Team 15 CFA Equity Research (MTN N)

CFA Institute Research Challenge
hosted by CFA Society Nigeria

Team 15
The CFA Institute Research Challenge is a global competition that tests the equity research and valuation,
investment report writing, and presentation skills of university students. The following report was prepared
in compliance with the Official Rules of the CFA Institute Research Challenge, is submitted by a team of
university students as part of this annual educational initiative and should not be considered a professional
report.
Disclosures:
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The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company.
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or publication of this report.
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Market making
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Disclaimer
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) to be
reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. The information
is not intended to be used as the basis of any investment decisions by any person or entity. This information does not constitute investment advice,
nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered to be a recommendation by any
individual affiliated with CFA Society Nigeria, CFA Institute, or the CFA Institute Research Challenge with regard to this company’s stock.
MTN Nigeria Communication PLC
The Nigerian Stock Exchange (NSE)
Team 15 Y’ello Brick Road, A Bright Future Telecommunications Industry
V
Fig 1: Company Overview Valuation Date: 03-Dec-2020 Recommendation: BUY
Current Price: N155 Target Price: N201.25
Target Price N 201.25
Ticker: MTNN Upside:30%
Closing Price N 155
Upside % 30% Fig 1.2: NSE-ASI vs MTNN Historical Prices
52 Wk High N 162 NSE-ASI MTNN
52 Wk Low N N90
35000 N160
Market Cap. N'trn 3.155trn
30000 N140
Shares Outs. bn 20.35bn
N120
25000
Free Float % 9%
N100
Source: Refinitiv 20000
N80
15000
N60
Comps trading Multiple Prices Weights WP 10000
N40
Discounted Cash Flow 266.12 30% 79.83
5000 N20
FCFE Income Model 153.76 0% 0
Dividend Discount Model 137.92 25% 34.48 0 N0
Sep-19 Oct-19 Nov-19 Dec-19 Jan-20 Feb-20 Mar-20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20
Residual Income Model 190.6 25% 47.65 Source: Refinitiv
Comps trading Multiple 196.43 20% 39.29
Fair value 201.25 MTNN 52 Weeks Modest Upside; Well Positioned for Long Term
We initiate coverage on MTNN with a BUY recommendation based on a 30% upside against the closing price as
Fig 2: MTN NIGERIA Vs MTN SOUTH at 3rd December, 2020, taking into consideration the potential average dividend payout ratio of 75% through
AFRICA 2025F. Our 12-month target price of N201.25 (30% Upside) was computed via four valuation methods;
Discounted Cash flow (DCF), Dividend Discount Model (DDM), Residual Income Model, and Comparable
multiples (P/E and EV/EBITDA multiples) with mixed weights of 30%, 25%, 25% and 20% respectively. We are
positive on MTNN’s ability to generate strong earnings per share (EPS) growing at 11.8% CAGR through 2020-
45% 2025F given its (a) positioning in an exciting market demography (b) strong competitive advantage (c) strong
40% industry leadership and (d) strong opportunity in Fintech.
35% INVESTMENT SUMMARY
30%
25%
Blue Eyed Subsidiary
20% Analyzing MTN Nigeria by Revenue and EBITDA, 31.0% and 40.1% respectively in 2019 with 71.1m subscribers
15% base as at H1 2020 against its South African counterpart with revenue, EBITDA and subscriber base of 30.2%,
10% 27.1% and 25.8m subscribers respectively, MTNN makes the largest subsidiary within the MTN group. It
5% explodes its prominence among firms in the whole of Africa by hitting the hallmark free cash flow level of over
0% N1tn. It emerged in 2019 as the ‘Most Valuable Multinational Brand in Nigeria’, ‘Most Valuable Telecoms with
Revenue EBITDA highest NPS among peers in Nigeria’ and one of the country’s Top 50 brand. We believe these achievements
that MTNN gains due to the strong support it benefits from the group would further strengthen its brand
leadership and performance in terms of capital appreciation and high dividend payment.
South Africa Nigeria

