African Connectivity And Fintech Will Unlock Future Opportunities

Key Takeaways

• Rapid subscriber and mobile money adoption, along with network expansion, is enhancing customer retention and diversifying growth beyond traditional voice services.
  
• Strategic capital allocation, operational efficiency, and improved market conditions are strengthening profitability, cash flow, and shareholder value potential.
  
• Intensifying competition, regulatory risks, industry commoditization, high CapEx, and macroeconomic volatility collectively threaten MTN's revenue growth, margins, cash flow, and overall profitability.

Catalysts

Provides mobile telecommunications services in South Africa, Nigeria, South and East Africa, West and Central Africa, and the Middle East and North Africa.

• MTN is experiencing significant subscriber and data usage growth across Africa, underpinned by favorable population dynamics, accelerating digital adoption, and rapidly rising smartphone/data penetration. This is expected to sustain double-digit top-line (revenue) growth as more customers utilize higher-value data and digital services.
  
• Expanding adoption of MTN's fintech and mobile money ("MoMo") platforms, including advanced services such as payments, remittances, and digital banking, is driving non-voice revenue growth, enhancing net margins, and creating long-term customer stickiness.
  
• The company is executing disciplined capital allocation, including strategic front-loading of CapEx in key growth markets like Nigeria and ongoing focus on expense efficiency programs. These initiatives support infrastructure quality and operational leverage, which should benefit margins and free cash flow as investment moderates in future periods.
  
• Ongoing 4G/5G network rollout, selective expansion of fiber and fixed wireless access, and strategic partnerships (including collaboration with non-terrestrial networks) position MTN to capture emerging opportunities in the growing African digital ecosystem, supporting sustainable revenue and earnings growth.
  
• MTN's improved macro, regulatory, and FX landscape in core markets (notably Nigeria and Ghana), combined with a stronger balance sheet, rising cash upstreaming, and potential for increased dividends or future share buybacks, provide further upside to medium-term earnings and shareholder returns.

MTN Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming MTN Group's revenue will grow by 10.9% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.6% today to 14.7% in 3 years time.
• Analysts expect earnings to reach ZAR 41.5 billion (and earnings per share of ZAR 20.87) by about September 2028, up from ZAR 7.5 billion today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 12.2x on those 2028 earnings, down from 33.9x today. This future PE is lower than the current PE for the ZA Wireless Telecom industry at 24.9x.
• Analysts expect the number of shares outstanding to grow by 1.32% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 16.74%, as per the Simply Wall St company report.

MTN Group Future Earnings Per Share Growth

Risks

• Heightened competitive intensity in South Africa, especially in the prepaid segment, is leading to lower market share and margin pressure, which may require ongoing cost absorption to maintain competitiveness, directly impacting revenue growth and net margins.
  
• Persistent regulatory, legal, and compliance risks-including ongoing legal cases (ATA, Turkcell, DOJ investigation), evolving digital taxation regimes, and complex SIM registration mandates-expose MTN to significant one-off or recurring costs and operational disruptions, which may constrain earnings and profitability over time.
  
• The commoditization of core connectivity services and industry price competition, particularly from MVNOs and OTT services, risks sustained downward pressure on ARPU and top-line growth if MTN is unable to fully offset these trends with data and fintech offerings, potentially eroding group revenues.
  
• High capital intensity and accelerating CapEx, especially in major markets like Nigeria (and selective 5G/FWA/FTTH rollouts), could lead to increased debt and capital allocation challenges, compressing free cash flow and potentially limiting dividend growth or share buybacks.
  
• Exposure to macroeconomic and foreign exchange volatility in key markets (notably Nigeria and Ghana) remains a long-term risk; while recent stability provided tailwinds, any renewed volatility or inability to repatriate cash due to local currency controls or capital restrictions could materially impact consolidated earnings and liquidity.

Valuation

• The analysts have a consensus price target of ZAR167.111 for MTN Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ZAR230.0, and the most bearish reporting a price target of just ZAR73.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be ZAR281.8 billion, earnings will come to ZAR41.5 billion, and it would be trading on a PE ratio of 12.2x, assuming you use a discount rate of 16.7%.
• Given the current share price of ZAR139.8, the analyst price target of ZAR167.11 is 16.3% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.