Mobile Internet And Fintech Will Drive Enduring Digital Transformation

Key Takeaways

• Surging data and advanced fintech services are reshaping MTN's revenue mix, driving higher margins and establishing new long-term growth platforms.
  
• Strategic investments, an expanding youthful customer base, and increased financial flexibility poise MTN for sustained earnings growth and enhanced shareholder returns.
  
• Mounting competition, regulatory risk, and heavy investment burden threaten MTN's revenue growth, margins, and ability to sustain shareholder returns over the long term.

Catalysts

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

• Analysts broadly agree that data revenue will grow strongly, but they may be underestimating the scale and duration of the upswing-management reveal 34% data revenue growth group-wide and cite data's rising share of total revenue, suggesting there is even more room for data ARPU and traffic acceleration as smartphone and device adoption surges, driving top-line revenue higher for years.
  
• Analyst consensus views the Fintech business as a margin enhancer, but this could understate Fintech's transformation into MTN's dominant earnings driver; management highlight that advanced fintech services grew by 42% and now make up a rising share of Fintech revenues, pointing to the potential for a step-change in group net margins as digital payments and advanced financial services rapidly achieve scale across MTN's massive user base.
  
• The scale and youthfulness of MTN's customer base position it to capture decades of demand growth, with nearly 300 million subscribers in rapidly urbanizing markets-this creates a structural platform for accelerating subscriber adds, increased data and digital service usage, and multi-year compounding growth in service revenue and EBITDA.
  
• MTN's front-loaded and sustained investments in 4G/5G and network modernization, paired with disciplined CapEx efficiency and selective spectrum acquisitions, could unleash further ARPU uplift as premium data and enterprise solutions proliferate, feeding through to sustainable earnings and margin expansion.
  
• Renewed financial flexibility and strong free cash flow generation, including reduced net leverage and improved upstreaming from subsidiaries, set the stage for substantial shareholder returns-once Nigeria resumes dividends and Eurobond maturities are addressed, MTN could rapidly pivot to larger buybacks or dividend hikes, significantly boosting future EPS.

MTN Group Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on MTN Group compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming MTN Group's revenue will grow by 15.4% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 3.6% today to 12.0% in 3 years time.
• The bullish analysts expect earnings to reach ZAR 38.0 billion (and earnings per share of ZAR 29.04) by about August 2028, up from ZAR 7.5 billion today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 17.5x on those 2028 earnings, down from 38.1x today. This future PE is lower than the current PE for the ZA Wireless Telecom industry at 27.1x.
• 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

• Escalating competitive intensity in MTN's core markets, especially South Africa, is driving down pricing power and margins, which could limit future revenue growth and profitability over the long term.
  
• The accelerating rollout of satellite internet and non-terrestrial networks, alongside the proliferation of Mobile Virtual Network Operators, threatens MTN's traditional connectivity revenue streams and may erode its subscriber base, directly impacting revenue and long-term earnings growth.
  
• Persistent exposure to high-volatility markets, such as Nigeria and South Sudan, leaves MTN vulnerable to currency devaluations, shifting regulatory regimes, and government interventions, which introduce significant risk to group earnings and can result in large, unpredictable swings in reported revenue and profits.
  
• MTN's consistently high capital expenditure for network expansion-particularly in rural and underpenetrated regions-places ongoing pressure on free cash flow, increasing leverage and constraining the ability to fund dividends or shareholder returns if revenue growth softens or cost inflation accelerates.
  
• The ongoing potential for regulatory, tax, and legal disputes, as evidenced by tax settlements, compliance costs, and U.S. Department of Justice investigations, may result in sustained unpredictable costs and margin pressure, negatively affecting net margins and ultimately long-term shareholder value.

Valuation

• The assumed bullish price target for MTN Group is ZAR220.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of MTN Group's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of ZAR220.0, and the most bearish reporting a price target of just ZAR73.0.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be ZAR318.1 billion, earnings will come to ZAR38.0 billion, and it would be trading on a PE ratio of 17.5x, assuming you use a discount rate of 16.7%.
  
• Given the current share price of ZAR157.12, the bullish analyst price target of ZAR220.0 is 28.6% 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.