Exciting Market Demography
Source: MTN Group 2019
A major advantage for MTNN is Nigeria’s status as the 7th most populous nation in the world which is set to
become top three with a CAGR of 2.5% (See: Appendix 25) whilst also being the giant of Africa in terms of
Fig 3: Median Age and Population Growth economy and telecoms market size with an estimated 200 million people and with over 180m mobile
subscribers. It enjoys being among the top brands in Nigerians appreciate, ringing reliability and quality in our
45 100% minds. Whilst the market penetration rate (p.r) at 90% to 181 subscribers is still low compared to other African
2.50% 2.2… 0.30%
1.20%
40 90% countries, with 191% (p.r) to 108s. for South Africa, 94% (p.r) to 93s for Egypt, 103% (p.r) to 53s for Kenya, we
35 80% expect demographic factors to offer growth opportunities for MTNN going forward with an outlook of five years
30
70% of blistering growth considering a mobile penetration upside of 96% (2024E). the exciting median age of the
1.40% 0.40%
60% Nigerian populace which is 19 years and the potential impact of these on market penetration in the near future.
25 2.30%
2.10% 41 50% (See Appendix 26)
20
28 40% Financial Analysis 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F CAGR
15 20 30% Revenue (N'bn) 1,039.1 1,169.7 1,269.6 1,449.0 1,655.3 1,840.3 2,035.0 2,231.3 11.4%
19
10 20% Revenue growth % 17% 13% 9% 14% 14% 11% 11% 10%
5 10% EBITDA (N'bn) 453.17 629.92 655.96 757.66 867.01 965.83 1,053.92 1,126.31 10.2%
0 0% EBITDA Margin % 43.6% 53.9% 51.7% 52.3% 52.4% 52.5% 51.8% 50.5% -1.1%
Nigeria Kenya South Africa WE
EBITDA growth % 31% 39% 4% 16% 14% 11% 9% 7%
Median Age Adj. EPS (N) 7.16 9.93 8.80 11.32 14.15 16.61 18.71 19.43 11.8%
Forecasted Population Growth CAGR in 5 years ARPU (N) 1,491 1,516 1,383 1,429 1,491 1,586 1,763 1,983 4.6%
Historical Population Growth ARPU growth % 5% 2% -9% 3% 4% 6% 11% 12%
Source: MTNN
1
Team 15 MTN Nigeria Communication PLC
Leading Telecom Operator in Nigeria with Great Competitive Advantage Across All
Segment
MTNN is the largest mobile network operator in Nigeria maintaining its leadership since 2001 knocking down
49% market share of the industry’s revenue (higher by 22pp when compared to closest rival) and 40.39% of the
oligopolistic market in terms of subscriber base as at September 2020 and an ARPU leader of N1519 as at Q4 of
2019 greater than the closest competitor’s N1,000 ARPU. The nationwide coverage and network quality has
been greatly unpaired with MTNN owning >29,000km of fibre network which is 3x of the closest competitor’s
with 90% mobile penetration covering 223 towns and cities in over 10, 000 communities. This exciting market
leadership offers great competitive advantage edge and growth potential for MTNN.
Vista Opportunities in Fintech: Nigeria Turning to Telecoms to Drive Financial Inclusion
MTNN’s aggressive penetration into the fintech industry through the expansion of its agent network to 108, 000
which served c.1milllion unique subscribers led to a transaction volume of over 200milion in 2019 with a
reported 23.3% YoY revenue increase as at March 2020 with MTN Xtratime accounting for 95% of fintech
inclusion in Nigeria alongside rivals such as Glo Mobile Money, Stanbic 909, GTbank 733, PAGA, PocketMoni etc.
revenue. MOMO, MTNN’s mobile money agent platform is among the e-payment businesses towards enhancing
financial inclusion. We note that MTNN-Diamond Bank partnership (Diamond Y’ello Account) and Diamond bank
recent merger with Access Bank paves opportunity to expand customer base. The recent approval of Super-
Agent Network and the awaiting payment service bank license (PSB) license will tap the opportunity of more
than 70million unbanked adult population and enable the firm to penetrate the limited traditional bank
presence in the rural areas in Nigeria. We believe MTNN Fintech penetration will support provision of strong
long-term shareholders return.
MAJOR HIGHLIGHTS
Commitment To Stakeholders’ Interests Amidst Covid-19 and Afterwards
We discovered an upsurge in data and voice services from the onset of Covid-19 pandemic in March with an
Fig 4: Covid-19 Period increase in subscriber base. MTNN subscriber base rose on a CAGR 2.3% from March (peak of lockdown) to
2.5% Subscribers Movement August compared to other competitors, Airtel 1.4%, GLO 0.4% and 9Mobile 0.2%. MTNN also witnessed a boom
in Q1 revenue majorly driven by data by 16.7% QoQ to N329bn and EAT grew 5.6% compared to the Q1. Though
2.0% H1 2020 revenue dropped by 4.7% to N638.07billion but this is greater than N566.99billion in H1 2019 by 12%.
The company still proposed an interim dividend of N3.50 which translate to a dividend payout ratio of 75% while
1.5%
service revenue maintains double digit increasing by 13.9% YoY to N973.8billion in Q3 of 2020. We expect
1.0% revenue to grow at a moderate CAGR of 11.4% and EPS growing averagely by 11.8% to 2025F while MTNN
remain resilient to economic pressures going forward.
0.5%
All Eyes on Africa as Group Pull Out from The Middle East
0.0% MTN Telecommunications Group recently announced to sell their 75% stake in the middle east to enable them
MTNN Airtel Glo Etisalat mount substantive focus on their Pan-Africa businesses. We see this move as a positive outlook for each
Source: NCC, Team Analysis
respective African subsidiary, and more so for MTN Nigeria which brings in most revenue for the group, is the
largest economy in Nigeria, and the most populous African market.
Fig. 5: MTNN AND SUBSIDIARIES Ditching CBN Rate for NAFEX: MTNN, IHS Amends Tower Agreement
MTNN revised its tower business with HIS to allow it focus on its core business and reached decision referencing
forex rate to NAFEX which average N385/$1. MTNN reveals its EBITDA margin will fall by 0.44p approximately
MTN NIGERIA
COMMUNICATIO on IFRS 16 basis, but this is expected to be offset by improved pricing and increased focus on rural connectivity
N PLC as it will improve cost for technology in future bringing fruit of profitability for MTNN.
BUSINESS DESCRIPTION
Y’ello Digital
Visafone Established in February 2001 as a subsidiary of MTN Group – Africa’s leading telecom, MTN Nigeria
XS Broadband Communication
Finance Communications Plc is the largest MNO in Nigeria having three subsidiaries under its watch: XS Broadband, Y’ello
Limited
Digital Finance and Visafone communication Limited. MTN Nigeria boasts of 71.1 million subscribers, 40.59% of
the market share, 49% market share of the industry’s revenue, 90% mobile penetration rate with an expansive
coverage of 29,000km fibre network in more than 10,000 communities (223 towns), over 16,000 based station,
Source: MTNN, Team Analysis
12 switching centers and over 410 customer touchpoints. It extends wide spectrum of services i.e. voice, data,
digital services, fintech etc. with great technology (2G, 3G, 4G LTE) with the privilege of having 20m Nigerians in
Fig 6.2: Revenue Breakdown In FY19 a place where MTNN is the only MNO. Upon listing on the premium board of the Nigerian Stock Exchange (NSE)
Voice Data in May 2019, MTN quickly reached a market cap of over ₦2trn and conducted the first ever 5G network trial in
Digital Value Added Services
SMS Interconnect and Roaming
the whole of West Africa in the same year. The firm has contributed more than N21bn in corporate social
Handset and Accessories Other Revenue investment so far and won the Nigeria Risk Award of ‘Most responsive organization to Covid-19 pandemic in
, 3%
2020’. The firm’s management reflects robust levels of expertise across telecommunications, finance, public
3%
0.9%, policy and over 200 joint years of experience both locally and internationally. As at the time of writing this
0.2%, report, MTNN offers its services across six (6) main streams; (1) Voice (2) Data (3) SMS (4) Interconnect and
10.7%,
roaming (5) Digital and value-added services (6) Enterprise business unit.
Business Model
1% MTNN prides itself in a BRIGHT strategy (see: Appendix 17) the company developed in 2017, an operational
18.8%,
62.0% strategy that serves as a compass for all MTN users and clearly defines the six pillars on MTNN focus its business
sustainably. MTN Nigeria’s business model focused across three broad spectrum of customers, summarized in
three (3) broad segments – Consumer, Enterprise and Wholesale. Revenue contribution across these
subscribers’ segment includes; voice (Airtime subscription), Data, SMS, Handset and accessories, Value Added
Source: MTNN 2019 Annual Report, Team Analysis
Services, Digital, Interconnect and roaming and other revenues.
2
Voice: The primary driver of revenue, comprising 62% of FY19 annual revenue. Voice revenue has been the
Fig 6.1: Historical Component Of Revenue (bn) major driver of MTNN annual revenue averaging 64% from FY15 through FY19. Growing at a CAGR of 7.7% from
N1200 N538.9bn in FY15 to N725.4bn in FY19. Tremendous receipt in MTNN voice revenue is driven by its large mobile
subscribers, quality service, wide network coverage (29,000km+ of fiber optic coverage) and increased digital
recharge penetration of 38.3% (FY19).
N1000
Data: With 39% data penetration, MTNN annual data revenue grew from N82.5bn FY15 to N219.4bn FY19 at
27.7% CAGR. Revenue from data has averaged 13% of total annual revenue in the last 5 years. Contributing
N800
10.2% of revenue in FY15, data revenue has almost doubled to 18.7% in FY19. Growth in data revenue is
attributed to; (1) massive 4G roll-out (48% coverage in 132 cites), (2) continued investment in 3G network
coverage (1,187 3G sites), (3) Revamped data pricing in line with market and improved quality service delivery
N600 (increased 4G traffic contribution from 10.1% to 37.9% FY19) and (4) high smartphone penetration. Forecast
topline from data service is expected to grow at 15.3% CAGR by 2025 ensuing from increased demand for high
N400
content streaming service, teleconferencing, cloud and quantum computing.
SMS: Annual revenue growth in SMS category has been historically low, with a mean of 1.4%. From printing
1.6% of FY15 revenue, SMS contribution shrank to 1.2% FY19. Mild growth in SMS revenue is relatable to the
N200 rise in OTP services, instant messaging, social networks. Mild growth trajectory is envisaged from SMS revenue
projecting into 2025 at 3.2% CAGR from N13.5bn FY19 to N16.3bn FY25.
Interconnect and roaming: Prior to the increased demand for data services experienced in recent years,
N0
2015 2016 2017 2018 2019 Interconnection and roaming service printed the second highest contribution to annual topline (11.7% FY15).
Annual revenue averaged 11.3% over the 5-year period (FY15-FY19) growing at double-digits 31.8% from
N94.8bn FY18 to N125bn FY19. Contribution to Annual topline declined from 11.7% FY15 to 10.7% FY19 at 32%
Airtime Data
SMS Interconnect and roaming
growth over the period. Interconnect and roaming revenue projected to rise at 17% CAGR to N320.9bn, although
Handset and accessories Digital just 14.4% of FY25 annual revenue.
Value added services Other revenues
Handset and accessories: Contributing N0.22bn (c.0.03% of total revenue) FY15, revenue from sales of Handset
grew at a remarkable 894% to N2.2bn FY19 driven primarily by affordable smart phone devices. Annual revenue
Fig 6.3: Breakdown of Revenue by contribution averaged 0.1% during the 5-year period with a CAGR of 5.7%. Smart phone penetration stood at
Customer Segment 43% (Q1 20), with room for growth, forecast revenue is projected to reach N6.07bn FY25 at 18.4% CAGR.
Digital: Annual revenue from digital services has been on a free-fall declining at CAGR -13.6% from N64.5bn
FY15 to N35.9bn FY19. Contributing 8% of total revenue in FY15, digital revenue plunged 44.2% to contributing
EBU a weak 3.1% FY19. A mean contribution of 6.8% through the previous 5 years with relatively mild volatility (0.03),
11%
WBU revenue from digital service is projected to resuscitate. On the back of growing active user based (3.8million as
4%
at Q1’20) driven primarily by; (1) improved data penetration 35million active users (source: NCC) (2) increased
demand for infotainment (3) launch of MTN Music and Ayoba (instant messaging app) (4) rich domestic content
and mobile payments integration and lastly (5) opportunities in PSB and Fintech space. With focus shift to digital
services, revenue is projected at a double digit 19.3% CAGR growth to N103.8bn FY25 with improved average
CBU
85% total contribution of 4.1%.
Value Added Services: Tremendous double-digits 37.6% CAGR growth saw VAS revenue triple from N10.4bn
FY15 to N37.2bn FY19. From contributing an insignificant 1.3% of annual revenue in FY15, VAS revenue averaged
2.5% in the previous 5 years with an improved 3.2% FY19. Explosion in rich VAS content is expected to drive VAS
revenue to N97.2bn FY25 at 17.4% CAGR with improved contribution of 4.4% of annual revenue.
Fig 6.4: Revenue and growth Other revenue: Comprising revenue from cloud and infrastructure services, information and communication
technology (ICT) revenue, making up MTNN annual total revenue. Other revenue quadrupled from printing
Revenue (N'bn) Revenue growth (%)
N3.02bn FY15 at 38% CAGR to NN11bn FY19. Revenue from other revenue is projected to continue its growth
2500.0 20.0%
trajectory tripling to N30bn FY25 with an average 1.2% on the back of the following factors; (1) increased
demand for cloud services (2) advent of quantum and cloud computing (3) increased usage of AI, IoT and ML
2000.0 15.0% and lastly (4) integration of block chain technology. Summarily, from contributing a minute 0.4% of annual
1500.0 10.0%
revenue in FY15, revenue classified as others is expected to grow to 1.4% FY 25.
Enterprise Business Unit (EBU): The bulk of MTNN subscribers are classified in the Consumer segment (CBU),
1000.0 5.0% accruing 85% of MTNN annual topline (FY19). Small, Medium and corporate organizations are mostly classified
500.0 0.0%
under Enterprise subscribers, same as Multinationals, Oil & Gas, Large Corporates, Public Sector, Universities,
Small and Medium Scale Enterprises (SMEs) and Small Offices/ Home Offices (SOHOs). MTNN EBU total revenue
0.0 -5.0% topped N132.8 billion FY19, up 20.3% from FY18.
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Source: MTNN, Team Analysis Wholesale Business Unit (WBU): MTNN Wholesale business unit in FY19 printed N46bn from N31.7bn FY18
(45.11% growth within the year. The unit serves customers clients who intend to re-sell MTNN telecom products
in bulk either mobile or fixed to their external clients.
Fig 7: Ownership structure
Ownership Structure
75%
80% MTNN is a subsidiary company of MTN International Limited and a part of the MTN Group company
incorporated in South Africa. 75.81% stake of the company shares is owned and controlled by MTN International
60% (Mauritius) Limited and the company public floats stands currently at 9% (Se FIG 7.).
40%
INDUSTRY OVERVIEW: MARKET DYNAMICS
18% Global Outlook
20% The global telecoms industry size in terms of GDP as at 2019 according to Afrinvest, based on data made
27% 1.8% available by GSMA was valued at US$4.1trn which reflects a CAGR of 5.5% from 2015 to 2019. The global number
0% of unique subscribers as at Q1 2020 is 5.2bn signaling a 67% penetration rate compared to 2010 3.3bn and 46%
MTN Nigerian
International shareholders
Mobile
Telephone
Public
Investment
p.r based on a Q1 2019 FBN Quest report. The global telecom industry possesses strong growth potential going
Networks Corporation forward as numbers of subscribers are expected to rise to 6bn with 71% p.r by 2025. We presume Nigeria to
SOC Limited
capture a good portion of this growth considering its rapid population growth rate and in the light of a strong
3
and stable economy going forward.

