MTN and Airtel scramble for market share

The two listed telecoms giants in Africa’s largest economy have just released their half year results that showed they recorded double digit growth earnings.

But investors are not interested in those catchy headlines and press release written in rosy languages. Instead they are more interested in numbers because these figures show them the true financial position of a going concern.

Undoubted, Nigeria is a cashcow for MTN Nigeria and Airtel Nigeria Plc because of the country’s robust young population that crave for smartphones.

For the first six months through June 2019, MTN Nigeria’s sales increased by 12.12 percent to N566.12 billion, while Airtel’s sales were up 22 percent to N112.64 billion in the same reporting period.

Both firms recorded expansion in margins, as they have become cost cutters, which is why they are able to maintain earnings momentum amid a harsh and unpredictable macroeconomic environment.

Airtel operating margins, other

wise known as earnings before and interest and tax margin rose to 38.86 percent in June 2019 as against 17.71 percent as at June 2018.

MTN Nigeria’s EBIT margins increased to 33.58 percent in the period under review from 27 percent the previous year.

Airtel’s Earnings before interest taxation depreciation and taxation (EBIDTA margin) increased to 53.30 percent in the period under review as against 45.90 percent the previous year.

MTN Nigeria followed the same growth trajectory as its EBITDA margins increased to 53.80 percent in the period under review from 44.60 percent the previous year.

Gleams of the books of teleco giant show they have increased speding on the acquisition of property plant and equipment to drive revenue than peer rival.

Airtel Nigeria’s capital expenditure for the first six three months through June surged by 285.10 percent to N19.15 billion from N4.93 billion as at June 2018.

MTN Nigeria capital expenditure (CAPEX) increased by 63.80 percernt to N105.80 billion in the period under review from N96.10 billion the previous year. The largest carrier by subscriber has plans to embark on more CAPEX spend as it plans to expand its 4G network.

Telco companies are awash with cash, which means they have the financial strength to reward owners in form of dividend payment, settle debts, and fund future expansion plans.

Those companies together generated close to N40.63 billion in of cash flow from operations, but they may have to tap the market to raise more funds to underpin working capital.

However, there operating cash flow margin has been shrinking, which means they have to expand their assets to create long term value for shareholders.

MTN Nigeria’s cash margins fell to 4.57 percent in June 2019 from 16.57 percent as at June 2018. The company had planned to raise N200 billion to expand its market across Africa.

Airtel Nigeria cash margins reduced to 36.27 percent in the period under review as against 40.40 percent as at June 2018.

Some analysts prefer the operating cash flow margin as a measure of efficiency and profitability because it cash is used to generate revenue, and, moreover, unlike profit, it is difficult to tinker with cash.