder 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 set with the link to all shareholders registered to attend and those with proxies. The results of the poll will be announced before the close of the formal business of the meeting, which allows shareholders an opportunity to vote on resolutions during the proceedings. We shall now proceed with the ordinary business of the meeting. Shareholders to note that the quorum requirement for this meeting are at least 3 members to vote, are present or represented either by proxy or letter of representation. And in terms of the Companies Act of 2008 and at least 25% of the shares in issue are represented throughout the meeting. Having regard to the quorum, I should advise that 1,009 members are present at this meeting, either personally or by proxy, representing 1.559 billion, 981,547 shares, being 82%, 79% of ordinary shares in the company. As necessary quorum is present, I declare the meeting duly constituted. The notice of convening this meeting has set out in the AGM notice of the AGM booklet has been sent to all registered shareholders as of the record date of Friday, 19 April 2023. And I shall take the notice as read. Should there be any questions to this procedure, please use the messaging tab to post any written objection or use the virtual microphone link that can be found on the HOME tab.

[ Andre, ] can you please confirm that there are no objections? Thank you.

There are no objections...

As 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 the provisions of the Companies Act, JSE Listings Requirements, Memorandum of Incorporation as well as Company policies in relation to this meeting and the resolutions being passed at this meeting have been attached. In order to reflect more accurately the views of all members and to comply with the best practice, we will be conducting the voting on all resolutions proposed at this meeting by way of power. Shareholders who have logged into the platform with your prearranged usernames and passwords, which should enable you to submit your votes electronically during the meeting. You would have received shareholders' user guide that explains how the voting platforms work. 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 for the purposes of the poll and will appoint Computershare to that effect. I nominate a representative of the transfer secretaries with 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 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 objection or use the virtual microphone link that can be found on the HOME tab.

Chair, there are no objections.

We will now proceed to the business of the meeting and the voting. You will see all the resolutions that are being tabled at this AGM on the screen. We have 20 ordinary resolutions, 42 special resolutions to be considered at this AGM. Special resolution #1 has been individually separated and split into 38 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 proceedings. At this point, I will declare the voting closed on all resolutions and then announce the results of all the resolutions. We will now continue with the rest of the business of this meeting while voting occurs. And I'll call upon the Group President and CEO, Ralph Mupita, to give us an update on the business.

Thank you, Chairman, and Andre, as on making my introductory remarks. If you can put the presentation up, that I will decide to cover and give the shareholders some updates. So good afternoon to all the shareholders and broader stakeholders who are joining us for this AGM. I will give an update, which is basically framed from our Q1 2023 trading update, which we released just over 2 weeks ago, and I'll use that to create a frame for how we're seeing the businesses perform and the conditions that we are trading under. Just looking at this highlights page, which really is around the financial performance that we achieved in the context of the first quarter. We are pleased with the resilient performance of the business and what was a challenging macro occasion by elevated inflation, foreign currency availability challenges in key markets and loadshedding in South Africa is the main macro drivers. And as you can see in the chart, we had a very resilient top line growth when you look at service revenue. Our service revenue was in line with our medium term guidance, driven by very strong growth in data and the resilient performance in our fintech business, which has recovered post the taxes and levies that we saw in 2022. The margins have been under pressure, driven primarily by the elevated inflation but remain healthy. And the balance sheet continues to be sound and strong. And we have a very strong liquidity profile. If I talk a little bit about the strategy. If we move to the next slide, we are encouraged by the progress that we're making on our Ambition 2025 strategy. We're seeing good progress in some of the key areas, and I'll highlight some of them. In terms of our asset realization program and portfolio optimization, we are making progress for the orderly exit in Afghanistan. We are exploring the exit of some of our small weaker markets of Bissau, Conakry, and Liberia. And as we stated with our Ambition 2025 strategy, part of this is about focusing our capital and human resource in our key markets, and we'll update shareholders as we progress in that regard. In terms of a key part of our strategy, which is the structural separation of our infrastructure assets and platforms, again, we're encouraged by the progress we're making, both on the fintech and fibre side. We have progress with minority investment for the fintech, which we updated you with the Q1 trading update. And you'll have seen in the press in recent weeks that we signed an agreement with Africa50 on our East2West Project as part of building our fibre railroads and moving towards our target of 135,000 kilometers proprietary fibre across our platform. In terms of the balance sheet, which I commented on before, again, you see the focus we have on the Holdco leverage constantly within the range of less than 1.5x and in conditions where balance sheets are constrained. We have a very healthy liquidity headroom of just over ZAR 57 billion equivalent of cash and available committed facilities. And then on asset realization, we did make some progress in upstreaming in Nigeria, just under ZAR 1 billion from the Series 1 sell-down in Nigeria as part of our localization strategy. And you'll see in our great shareholder value, the cost to communicate, if you take the effective rate per giga -- a gigabyte of data is down just under 23%. So all-in-all, making good progress within our strategy. Moving on to the next slide. Obviously, as I mentioned, we're operating under very challenging operating context across our markets. And as we have communicated to shareholders, we bought an 8-point plan that's basically framing and guiding us as we navigate some of the headwinds that we see in the market. So a set of commercial objectives, managing the supply chain, the network and then obviously, the financial resilience. And these programs are all being implemented across our markets, and we are very encouraged by the progress that we're making. And we'll have a lot more to say around that in our Capital Markets Day, which we are having next week. And as I move on to that topic, just to give you a flavor and if we move to the next slide, we've set aside 2 days of the 31st of May and the 1st of June, where we intend to cover on the first day, just some of the macro drivers that we're seeing across our markets. And we have special guests that are going to join us for -- across our 3 key markets of South Africa, Nigeria and Ghana. And on the screen, you will see what we have in store for you there. And then on there are too the executives, myself and the executive team will take you through how we are navigating these macro conditions and feel very resolute and confident that the Ambition 2025 strategy that we're executing is the appropriate one, which will create shareholder value over the medium term. So Chair, that's all I have in terms of the business updates and very happy later to take Q&A questions in terms of how we progress.