Fig 8: Real GDP and Telecoms growth (%) COVID-19
Pandemic
COVID-19 Impact: Telecoms operation are key to the functioning of other firms due to the need to internet
20%
connectivity and the growing trend of digitalization. For this reason, we do not foresee the advent of Covid-19
to have significant impact on the global telecom industry that will change our forecast.
Domestic Outlook
15% The Nigeria telecommunications industry is the largest in Africa evidenced in the country’s population size of
approximately 200million and 173million mobile subscribers as at March 2019. The sector is largely dominated
by GSM technology with 99.7% share versus CDMA and Fixed Wired/Wireless. The sector performance can be
10%
perceived from its contribution to GDP standing at 10.88% Q1 2020, a 0.28% increase when compared to Q4
2019. Foreign capital investment in the industry rose to $944.05million by 725% in 2019 from $114.43million
5% 2018 driven by MTNN and Airtel Africa stock exchange listing amongst other things.
Continued Industry Growth Despite Drawbacks

0% Despite the Nigeria economic downturns (recession, foreign exchange volatility, dwindling oil price and OPEC+
regulation etc.), the telecommunication industry has been resilient and growth have been majorly impacted by
Nigeria's rising population which is the largest in Africa and 7th in world growing at 1.6x to 201.0 million from
-5% NBS
Source: recession 2002-2019 (Afrinvest, 2019). Consumer spending has also fueled the industry’s growth with telecommunications
owning a 5.5% (N2.2trn) share in 2019 of the total amount spent on non-food consumption. The market is still
-10%
less penetrated compared to other countries. With this, we believe the Nigeria telecom industry offers growth
opportunities for the telecom operators.
Q3'15
Q1'19
Q1'15
Q2'15
Q4'15
Q1'16
Q2'16
Q3'16
Q4'16
Q1'17
Q2'17
Q3'17
Q4'17
Q1'18
Q2'18
Q3'18
Q4'18
Q2'19
Q3'19
Q4'19
Q1'20
Q2'20
COVID-19 Impact: The sector recorded a growth in real terms by 18.1% in Q2 2020 compared to 11.34% Q2
Telecomms growth % Real GDP growth % 2019 and 9.71% in Q12020. We do not foresee the advent of Covid-19 to have significant impact on the local
Source: CBN, NCC
industry that will change our forecast as we expect the industry to remain resilient.
Fig 9: Nigeria's Population (mn) and Population Telecoms and Regulation: What’s bad?
growth % The Nigeria Communications Commission (NCC) scores well in terms of regulation and compliance monitoring
250.0 3.0%
with a score of 67.8% higher than the Sub-Saharan African Countries according to Fitch Report, Q2 2020. The
success of Nigeria’s telecom industry is well influenced by the NCC asserting its efforts toward regulating market
186 201
191 196 monopoly and subscriber’s protection. The regulation in telecom industry is not limited to the extraordinary
200.0 181
176 2.5% ability of the NCC but extend to other authorities. This stiff regulatory measures have impacted MTNN negatively
150
150.0
143 146 compared to other MNOs in the industry. MTNN has recently been ordered to suspend sales of SIM Card amid
2.0%
compliance checking of regulatory guidelines. It was fined in 2015 with $5.2b due to the failure to disconnect
100.0
unregistered SIMs which the Nigeria government suggest may have enabled security disruptions affecting the
nation thereby reporting loss before tax of N12,335million in FY 2015 (PBT FY 2015 would have been
1.5% N262,739million assuming there was no fine). The authority also set up a minimum standard of quality of
50.0
services (QoS) to cinch quality service provision, though poor QoS have been criticized by operators due to
ceaseless cuts of fibre, diesel scarcity to power base station etc. causing poor industry growth and profitability
- 1.0%
2006 2007 2008 2014 2015 2016 2017 2018 2019 (Fitch Report).
A Dawn of New Growth
Population Population growth (annual %)
Source: NBS
4G LTE Expansion and 5G: The national broad-band plan of 2020-2025 is aimed at expanding 4G/5G coverage
by 2025 to 90% of the population which currently stands at 30%, provide data download speed at a minimum
Fig 10: Historical Profit after tax (bn) of 25Mbps and 10Mbps in rural and urban areas at a price not more than N390 per 1GB of data. Nigerians are
sensitive to price and high quality service and we believe the aggressive investment in 4G LTE which is better
N250.0
than other players (4G LTE is expected to grow from 15.4mn in 2020 to over 137.7mn by year 2029 (Fitch
N200.0
Solution, Q1 2020) and the successful 5G trial (first of its kind: from experience, the company which happens to
be the first to penetrate the market with new product capture the huge share of market revenue) brings
N150.0 opportunities to further penetrate the market thereby growing revenue and deepening its market dominance.
Payment Service Bank(PSB): The Nigeria government turned to telecom with the drive to promote financial
N100.0
inclusion and enhance access to financial services especially in rural areas where bank presence is less felt
N50.0
(known as unbanked areas/population). The CBN and NCC signed a MoU that award telecoms the opportunity
to acquire license and begin operation as a PSB with capital base of N5.0bn. We believe MTNN is favorably
N0.0 positioned and one of the best to penetrate 70million unbanked adult population as evidenced by being the
2014 2015 2016 2017 2018 2019
market leader of telecoms with strong subscriber base reflecting on the performance of M-PESA in Kenya.
-N50.0
-N100.0
INDUSTRY OVERVIEW: CONSUMER DYNAMICS
Source: MTNN, Team Analysis Upsurge in Data Demand: Data demand have seen upsurge over years as telecoms revenue are moving from
voice centric to data centric evidenced by the Q1 2018 hallmark of 100million internet subscriptions which has
Fig 11: Data Revenue contribution been on a bullish trend since then. The advent of Covid-19 has further ignited the rising in demand for data.
MTNN active data subscription as at H1 2020 rose by 663% YoY from 3.8million to 29million while data revenue
printed an increase of 57.6% YoY. Both MTNN and Airtel has witnessed a rise in data revenue growing at a rate
WE 67% higher than that of Voice (these are the only two telecom companies that makes their financials publicly
available).
Over the Top (OTT) As a Catalyst: Mobile VoIP services where APP like WhatsApp, Skype, Zoom, Viber, Facebook
South Africa 57% etc. would be an end to the services provided by telecom operators causing market disruption depriving
telecoms of their revenue from voice services. This uptake has stimulated telecoms to invest heavily in data.
Nonetheless, the contribution of data revenue to total telecom revenue is too low but we expect continued
Nigeria 31% rising trend of data revenue as telecoms moves from voice to data centric.
How sensitive are the consumers? Telecoms subscribers are price and quality sensitive, however the market
Source: MTNN position is fairly elastic considering the network quality and speed offered by the different MNO. MTNN is well
4
positioned to cope with porting of subscribers favorably overtime. MTNN offers highest quality services compare
to its competitors in terms of network coverage (See: Appendix 36). As the best telecom with highest Network
Fig 12: Market Share by GSM Net Promoter Score (NPS) of 63% and its unmatched best nationwide coverage, we believe MTNN is best
operators positioned to enjoy customer’s loyalty overtime.
COMPETITIVE POSITIONING
Extensive network coverage accustomed with great network quality, wide range of spectrum holdings and
significant subscribers base have been the bedrock of MTNN’s competitive positioning in the telecoms industry
Airtel
in Nigeria. MTNN positioned itself by being the largest telecom in the industry leading by all key indicators (See
27%
appendix). Its recent strategic expansion to other businesses cushioned with the BRIGHT business model
expectantly will go a long way to fetch the firm incredible growth going forward.
MTN
Extensive Coverage and Spectrum Unpaired by Rivals
Nigeria
41% We maintain that MTNN has the most extensive coverage reaching throughout the nation with 223 towns and
GLO cities in more than 10,000 communities which position it favorably. It has the largest fibre network of >29000km
26%
which is almost 3x the closest rival and further complemented with third party partnership. It maintains the
Fig 14: Price Output
largest coverage by population, 88% for 2G, 78% for 3G and 44% for 4G as at Q1 2020 thereby expansively
Source: NCC
covering the rural-urban areas. By holding wide range of spectrum across the nation, MTNN stands at the top
of the peak against its competitors adding clear 4G spectrum advantage over its peers (being the only MNO with
9mobile nationwide coverage of 2600MHz, 3500MHz) which now covers 52.9% of the population as at Q2 2020 from
6% 48.6% in Q2 and 35.4% in Q2 2019 leading to a growth in voice and data revenue by 13.9% and 4.2% YoY in Q3
Source: NCC
2020 while data traffic rose by 135.6% YoY and average usage by 70.4% in the same period. We note that, the
Fig 13: Porter Five Forces recent national roaming trial approval between MTNN and 9mobile which would allow a user travel outside the
coverage of their network provider but still be able to use the network service of another MNO would exclude
Industry the stimulating need for other operators to expand their coverage. We expect this to come as additional cost to
rivalry network providers that lack wide enough coverage which would mean an opportunity for MTNN in terms of
increased reliance on MTNN network coverage capacity and roaming revenue.
threat of
Bargaining MTNN: Market Controller with Large share of Market Revenue.
Power of As at September 2020, MTNN has a market share of 40.59% which reaches almost the sum of its two closest
substitute
buyers
competitors. Main competitors are Airtel, Glo and 9mobile. The 2nd largest competitors following MTNN (Airtel
and Glo) approximately have a combined market share of 52%. While MTNN capture 50% of market revenue,
Bagaining threat of the remaining market revenue is shared by the other telecoms. It is on this note that we deem the market to be
power of New moderately condensed in favour of MTNN. MTNN continued strategic investment on massive expansion in
sellers Entrants
network quality and speed, positive brand reputation and good management sees to net addition of 10.7million
subscribers, the first time the company will exceed 10million in an annual cycle with one quarter remaining
bringing the total number of subscribers to 75million as at Q3 2020 affirmed us of its maintainable market
Source: Team Analysis
leadership potential. A key consideration is the massive deployment of 5G and aggressive investment in 4G LTE
as the market move from voice centric to data centric on a steady trend
Subscribers Don’t Want Bells and Whistle; Only Quality Network at Affordable Prices
Other MNOs have been catalyst to telecom prices over years offering services at cheaper prices but with very
