For most of Ralph Mupita’s six years as CEO, the strategic direction at MTN has been clear: simplify the sprawling group, get out of difficult markets, reduce foreign-currency debt and strengthen the balance sheet.
That process was partly forced on MTN by experience. Its ventures into places such as Iran, Syria and Afghanistan produced regulatory, legal and geopolitical problems that persisted long after the initial investment decisions. Under its Ambition 2025 strategy, MTN sold businesses, separated infrastructure assets and steadily reduced leverage.
The financial result is impressive. Group leverage is now just 0.3 times EBITDA, compared with much higher levels five years ago; dollar debt has been slashed and cash generation has improved. Even the remaining Iranian exposure is becoming less important: Irancell now contributes only 3% of adjusted headline earnings, although MTN took a R3.9bn impairment against the investment in these interim results.
But MTN’s next five years look rather different from the previous half-decade.
The group is buying control of IHS Towers, plans to expand lending through its MoMo financial-services business, is considering how much AI-related infrastructure it should own and is working out its relationship with low-earth-orbit satellite companies. Taken together, those decisions suggest MTN is moving from a period principally concerned with reducing risk towards one in which it is prepared to deploy capital more aggressively.
Mupita does not characterise it quite that way. The group’s emphasis remains on capital discipline and keeping leverage low. But the balance sheet MTN spent years repairing now gives it considerably more freedom.
Controlling its infrastructure
The biggest example is IHS. MTN already owns 24.7% of the tower company and has agreed to buy the remainder. To complete the deal, it expects to raise about $1.1bn of additional funding, lifting pro-forma group leverage from 0.3 times to roughly 0.8 times EBITDA. That is hardly excessive, but it does reverse the direction of travel: MTN spent years monetising infrastructure and is now bringing a large infrastructure business back into the group.
There is a strategic explanation. Telecom companies increasingly see towers as part of a much larger infrastructure opportunity involving fibre, data centres, edge computing and rapidly expanding data demand. Controlling more of that infrastructure can give MTN greater control over costs and investment as data traffic grows.
It is not alone: Airtel Africa is investing heavily in fibre and data centres, while its Indian parent Bharti Airtel this year announced a $1bn investment into Nxtra, its data-centre business, specifically to expand AI-related capacity. Airtel Africa invested $884m in network infrastructure in its latest financial year and is building out fibre, home broadband and data centres alongside its traditional mobile business.
The difference is that MTN is combining those ambitions with direct ownership of a major tower company.
The same expansion is visible in fintech. MoMo now has just under 71-million monthly active users and processed 13-billion transactions worth $330.5bn during the half year. Transaction values grew by almost a third, although fintech revenue growth of 13.3% remained below MTN’s medium-term target.
The financial services push
The important change is what comes next. Until now much of MTN’s lending has been done through banking partners. Mupita said MTN intends gradually to do more lending itself as it secures the necessary licences.
“The big driver would really be around lending over the medium term,” he said, identifying Ghana and Uganda as the immediate opportunities and Nigeria as an important longer-term market.
That moves MoMo further beyond being a payments platform towards a broader financial-services business. Airtel is heading in much the same direction: its mobile-money strategy explicitly includes loans, savings, insurance, merchant payments and virtual cards. Airtel Money processed more than $195bn in its latest financial year.
The opportunity is substantial because mobile operators have enormous amounts of information about how customers use their networks, allowing lending decisions to be made to customers whom conventional banks struggle to assess. But lending also introduces credit risk and a much heavier regulatory burden. MTN will have to decide how much of that risk it ultimately wants on its own balance sheet.
Technology poses another set of decisions. Mupita was unusually direct on AI during the results presentation: “You get the technology shifts wrong. The business will lose its footing.” MTN is examining AI models, their costs and how they should be deployed across the group.
Some uses are already fairly practical. MTN SA CEO Ferdi Moolman said the company had successfully tested AI in the Western Cape to reduce network power consumption and would roll it out nationally. He said the broader South African cost programme was structural and could take another two to three years to complete.
Grappling with satellite tech
Satellite technology raises a more fundamental strategic question because it can both extend MTN’s network and potentially compete with it. MTN has been testing direct-to-device technology and partnerships with providers including Starlink. Mupita’s position is pragmatic: “Ultimately, we have to embrace LEO satellites; they are not going away.”
Airtel Africa has reached a similar conclusion, partnering with Starlink, while Vodafone and other international operators are also working with satellite providers. For African operators in particular, satellites offer a relatively cheap way of covering sparsely populated areas where building terrestrial infrastructure makes little economic sense. The longer-term question is how the economics change as direct-to-device technology improves.
All this expansion comes against a strong set of interim results. MTN’s service revenue grew 17.5% in constant currencies and EBITDA by 24.4%, while adjusted headline earnings increased 21.3%. Nigeria and Ghana remain the main engines of the group, together producing close to 60% of its EBITDA. Nigeria alone accounts for roughly 35%.
South Africa is the obvious weak point. Service revenue grew only 1.5%, with prepaid voice particularly poor after MTN deliberately reduced airtime lending to customers. Management argues this has improved the quality of the prepaid base and says cash recharges are growing again.
There is also a larger structural question about the South African market. Mupita believes there are simply too many operators chasing too small a profit pool. South Africa, he said, “screams for consolidation”. He points to the UK, Europe and India, where mobile markets have increasingly moved towards two or three large operators.
That is another indication of where MTN’s thinking is heading.
The important distinction is that MTN is not returning to the old model of accumulating operations across difficult jurisdictions. Its geographical footprint is considerably more focused and its balance sheet much stronger. The new risks are principally about capital allocation: how much infrastructure to own, how much credit risk to take through fintech, how much to invest in AI and data centres, and how to accommodate satellite technology without weakening the economics of its terrestrial networks.
Mupita now has the financial room to make those choices. The next stage of the MTN story will depend on whether the discipline developed during five years of de-risking survives the return of opportunities to spend.