Thank you very much, Ralph. And we will now proceed to the presentation of the audited annual financial statements, directors' report, Audit Committee report, Social, Ethics and Sustainability report. The consolidated audit annual financial statements of the company and its subsidiary as approved by the Board of Directors of the company, including the directors report, the Audit report and external auditors report for the year ended the 31 December 2022, have been distributed as required and are being presented to the shareholders. Copies of the integrated report, which contain a briefed version of the annual financial statement have also been distributed by registered post and by electronic means to shareholders who are present in this meeting. The Social, Ethics and Sustainability report which details the activities of the committee for the year ended 31st December 2022 has been distributed by registered post or by electronic means to shareholders, and is presented at this meeting. In suit of respond of reports are also available on the company's website. Are there any questions regarding the business presentation, our annual financial statements and reports?

Andre, please just confirm to the AGM, if there are any questions being raised?

We do have questions, Chair. The first question we have is from [indiscernible] and he is on behalf of ESG Insight South Africa on behalf of various pension funds. And his first question is with regards to the auditor reappointment. We have raised the question why the appointment of PwC continues to be tabled despite the firm being long tenured, which is over 28 years and in light of mandatory auditor rotation? Please advise in light of MAR requirements.

Andre, I will read the next question. And when the question was, please advise in light of MAR requirements is in terms of the mandatory auditor rotation. And the second question, Chair, and the directors, why our international directors being paid significantly more than local directors when they perform the same duties? And the next question, Chair, from [indiscernible] for the questions. It's around the remuneration policy. The question is the ESG metric is vague. What considerations are taken into account to determine what material for MTN from an ESG perspective, including the ESG metric under the 2 performance for a little unaccountable for something that is greatly communicated in the company's strategy and disclosures? Thanks, [indiscernible] for the questions. And maybe Chair also take the next one. I think it's also from [indiscernible] It says in line with the exiting trouble markets, MTM has indicated, it is considering options for the Afghan exit. What are the time lines and expectations for the Afghan exit? Thank you, Chair. Thanks to directors.

I'll probably ask a couple of directors to respond to the questions. The first question is with regards to the auditors. And I'll ask within the company secretary to respond to the early questions.

Thank you, Chair. The joint auditors we had for the last year was PwC and EY. And in the current year, for the year ending 31st December 2023, it's only Ernst & Young, that will be the auditors of MTN Group. PwC will no longer be auditors. After we followed the mandatory auditor rotation, extensive conversations, I think, at the Audit Committee, which were reported to the shareholders in the year 2021 and 2022. So now we only have 1 auditor, which is Ernst & Young. Thank you, Chair and the directors.

The second question relates to the remuneration for intent the difference between remuneration of international directors and local directors. And I ask Khotso to respond to the questions.

Thank you, Mr. Chairman. The echo that we felt this morning is still there. This question arises repeatedly. We -- yes, all directors of the company as the question implies, perform the same duties. But when it comes to remuneration of directors, what factors that go into that consideration, the markets in which they reside and from which we recruit them. It would be inappropriate for us to use just one scale for both local and international directors who live in different parts of the world. And so consequently, what goes into that consideration is where we recruit them from and where they are resident. Mr. Chairman, if I can take the next question as well on ESG metric. I can also say that the MTN is a very comprehensive ESG framework, which is led out of the executive by a dedicated member of Exco, but with the entire ExCo and the Board committed to ESG. When it comes to which elements of a very comprehensive framework that we have adopted, we as REM Comm. and supported by the Board felt that at this stage, the most relevant ones that we want to include in the remuneration framework is gender parity, reaching net 0 by 2040 and expanded broadband coverage to cover more areas. Increasing our overall coverage, including rural areas to 87.8% versus the target of 95% by 2025. For now, these are the ones that we consider most relevant to be incorporated into the remuneration framework. And I'm sure over time, this will change. Thank you, Chairman.

And now, Mr. Sowazi, whether you want to add?

No.

The last question that was asked related to exit of difficult markets and are specific to Africa. And process has started and to have a firm offer for the exit and maybe [indiscernible] could tell you the time frame.

Thank you, Chair. The process of exiting in an orderly way Afghanistan is well advanced. We have signed a share purchase agreement with M1. We've had M1 engaging with the regulatory authorities in Cabo, which is part of the conditions precedent and we are in the process of the transition arrangements, which are always necessary with such an exit. So the only outstanding matters are the regulatory approvals and concluded the transition agreement once those are done, then our orderly exit would be completed. Obviously, we are in the hands largely of the regulators. We can't tell them about the time line, but we're anticipating that actually, in the next month or 2 months, we should receive those obviously subject to the regulatory approval. So Chair, that is the answer for the time line.