week quality network. This is the case where the likes of Airtel and Glo came in and disrupt the market with
their pricing strategy. Data from Research ICT Africa showed that in Nigeria, Voice product price dropped by -
78.6% from US$9.28 in 2011 to US$1.99 in December 2019 while broadband product price declined from
US$10.53 in 2014 to US$2.78 by -73.6% in December 2019. The trend in the market competition with regard to
great quality and Nigeria rising inflation are making it very difficult to maintain pricing power as subscribers who
are aware of this exercise their bargaining powers. (Appendix 33: Porter’s 5 Forces). MTNN okays their prices
for high quality network driving its market dominance (See: Appendix 27). As MNOs pricing strategy becomes
captious for revenue generation going forward, it is therefore important to invest heavily on network speed and
quality which MTNN has been in the forefront of implementation. We consider MTNN strong brand awareness
and experienced management team to be a supplement to their relative competitive positioning.
We carried out anonymous survey to examine the interplay of network providers in Nigeria. The survey shows
MTNN is favorably positioned (See Appendix).
VALUATION
Valuation Summary
We initiate coverage with a BUY recommendation on MTNN. Our valuation is based on Discounted Cash
Flow(DCF), Dividend Discount Model(DDM), Residual Income Model, Comparable Multiples (EV/EBITDA and P/E
Multiples), weighted at 30%, 25%, 25% and 20% respectively. We derived a 12-month target price of N201.25
WACC COMPUTATION EXPLICIT TERMINAL per share at a total upside of 30% to the current share price of N155 on December 3rd 2020. The fair value
Cost of Equity 12.16% 7.46% arrived at shows the intrinsic value of MTN Nigeria Communication PLC. Intrinsic methods were computed to
Risk Free Rate 5.24% 6.0% determine the fundamentals of the company. Comps trading multiples were computed to corroborate our
Equity Risk Premium 9.81% 3.00% intrinsic methods. We decided low weight for comparable multiples due to insufficient comparable companies
Company Beta 1.05 1 in the local environment in which MTNN operate in terms of scale and key attributes. However, we extend our
After Tax Cost of Debt 10.7% 6.8% reach to selected companies in the MENA region on some rational metrics later discussed (See: Appendix 13).
Cost of Debt 15.7% 7.00%
Revenue
MTNN has brilliantly performed in the past five years with an astonishing increase in revenue rising on a CAGR
Tax Rate 32.0% 32.0%
of 10%. Considering MTNN leadership control in the market, high quality brand and strong management
Debt Weight 69.76% 70.00%
expertise, we believe this rate would be sustained overtime with an additional 0.01bps. Our forecasted revenue
Equity Weight 30.24% 30.00%
is derived for each segment on the basis of numbers of subscribers, ARPU and majorly on the basis of the share
WACC 12.16% 7.46%
Source: Team Analysis and Forecast
of MTNN in telecom contribution to GDP. We expect that nominal GDP will on at 11.06% with a 10% of telecoms
5
contribution to 2025F.
Returns Analysis
ARPU
MTNN ARPU is driven primarily by two major factors; (1) Subscribers (2) Revenue. MTNN mobile subscribers is
100%
projected to grow at 8.1% CAGR to 102.8million through our forecast horizon (FY25). Similarly, revenue is
80% projected to grow at 11% CAGR over the same horizon. Consequently, we estimate MTN moderately from
N1,519 FY19 to N1982.8 FY25 due to hypercompetitive market slowing down topline at 4.6% CAGR.
60%
Capex
40%
WACC Forecasted to grow 17.4% CAGR through our explicit horizon, MTNN capex is estimated to hit N531bn by FY25.
15.49%
20% MTNN is expected on continued capex spending in order to ensure continuous upgrade of its facilities, revamp
its 4G roll out across Nigeria and continued access of broadband facilities to rural areas.
0%
FY20 FY21 FY22 FY23 FY24 FY25
Free Cash Flow to Firm
WACC ROIC ROE FCFF was projected using NOPLAT accruing the benefit of ascertaining MTNN firm value. FCFF is estimated to
Source: Team Analysis and Forecast grow 8.6% CAGR through our explicit horizon. Similarly, our FCFF was discounted using the WACC in both
Fig 18: terminal and explicit horizons. Our FCFF was projected for 6-years, into the future in the explicit period.
DCF | 30% Weighted Average Cost of Capital (WACC)
PV Explicit FCFF 2,818,883.23 A debt-to-equity mix of 70% to 30% assumption was used in computing our explicit and terminal WACC arriving
PV Continuing Value 3,185,297.67 at 12.16% and 7.76% respectively. We employed the capital asset pricing model (CAPM) in computing cost of
Sum of Present Value 6,004,180.90 equity of 15.50% and 9.00% explicit and terminal; Cost of Equity (Re)=Risk free rate+ (beta*Equity risk premium).
Mid-year Adjustment Fctor 1.06 A risk-free rate of 5.24% was used factoring in the 10 year FGN bond as of October 11, 2020 (FMDQ). The equity
Value of Operating Assets 6,380,527.82 risk premium was computed using the historical difference between the NSE ASI index market return, the risk
Non Operating Assets - free rate and the Nigeria government bond return. We arrived at an ERP of 9.81% and 3% respectively and
Excess Cash 44,503.20
MTNN’s levered beta of 1.05 in the explicit period. Explicit after-tax-cost of debt was derived using historic
Enterprise Value 6,425,031.02
average interest yield multiply by marginal tax rate.
Less: Non Equity claims 1,008,367.52
Value of Equity 5,416,663.50 Intrinsic Valuation of Free cash flow to Firm Spurs Undervalued Fundamental Stock (DCF) | 30% Weighting
Shares outstanding 20,354.51 Our DCF model was computed discounting the FCFF using the WACC of 12.16% over a six-year forecast horizon
Value Per Share N266.12 arriving at an intrinsic value of N266.12, an upside of 72%. FCFF was calculated using NOPLAT and we expect an
Source: Team Analysis and Forecast upturn in FCFF growing at 8.7% CAGR to N834bn (FY25). Our analysis supports the fundamentals of MTNN’s
Fig 19: strong cash flow over the years. The DCF analysis was computed in two phases (i) where FCFF grew at a CAGR
DDM | 25% of 8.7% to FY25, and (ii) expected growth at stable 5% rate into perpetuity.
PV of Explicit Dividend 784,064 DDM underpins robust future dividend | 25% Weighting
PV of Terminal Value 1,813,817 With consistent dividend payout over the years, we computed a DDM to complement our DCF analysis. The
Sum PV of Dividends 2,597,881 analysis valued MTNN at N 137.92 per share, an 11% downside of the current share price. The cost of equity of
Mid-year adjustment factor 1.08 15.50% and 9% was employed, computed using the CAMP Model for explicit and terminal period. We noticed a
Equity Value 2,807,276
continuous increase in total dividend growing at double-digit 13% CAGR to N296.6bn FY25. Our rationale for
Shares outstanding 20,355
this valuation method is based on MTNN’s ability to generate strong earnings for equity holders. Our forecast
Value per Share 137.92
Source: Team Analysis and Forecast shows that earnings are expected to grow at 11.8% CAGR to FY25 with a mean dividend payout ratio of 74%.
Our analysis arrived at an equity value of N2.8trillion given us a fair value of N137.92.
Fig 20:
DCF (FCFE) | 0% Residual Income Model accentuates a value creating company | 25% Weighting
Sum of Explicit FCFF 1,082,527 The residual income method was also employed to corroborate our above income benefit valuation analysis. A
PV(Continuing Value) 1,813,817 major assumption of the model is that the earnings generated by a company must account for the true cost of
Sum of PV 2,896,344 capital. We employed WACC as our discounting factor allowing us the benefit of valuing MTNN at firm level. Our
Mid-year adjustment factor 1 continuing value arrived at N6.38trn discounted to N2.68trn. We arrived at an equity value of N3.8trn, N190.60
Value of Equity 3,129,796 (23% upside) per share.
Shares Outstanding 20,355
Value Per Share N153.76 Comparable Valuation Model | 20% Weighting
Source: Team Analysis and Forecast Comps Multiples Posted Upsides for MTNN
Fig 21: Arriving at target price of N196.41, 27% upside potential, we conducted a relative valuation using forward
DCF (FCFE) | 0% trading multiples. The forward multiples are more indicative of future expectations of the market and
Sum of Explicit FCFF 1,082,527
appropriately infer MTNN’s valuation in comparison to assumptions driven historical book metrics. The
PV(Continuing Value) 1,813,817
multiples ultimately used in our valuation were: EV/EBITDA and P/E, with equal weighting assigned to both
Sum of PV 2,896,344
metrics. In the comps analysis, we carefully selected financially robust and well positioned comparable
Mid-year adjustment factor 1
Value of Equity 3,129,796
companies in emerging markets. We recognized that there is no exact comparable to MTNN due to different
Shares Outstanding 20,355 macroeconomic climate, enterprise value, and management structure. Therefore, in our selection, we employed
Value Per Share N153.76 three metrics as a proxy for suitable comparables (1) financial strength (2) business characteristics (3) market
Source: Team Analysis and Forecast capitalization as a better reflection of MTNN’s financial and value characteristics (See: Appendix 13).
Fig 21: EV/EBITDA: Whilst similar weightings were assigned to our comps trading multiples, EV/EBITDA multiple is a
RIM | 25% better proxy of peers’ comparables with neutrality on capital structures while focusing on operational
PV of Explicit Economic Profit 120,635.25 efficiencies. Forward EV/EBITDA multiple 7.20x yielded an N197.08 implied share price for MTNN, 27.2%
PV of Continuing
Source: Valueand Forecast
Team Analysis 2,689,483.78 premium. MTNN attractive EV/EBITDA multiple accrue to its strong EBTIDA margin, 47% historical average.
PV of Econom ic Profit 3,516,653.74
Fig 22:
Invested Cap at beginning of forecast period 1,041,101.48
P/E: Similar to EV/EBITDA multiple, P/E also assigned 50% weigh in our overall comps trading multiples. Unlike
Invested Cap + PV of Econom ic Profit 4,557,755.22 EV/EBITDA multiple which focuses on operational profit, P/E as a measure of value utilizes profit after tax taking
Mid-year adjustment factor 1.06 into consideration capital structures and accounting differences. Similarly, our P/E multiple of 22.25x yielded an
Value of Operations 4,843,439.01 implied price per share of N195.73, 26.3% premium compared to the market.
Enterprise Value 4,887,942.21 Football Field Analysis
Debt (1,008,367.52)
Value of Equity 3,879,574.69
We conducted a football field analysis to provide a visual summary and demonstrate valuation range on all the
Shares outstanding 20,354.51 valuation methodologies that were used. DCF Analysis is based on 6.5%~8.5% terminal WACC Whilst DDM varied
Value per share N190.60 cost of equity 8%~10%. Trading multiples varied P/E and EV/EBITDA multiples 16.5x~26.02x and 5.50x~9.97x.
Source: Team Analysis and Forecast 6
Fig 23: Sensitivity and Scenario Analysis

EV/EBITDA multiple Sensitivity: To test for the impact of operational risk on our target price, sensitivity analyses were conducted on
EBITDA 655,959.4 the key drivers of MTNN valuation (cost of capital/equity and stable growth rate). These inputs were sensitized
EV/EBITDA multiple 7.20x as they encompass the growth and risk assumptions of MTNN. Given that MTNN fair value is sensitive to its
Enterprise Value 4,719,938.4 continuing value, it was important to vary our terminal WACC input. Overall, the fair value per share price is
Cash 300,952.7 extremely sensitive to changes its terminal WACC and sustainable growth rate assumptions (See: Appendix 15).
Debt (1,008,367.5) Scenario: In order to vary the inputs that drive MTNN asset value and ultimately its estimated cash flows, we
Equity value 4,012,523.5 conceived bull and bear scenarios based on MTNN’s competitive positioning in the mobile/data space, and the
Shares outstanding 20,354.5 overall macroeconomic climate. The analysis reveals that our bull scenario renders a fair value per share of
Implied Value per share 197.13 N219.88 (42% premium to the market), whilst our bear scenario renders a share price of N140.05 10% discount
Source: Team Analysis and Forecast to the current price. (See: Appendix 15).
Fig 24: Monte Carlo Simulation
P/E Multiple In order to introduce probability and randomness into our sensitivity analyses, we conducted Monte Carlo
Earnings Per Share 8.80 simulations. The three key drivers of our overall valuation; (1) sustainable growth rate (2) sustainable NOPLAT
P/E Multiple 22.25x margin and (3) sustainable net margin were highlighted and flexed along a normal distribution. A total of 100,000
Im plied Value per share 195.73 trials were conducted on these key drivers testing our upside and downside cases. The simulation yielded a price
Source: Team Analysis and Forecast ranged N151.25~N255 with 10%~90% percentile of our share price ranged N187.65 ~N221.72. Overall, 90% of
Fig 24:
our simulation recommends a BUY while 10% fall within a HOLD recommendation.
NB: a 10% upside is considered a HOLD factoring in Nigeria’s inflations and risk premium.
Comps Multiple Price Weight
EV/EBITDA multiple 197.13 50%
P/E Multiple 195.73 50%
Implied Comps Value 196.43
Fig 24:
Share Price MC Simulation
Trials 100,000
Base Case N201.25
Mean N203.48
Median N201.35
Standard Deviation 14.36
Variance 206.18
Skewness 1.76
Kurtosis 16.58
Coeff. of Variation 0.0706
Minimum 161.13
Maximum 588.3
Mean Std. Error 0.05
Fig 24:
Financial Analysis
Football Field Q1 Median Q3
DCF 190.57 200.65 222.28 Revenue | Robust Turnover amid stiff competition
DDM 198.25 201.25 207.11 MTN Nigeria has maintained tremendous growth in its top-line over the last decade. Over the years, MTNN has
RIM 163.46 173.96 187.29 continued on its prosperity path with significant historical growth in revenue. In 2015, the company’s revenue
Trading Multiples 143.62 196.41 257.63 grew 9.9% to N897.2bn (FY17) before recording the remarkable feat of surpassing N1trillion turnover in 2018
Source: Team Analysis N1.04trn ($3.4bn) the only Nigerian firm to surpass that threshold to date. The 9.7% (CAGR) turnover growth
from FY15 (N807.4bn) to N1.17trn (FY19) has been on the back of growth in subscribers, large market size,
Fig 25: Football Field
increased infrastructure, smartphone penetration, favorable demography along with strong brand quality.
Subscribers have grown at a 6.5% CAGR from 139.14mn subscribers to 203.5mn as of August 2020. MTNN top-
Target
Comparable Price line has been supported by increased growth in its subscribers’ base from 47.4m in 2012 to 64.3mn in 2019
Company
Analysis N201.25 (4.4% CAGR) over the last 7 years with a leading market share of 40% of total GSM subscribers. Nigeria’s growing
EV/EBITD population (2.5% annual population growth rate) has supported both increased market and consumer base.
A Nominal GDP averaged 11.3% within the last 4years (2015-19) with the telecoms industry printing a remarkable
23% of Nominal GDP FY19. MTNN remarkable top-line has been supported by voice (Airtime subscription) with
a mean contribution of 64% MTNN annual revenue supported by large subscribers’ base and rising teledensity.
P/E
Regardless of increased competition for market share, we expect MTNN annual turnover to continue its upward
Income Benefit
Approach
trend supported by an increase in demand for data service for high-quality content streaming, Internet of things
52 Week (IoT), artificial intelligence, and most recent 5G network. New opportunities in the fintech i.e payment service
Range bank) will put MTNN at the forefront of increasing financial inclusion in Nigeria with a new source of revenue.
Hence, we expect MTNN to surpass the N2trn annual turnover by 2024.
Residual
Income
Operating Cost | Macroeconomic uncertainties supports COS and OPEX
Model Direct network operating costs led MTNN historical operating costs with a mean of 24% of annual sales. DNCO
grew at a strong double-digit 18.6% CAGR from N125.8bn FY 15 to N247.6bn FY19. In Fy19, cost of sales accrued
Dividend N382bn (c.71% of total operating costs) implying a heavy cost of sales driving down gross margins. DNCO relates
Discount
Model to MTNN costs incurred to provide its services (using its spectrums). Operating expenses, on the other hand,
have been mild with selling, distribution, and marketing taking a large churn due to MTNN aggressive marketing
expenses on advertisements. In General, operating cost has grown alongside revenue at 9.6% CAGR (0.1% points
DCF Base
less than turnover CAGR growth) showing how it has been able to grow its revenue at a lowered cost increasing
N80 N180 N280 margins. Our analysis shows that due to the increasing competition in the telecoms space, MTNN will continue
7
spending heavily on its marketing strategy to maintain its market share. Rising inflation (13.22% as at August
Fig 26: Revenue growth (N'bn) and Margins '20) is expected to also spur cost into the future. Other uncertainties like the incessant devaluation of the Naira
forecasts (LHS)
2500.0
51.7% 52.3% 52.4% 52.5% 51.8% 50.5%
60% (NGN), forex illiquidity restricting accessing to forex in the Nigerian macroeconomic space is expected to drive
50%
operating cost. However, we expect MTNN competent directors to successfully proffer buffers to these
2000.0
economic uncertainties taming rising costs to support increased margin with operating cost normalizing to 50%
40%
1500.0 30.2% 31.1% 31.4% 31.5% 30.9% 29.4% of turnover by FY25.
30%
18.4% 18.7% 17.7%
Profitability | Strong cost control spurs earnings
1000.0 15.9% 17.4%
14.1% 20% In 2015, MTNN was fined a sum of N330bn by the regulatory commission (NCC) on basis of the untimely
500.0 disconnection of 5.1 million MTNN subscribers. The company made N275bn provisions for the fine in FY15 as a
10%
sign of good faith which drove down margins by -138% to a loss of N80.3bn. Bouncing back from the loss
0.0 0% recorded, MTNN has recorded tremendous growth in its net margins averaging 12.9% (FY15-19). Net margins
2020F 2021F 2022F 2023F 2024F 2025F
have grown from 11% (FY16) to 17% in FY19 and the trajectory is expected to continue with our analysis
Revenue EBITDA margin (%)
Operating margin (%) Net margin (%)
estimating a 1%-point increase of net margin to 18% amidst a stiff competitive landscape. Our forecast is
Source: MTNN, Team Forecast supported by MTNN moderating operating costs expected to increase EBITDA and decreasing Net financing
costs due to reduced exposure to dollar-denominated borrowings. Supported by 10.2% CAGR estimated growth
Fig 27: Operating costs (bn)
in EBITDA to N1.12trn FY25 (50.5% revenue) on the back of strong cost control, especially the cost of sales. We
N1200 COGS Opex forecast earnings before tax to grow 12.6% CAGR to N581.6bn while bottom-line to grow at strong double-digit
N1000
11.8% CAGR to N395bn FY25. Hence, our analysis estimates adjusted EPS to grow 96% to N19.43 FY25 (from
N9.93 FY19).
N800
N600 Return on Shareholders’ Fund

N400
MTNN has historically boost of a relatively high ROE, above its peers. MTNN’s high ROE has moderated from
732% in FY15 to 11% in FY19. The highest ROE recorded in FY15 733% due to the Net loss of N80.3bn ensuing
N200
from the N275bn provisions for a regulatory fine which negatively plunged equity to N10.9bn. Compared to
N0 other non-telcos COYs listed on the NSE Premium board in FY19 (Seplat 15.4%, DangCem 21.6%, Zenithbank
23.8%, Access 17.7%), MTNN has shown strong profitability to generate returns to its shareholders. MTNN has
grown its Net margins from -10% FY15, 11.2% FY16 to 17.3% in FY19 and a projected 17.7% increased net margin
Source: MTNN Report, Team Forecast
by FY25. On the other hand, Asset turnover has improved from 0.8x in FY15 to 1.0x in FY19 implying that MTNN
is utilizing its assets efficiently to generate returns averaging 0.91x between FY15 and FY19. MTNN asset base
Fig 28: Operating Profit and Margin has grown from N992bn in FY15 to N1.52trn FY19 and we expect a continued trajectory to N2trn by FY25 with
Operating profit (N'bn) Operating margin (%)
an improved turnover of 1.15x. The last component of ROE - Equity Multiplier has been on the high side from -
90.62x in FY15. The negative multiple recorded was attributed to a decrease in Retained earnings shrinking
N700 40% equity to (-1.1% of Assets). Equity financing of assets has improved from 7.6% in FY15 to 11.8% in FY 19 hereby
N600 35%
30%
dragging down Equity multiplier from 30.1x to 6.8x. We, therefore, project that by FY25 equity will grow at 27%
N500
N400
25% CAGR improving equity multiplier to 3.6x. Consolidating all our forecasts, we expect ROE to moderate to 104%
20% and 101.2% in FY 20 and FY21 with a continued decline to 71% in FY 25. This decrease is mainly driven by reduced
N300
15%
N200 10% equity multiplier.
N100 5%
N0 0% Capital Financing | Debt Financing Leads
Considering the high capital requirements of the telecoms sector, MTNN has over the years successfully had a
Source: MTNN, Team Forecast mix of debt and equity financing. From FY15 through FY 19, MTNN has successfully expended N912.4bn in CAPEX
with an improved CAPEX intensity from 16% to 23% and 17% in FY18 and FY19 respectively. The debt-equity mix
Fig 29: PAT and Net Margin
has averaged 76%/24% tilted in favour of debt financing. The bulk of MTNN debt is long term borrowings and
PAT (N'bn) Net margin (%) leases (93% of total financial obligations in FY19). The yield on MTNN’s borrowings has also improvised
significantly from 46% in FY 16 to 19.5% in FY19, an indication of its reduced exposure to foreign borrowing and
500 30.0%
forex risk. The recent commercial paper issuance by MTNN is in a bid to further diversify financing structure
400
25.0% amid a low-rate environment. Our analysis shows that going forward, MTNN will tilt towards more equity
20.0% financing as it approaches the maturity stage. Our estimates show that MTNN debt-to-asset will reduce from
300
15.0% 0.6x (FY19) to 0.4x (FY25) while the debt-to-equity metric will fall from 6.4x (FY19) to 1.50x (FY25). Meanwhile,
200 10.0% interest coverage (FCF) is expected to improve to 3.8x by FY25 from 1.8x (FY19).
100 5.0% We conducted Altman Z-score to test the strength of the MTNN balance sheet and the probability of potential
0.0% bankruptcy. Our calculation showed that MTNN is not susceptible to bankruptcy with a high Z-score 2.75, well
0
-5.0% above the 1.8 point of distress (See appendix 9).
-100
-10.0%
Regulatory LIQUIDITY
-200 -15.0%
fine
201420152016201720182019202020212022202320242025
Examining the company’s short term liquidity position, the company’s current and quick ratios stood at 0.7x
Source: MTNN Report, Team Forecast each in FY19. Both ratios have declined from 0.9x in FY15 to 0.7x in FY19. Our analysis further reveals that MTNN
current and quick ratios are almost in tandem owing to MTNN massive reduction of inventory from its asset
Fig 30: Capex (N'bn) and Capex Intensity
holding (N5.4bn FY 15 to N0.91bn FY 19). At 0.7x current ratio, well below the theory of unit, we still believe
(%)
MTNN is well-positioned to meet its short term obligations due to its massive cash reserves, adequate short
Capex Capex intensity borrowings, and improved credit facilities. We are also conscious of MTNN strong brand image it has built over
N600 25%
N500
the years as a reliable creditor ensuring it an upward credit rating review from Augusto & co (from Aa to Aa+).
20%
N400 DIVIDEND PAY-OUT
15%
N300 From FY15 through FY 19, MTNN has paid a total of N144.7bn in dividends to its equity shareholders. Dividends
10%
N200 have grown at a 188% CAGR from N2.04bn in FY15 to N140.9bn FY19. Regardless of a Loss-after-Tax of N80.3bn
N100 5% declared in FY15, MTNN paid N2.04bn dividend to its equity holders. The only known period in which MTNN did
N0 0%
not declare dividends was in FY16. Dividend payout currently stands at 70% of earnings, our analysis shows that
MTNN is expected to continue the trend reaching 75% by FY25.
Source: MTNN Report, Team Analysis

8
Fig 31: Adj. Earnings and Dividend Per Share

INVESTMENT RISK
N25 [R1] Emerging Risk: Covid-19 Based Risk. Going Forward, Virus Evolution Uncertain
With a drop in global output since the onset of the Covid-19 pandemic, Nigeria isn’t left out as IMF downgraded
N20
Nigeria’s 2020 GDP to -5% from 2.5% as it witnessed a number of restrictions including general lockdown
N15 thereby driving firms including MTNN to rationalize employees working from home requiring enormous
N10 amounts of data. The traffic growth, congestion and lower quality influenced churn rate within the industry
during this period which sees MTNN subscribers base to slow growth from 3.6% in June to 2.0% in July compared
N5
to Airtel’s 2.4% in the same year. MTNN’s outgoing port rate has increased by 291% as at April 2020 but with
N0 incoming port rate standing at an increase of 99% which is far less than Airtel, Glo and 9Mobile's 149%, 115%
-N5 and 198% respectively. The demand for voice service affected H1 2020 voice revenue especially in the mass
market segment (MTNN's largest market segment) which was partially offset by digital and data revenue. Amidst
Source: MTNN, Team Forecast these crisis is restrictive supply chain, drop in oil price and production, foreign exchange volatility and persistent
Adjusted earnings per share inflation all of which have hampered Nigeria economy mounting influence on the telecom performance.
Adjusted dividend per share Mitigant
Source: MTNN Report, Team
Forecast
MTNN implemented work from home initiative to clinch on business ceaselessness and provide protective
measures and sanitizers to preserve staff wellbeing. MTNN built up inventories of physical critical spares with
Fig 32: Inflation Vs Telecom Prices
strong control management of supply chain to stabilize network and supply chain. As lockdown restriction
$12 20% continues to ease, we expect encouraging performance recovery driving up MTNN profitability though further
impacts of Covid-19 seem unpredictable and its dependent on the state of the virus going forward.
$10
16%
$8
[R2] Regulatory/Compliance Based Risk
12% MTNN finds itself in an evolving regulatory environment, a reason why it is prone to a high regulatory risk. MTNN
$6
was fined N330bn in 2016 for not deregistering 5.1 million improperly registered users. NCC also suspended
8%
$4 regulatory services to MTNN in an effort to curb monopoly, which limited the company’s ability to develop new
4%
products and in turn led to market share loss and loss of value to shareholders during the period. All of these
$2
happened before MTNN became a PLC in May 2019. The firm also witnessed a public concern regarding share
$0 0% manipulation that saw MTNN share price jump more than 21% in 2 days of trading which made skeptics believe
2014 2015 2016 2017 2018 2019 2020
that the firm is conniving with the regulatory authority to filch from the retail investors as a means to recover
Prepaid Mobile Voice ($) value to its stakeholders as they lost huge amid the time of litigations. We expect a crummy decline in MTNN
stock price on NSE from any litigation going forward that loosen investors’ confidence.
Prepaid Mobile Braodband ($)
Mitigant
Inflation %
Source: CBN, Research ICT Africa The company has announced an internal restructuring as well as improved corporate structure to focus on
mitigating regulatory risk. However, collaboration, strong relation with key stakeholders and regulators and
Fig 35: Risk matrix dedicated management function have been the bedrock of MTNN evolving regulatory environment
6 management. The firm also takes advantage of international diplomacy and continue to strengthen its capability
to manage all regulatory risk. MTNN reported 38.73% FY19 astonished increase in profit afterwards. Due to the
5
restructuring of MTNN's management and the competence of the newly appointed directors, we do not foresee
R2 any uprising in regulatory and noncompliance risk that will impact the performance of the firm significantly.
Probability of occurrence
4
R4
[R3] Inflation Risk
R3 The Nigerian economy grapples with persistent price rise as inflation reached 13 months high by the end of
3 October 2020. Inflation rate in Nigeria as at October ending is 14.23% as against 13.71% recorded in September
2020. However, telecoms prices have been on the decline over years and telecoms have been unable to pass on
R1
2 the cost to subscribers. Data available from NCC shows On-Net and Off-Net price within 2010-2016 declined
from N25.35 and N26.10 to N12.01 and N12.64, a drop of -53% and -54% respectively (no data is available from
1 2017-2020). Data from Research ICT Africa showing cheapest prepaid prices for each country in Africa showed
that in Nigeria, voice product price dropped by -78.6% from US$9.28 in 2011 to US$1.99 in December 2019 while
0 broadband product price declined from US$10.53 in 2014 to US$2.78 by -73.6% in December 2019.
0 1 2 3 4 5 6
Source: Team Analysis Impact of risk
Mitigant
We expect MTNN Nigeria to leverage on the economic measure put in place by the government to correct
Fig 34: Inflation, Exchange Rate And Crude inflation and other economic downturn. The telecom industry has performed over years with an astonishing
Oil resilient growth, so the impact of opposite price trend will have minimal effect on the performance of the firm.
20% $400 [R4] Foreign Exchange Risk
18%
$350
Following a 6% devaluation of the Naira to N385 in Q2 of 2020 which is greatly impacted by drop in oil price,
16% MTNN disclosed its EBITDA margin will shrink by 0.4%, this is the second phase of devaluation within H1 2020
$300 by the CBN. MTNN ‘others’ revenue went down by -29.9% QoQ in 2020 (Q2 2020 AR), this include revenue from
14%
12%
$250 leased towers affected by currency devaluation. For Q2, YoY EBITDA margin and EPS both went down by 0.2pp
as a result of combined effect of foreign currency volatility among others. EBITDA margin in FY2020 is expected
10% $200
to decline by 0.44p on IFRS 16 basis. If the trend in foreign currency volatility persists, we expect revenue to dip
8%
$150 more which could potentially negatively affect the company's profitability.
6%
$100 Mitigant
4% MTNN tries to manage the foreign exchange risk whenever possible by localizing contracts. The firm also ensures
$50
2% minimal foreign exchange denominated debt on the statement of financial position. We expect MTNN
0% $0 renegotiation with Tower Companies like IHS towers and INT towers limited and the focus on operational
2008 2010 2012 2014 2016 2018 2020 2022 efficiencies to further mitigate the impact cushioned with MTNN’s submission that the effect of exchange rate
Inflation % Exchange Rate volatility would be offset overtime by improved pricing and increased focus on rural connectivity and backhaul
in the network. In addition, MTNN also submits to conducting stress test of business plan against currency
Crude Oil Price
Source: CBN volatility and explore hedging derivatives (e.g. forward contract) where viable.
9
ENVIRONMENTAL, SOCIAL RESPONSIBILITY

Fig 36: MTNN Coperate Social
Responsibility In Figures (N'bn) Environmentally conscious business: The nature of MTN's business operations as a service provider does not
call for wild concerns as regards carbon emissions or climate destruction. However, MTN just as any business is
not entirely free of environmental responsibilities. MTN has shown continued commitment to environmental
preservation through the discretionary strategy of its management and through digital innovations. These
strategies include implementation of energy-efficient plants and machines that are also noise-controlled, and
waste management control e.g through the promotion of USSD recharging and other digital services. The use of
Others paper recharge card poses harm in a way of polluting the environment and MTN subscribers are now able to
3.206bn easily recharge from their banks through MTN quick code *904#.
Social responsibility since inception: MTN Nigeria incorporated the MTN Nigeria Foundation Limited by
Health
5.641bn
Guarantee (MTNF) in July 2004 to execute its desire for long term and positive social impact on communities
where it operates. The foundation is solely funded by MTN Nigeria through 1% of its profit after tax annually
and as at December 2019 has invested over 21 billion naira through its various interventions. The focus of the
Empowe foundation has evolved over the years into four major causes; Youth Empowerment, Arts and Culture, Maternal
rment
5.298
and Child Health, and National Priority; causes of which are aligned with the Sustainable Development Goal of
ensuring peace and prosperity for all its member states. In the last 15 years, the Foundation has birthed over 40
initiatives, implemented in over 850 active project sites across the 36 states and the Federal Capital Territory,
Educatio which have improved the quality of people’s lives and their communities. Of the total expenditure of N21.753bn
n7.607
made to these causes, 7.6bn have been invested into Education, 5.6bn into provision of Healthcare, 5.2 into
youth and economic empowerment and 3.2bn into other projects. (See: Appendix 21)
Social response to the Covid-19 crisis: At the peak of the pandemic, when lockdown measures were enforced
across the country and movements restricted, MTN provided over 4 billion free SMS gifts to their subscribers
essentially targeting the low-income mass market that make up 70% of its subscribers. The pandemic has
impacted personal and household income and this initiative allowed MTN subscribers to still be able to connect
with their loved ones easily and freely, whilst practicing social distance. MTN also provided free data usage to
its customers to access healthcare websites e.g NCDC and WHO for reliable information and updates as regards
Source: MTNN, Team Analysis the global pandemic. MTNN further made a N1bn donation to CACOVID, delivery of N250m worth of personal
protective equipment (PPE) to NCDC as well as the provision of logistical and communications support to NCDC
and Nigerian Government Forums. Partly due to this, the company reported that EBITDA margin declined by
2.0pp to 51.3% in H1 2020 while both PBT and EPS dipped 2.0% and 4.0% respectively.
CORPORATE GOVERNANCE
GOVERNANCE
Board composition: MTN's leadership structure comprises of competent individuals with relevant experiences
B+ across the telecommunications, technology, finance, regulatory and policy development and corporate
ENVIRONMENTAL SOCIAL
governance. Governed by a 15-member board of comprising 9 non-executive directors, 2 executive directors
and 3 independent non-executive directors. Although Nigerian occupy the majority with 60% while South
A- A- Africans and German with 33% and 6% respectively. Gender diversity statistics show less female 13.3%(2)
females more males of 86%(13). The board currently has four standing Committees namely; Board Audit
Committee, Risk Management and Compliance Committee, Remuneration, Human Resources and Social and
B- Ethics Committee, Nomination and Governance Committee. Prior to November 2019, the Audit Committee and
Risk management and compliance team were the same before a reconstitution was done for proper
administration and efficiency in internal audit procedures, risk and compliance management. The Committees
MTNN OVERALL ESG RATING
make recommendations to the Board, which has the ultimate responsibility for decision-making. In certain
cases, the Board delegates approval mandates to its committees. From time to time the Board sets up adhoc
committees to address specific assignments as may be deemed necessary.
Premium Listing; First Telecoms ever: In spite of the stringent conditions required to be listed on the premium
board of the Nigerian stock exchange, MTN Nigeria became the first mobile telecom to join the elite group of 6
Fig: MTNN ESG Score other companies on the premium list with second largest market cap. following Dangote. The ability to meet
the premium listing requirements is a reflection of the competence of MTN's management and sound corporate
governance. The firm's leadership composition combines individuals with robust levels of expertise and years of
experience across relevant field e.g. MTN's current chairman is a former chief executive of the Nigerian
Communications Commission, his experiences on the board would greatly impact how the firm handles
compliance issues with the regulatory agency.
72.2 76.2 Rough regulatory compliance prior to listing: Before It's listing, MTN faced compliance issues with the Nigeria
Score Score Communications Commission, the most recent of scandals being the failure to disconnect millions of subscribers
with improper SIM registrations. This caused the NCC to impose a fine of N330billion on the firm along with
some conditions. This shows a significant failing in corporate governance of the firm. However, MTN has taken
measures to restore their corporate governance reputation by appointing new competent management
executives with relevant experiences and also restructuring its board committee by separating the Audit, Risk
and Compliance committee into two; Audit committee, and Risk and Compliance committee. This is to allow for
79.08 more efficient governance which is evidenced in MTN's continual success.
Score Succession Flow: The Board has a set Board Appointment Policy that ensures efficiency in the flow of succession
and turnover. The Nomination and Governance Committee of the board is responsible for leading the process
of identifying, screening and recommending appointments to the Board. An external consultant is engaged to
assist in identifying appropriate candidates with the highest standards and professional integrity and ethics for
consideration for nomination.
Evironmental Social Governance
10
Team 15 APPENDICES MTN Nigeria Communication PLC
FINANCIALS VALUATION MISCELLANEOUS 28. SURVEY SUMMARY

1. MTN SHARE PRICE HISTORY 11. VALUATION SUMMARY AND COST OF CAPITAL 17. BRIGHT STRATEGY 29. TELECOM RISK.REWARD INDEX
2. INCOME STATEMENT 12. INTRINSIC VALUATION SUMMARY 18. BUSINESS DESCRIPTION 30. PORTING ACTIVITIES OF MNO
3. BALANCE SHEET 13. COMPARABLES COMAPANY VALUATION 19. MARKET SHARE 31. SWOT ANALYSIS
4. CASH FLOW STATEMENT 14. VALUATION WEIGHT AND PRICE 20. KEY EXECUTIVE MEMBERS 32. PESTEL ANALYSIS
5. FREE CASH FLOW TO FIRM SCHEDULE 15. SENSITIVITY AND SCENARIO ANALYSIS 21. SOCIAL RESPONSIBILITY PROJECTS 33. PORTER’S FIVE FORCES
6. FINANCIAL RATIOS 16. EFFECT OF RISK ON OUR VALUATION 22. MTNN NETWORK LICENCES 34. MTNN HISTORICAL HIGHLIGHT
7. REVENUE FORECAST/ASSUMPTIONS 23. MAJOR REGULATORY HIGHLIGHT 35. NIGERIA GDP AND TELECOM
8. DuPont ANALYSIS 24. INTERNET SUBSCRIPTION CONTRIBUTION
9. ALTMAN Z-SCORE 25. MEDIAN AGE AND POPULATION 36. WIDE RANGE OF SPECTRUM
10. BENEISH M-SCORE ANALYSIS GROWTH HOLDINGS
26. SUBSCRIBERS, PENETRATION RATE
27. QOS KPI DATA
APPENDIX 1: MTNN SHARE PRICE HISTORY
N180
N160
N140
N120
MTNN listing on the
Nigerian Stock Exchange
N100 Covid-19 slumps
Equity market
N80
MTNN announces
N60 resignation of Rob
Shutter from board of
MTNN releases 2019 Annual Report
directors.
N40 after Nigeria withdraws $2bn tax
case against MTNN Nigeria Stocks gain for
N20 7th session
N0
APPENDIX 2: INCOME STATMENT

Incom e Statem ent (N'm n) 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Revenue 1,039,118 1,169,735 1,269,565 1,449,012 1,655,290 1,840,284 2,034,975 2,231,345
Airtime and subscription 681,911 725,448 726,310 810,244 895,563 980,631 1,063,329 1,140,964
Data 154,134 219,397 283,272 337,484 400,220 439,650 478,520 515,741
SMS 14,307 13,505 13,678 14,722 15,594 16,214 16,489 16,301
Interconnect and roaming 102,569 125,042 139,489 165,814 196,857 232,381 273,564 320,889
Handset and accessories 2,201 2,208 2,729 3,087 3,758 4,381 5,190 6,069
Digital 40,706 35,940 47,759 52,225 64,705 74,787 88,980 103,823
Value added services 32,276 37,168 42,683 50,014 59,808 70,347 82,963 97,228
Other revenues 11,014 11,026 13,645 15,423 18,784 21,894 25,939 30,329
Other Income 2,225 97 - - - - - -
Operating incom e 1,041,343 1,169,832 1,269,565 1,449,012 1,655,290 1,840,284 2,034,975 2,231,345
Cost of Sales (433,666) (382,078) (433,567) (490,854) (556,392) (618,226) (696,846) (793,885)
Gross Profit 607,677 787,754 835,998 958,158 1,098,898 1,222,059 1,338,128 1,437,460
Operating expenses (154,508) (157,835) (180,039) (200,502) (231,892) (256,226) (284,208) (311,154)
EBITDA 453,169 629,919 655,959 757,656 867,006 965,833 1,053,920 1,126,306
Depreciation and Amortization (167,863) (234,622) (272,095) (307,242) (347,869) (385,413) (425,929) (470,925)
EBIT 266,114 395,297 383,865 450,413 519,137 580,420 627,992 655,382
Finance income 22,568 20,132 27,111 18,007 22,930 26,962 31,800 37,132
Finance costs (67,339) (125,325) (147,638) (129,553) (118,482) (110,222) (99,798) (110,955)
Profit/(loss) before tax 221,343 290,104 263,337 338,868 423,584 497,160 559,994 581,559
Income tax (75,657) (87,993) (84,268) (108,438) (135,547) (159,091) (179,198) (186,099)
Profit after tax 145,686 202,111 179,069 230,430 288,037 338,069 380,796 395,460
Shares outstanding 407 20,355 20,355 20,355 20,355 20,355 20,355 20,355
Earnings per share (EPS) 358 10 9 11 14 17 19 19
Adjusted earnings per share (Adj. EPS) 7 10 9 11 14 17 19 19
Dividends per share 95 7 6 9 11 13 14 15

Adjusted dividend per share 2 7 6 9 11 13 14 15
11
APPENDIX 3: BALANCE SHEET
Balance Sheet (N'mn) 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F
Assets
Non-current assets
Property, plant and equipment 607,024 625,096 682,942 755,717 841,964 939,184 1,046,948 1,161,215
Right of use assets 0 500,068 444,749 382,336 313,521 237,935 157,405 71,336
Intangible assets 119,368 120,947 111,823 103,644 102,578 110,594 129,633 183,979
Contract acquisition costs 3,766 4,851 4,851 4,851 4,851 4,851 4,851 4,851
Non-current prepayments 15,727 12,145 15,590 17,705 20,107 22,350 25,049 28,229
Deferred tax assets 0 0 0 0 0 0 0 0
Derivative asset 0 0 0 0 0 0 0 0
Total non-current assets 745,885 1,263,107 1,259,955 1,264,254 1,283,022 1,314,915 1,363,887 1,449,611
Current assets
Assets held for sale 0 0 0 0 0 0 0 0
Inventories 1,539 910 2,591 2,244 2,944 3,052 3,544 3,924
Trade and other receivables 38,617 52,400 46,701 54,838 61,767 69,158 76,205 83,706
Current investments 65,468 54,827 74,348 79,682 93,981 102,841 114,629 125,193
Restricted cash 37,219 38,050 44,503 48,707 56,832 62,521 69,502 76,008
Cash and cash equivalents 53,012 116,278 259,383 289,820 311,655 300,187 230,694 359,055
Current assets 195,855 262,463 427,526 475,290 527,179 537,759 494,574 647,886
Total assets 941,739 1,525,570 1,687,480 1,739,543 1,810,200 1,852,673 1,858,460 2,097,497
Equity
Share capital 647 407 407 407 407 407 407 407
Share premium 64,498 17,216 17,216 17,216 17,216 17,216 17,216 17,216
Retained profit 154,201 126,541 164,120 221,727 293,737 378,254 473,453 572,318
Other reserves 6 521 521 521 521 521 521 521
Total equity 219,352 144,686 198,960 256,567 328,576 413,094 508,293 607,158
Liabilities
Non-current liabilities
Borrowings 31,438 380,089 412,527 391,233 364,164 331,251 264,547 446,269
Derivatives 14 265 265 265 265 265 265 265
Lease liabilities 0 481,434 522,522 507,154 496,587 460,071 406,995 334,702
Share based payment liability 655 745 745 745 745 745 745 745
Other non-current liabilities 0 0 0 0 0 0 0 0
Provisions 66 71 71 71 71 71 71 71
Deferred tax liabilities 109,266 120,587 120,587 120,587 120,587 120,587 120,587 120,587
Total non-current liabilities 141,439 983,190 1,056,717 1,020,055 982,418 912,989 793,209 902,638
Current liabilities
Trade and other payables 213,715 190,440 217,388 231,106 247,741 257,333 269,083 280,988
Borrowings 143,876 32,453 35,223 40,201 45,924 51,057 56,458 61,906
Lease liabilities 0 35,100 38,095 43,480 49,670 55,221 61,063 66,955
Contract liabilities 42,739 46,806 48,204 55,240 62,977 70,085 77,461 84,957
Provisions 21,359 27,269 27,269 27,269 27,269 27,269 27,269 27,269
Tax liabilities 54,131 65,626 65,626 65,626 65,626 65,626 65,626 65,626
Share based payment liability 0 0 0 0 0 0 0 0
Obligations under finance lease 0 0 0 0 0 0 0 0
Regulatory fine liability 105,128 0 0 0 0 0 0 0
Total current liabilities 580,948 397,695 431,805 462,922 499,206 526,590 556,959 587,701
Total liabilities 722,387 1,380,885 1,488,521 1,482,977 1,481,624 1,439,580 1,350,168 1,490,339
Total equity and liabilities 941,739 1,525,570 1,687,480 1,739,543 1,810,200 1,852,673 1,858,460 2,097,497
12
APPENDIX 4: CASH FLOW STATEMENT
Cash Flow Statem ent (N'm n) 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Opening cash balance 89,565 53,012 116,278 259,383 289,820 311,655 300,187 230,694
Cash flow from operating activities

Profit/(loss) before tax 221,343 290,104 263,337 338,868 423,584 497,160 559,994 581,559
Adjustm ents for non-cash item s:

Finance cost 67,339 125,325 147,638 129,553 118,482 110,222 99,798 110,955
Finance income -22,568 -20,132 -27,111 -18,007 -22,930 -26,962 -31,800 -37,132
Depreciation of property, plant and equipment 141,162 147,808 177,872 199,701 225,018 248,832 274,899 305,321
Depreciation of right of use assets 0 56,817 61,666 70,383 80,402 89,388 98,845 108,383
Impairment loss on property, plant and equipment 759 -3,000 0 0 0 0 0 0
Amortisation of intangible assets 26,700 29,997 32,557 37,159 42,448 47,192 52,185 57,221
Amortisation of prepaid BTS leases 0 0 0 0 0 0 0 0
Amortisation of contract cost 2,476 2,676 0 0 0 0 0 0
Profit on disposal of property, plant and equipment -457 -960 0 0 0 0 0 0
Fixed assets w ritten off to income statement 0 3,041 0 0 0 0 0 0
Share based liability excess w ritten back -1 90 0 0 0 0 0 0
Bad debts w ritten off 7,747 9,367 0 0 0 0 0 0
Impairment of trade and other receivables -8,758 -9,066 0 0 0 0 0 0
(Writeback)/Impairment of assets held for sale 0 0 0 0 0 0 0 0
Impairment losses recognised on initial application of IFRS 9 -82 0 0 0 0 0 0 0
Impairment of inventory 2,278 -1,349 0 0 0 0 0 0
Impairment of other receivables -268 0 0 0 0 0 0 0
Loss on assets held or sale 0 0 0 0 0 0 0 0
Loss on fair valuation of derivatives 70 250 0 0 0 0 0 0
Other movements in intangible assets 0 32 0 0 0 0 0 0
(Decrease)/increase in provisions 8,165 -323 0 0 0 0 0 0
Cash generated from operations 445,905 630,677 655,959 757,656 867,006 965,833 1,053,920 1,126,306
Changes in operating assets and liabilities:

Inventories 1,913 1,978 -1,682 348 -700 -108 -492 -380
Receivables -4,427 -14,669 5,699 -8,137 -6,929 -7,391 -7,047 -7,501
Prepayments -2,044 -4,001 0 0 0 0 0 0
Trade and other payables -11,067 -13,149 26,947 13,718 16,635 9,592 11,750 11,905
Contract liabilities 7,206 4,068 1,398 7,036 7,737 7,109 7,376 7,496
Total w orking capital changes -8,417 -25,773 32,362 12,965 16,743 9,202 11,587 11,520
Total cash generated from operations 437,488 604,904 688,321 770,621 883,748 975,034 1,065,507 1,137,826
Share-based payment made 0 0 0 0 0 0 0 0
Regulatory fine paid -110,000 -110,000 0 0 0 0 0 0
Tax paid -21,607 -62,082 -84,268 -108,438 -135,547 -159,091 -179,198 -186,099
Net cash generated from operations 305,880 432,822 604,053 662,183 748,201 815,943 886,309 951,727
Cash flow s from investing activities

Proceeds from the sale of assets held for sale 0 0 0 0 0 0 0 0
Acquisition of property, plant and equipment -201,195 -181,685 -235,718 -272,476 -311,265 -346,052 -382,662 -419,588
Proceeds from sale of property, plant and equipment 653 1,023 0 0 0 0 0 0
Acquisition of right of use assets 0 -4,571 -6,348 -7,970 -11,587 -13,802 -18,315 -22,313
Acquisition of intangible assets -10,119 -21,041 -23,433 -28,980 -41,382 -55,209 -71,224 -111,567
Acquisition of subsidiary 0 0 0 0 0 0 0 0
Investment in bonds, treasury bills and foreign deposits 5,484 13,876 -19,521 -5,334 -14,299 -8,860 -11,788 -10,563
Increase in restricted cash 4,399 -831 -6,454 -4,203 -8,126 -5,689 -6,981 -6,506
Acquisition of non-current prepayments -2,830 -3,762 -3,444 -2,115 -2,402 -2,242 -2,700 -3,180
Interest received 19,604 16,058 27,111 18,007 22,930 26,962 31,800 37,132
Net cash used in investing activities -184,005 -180,932 -267,806 -303,072 -366,132 -404,892 -461,870 -536,586
Cash flow s from financing activities

Proceeds from borrow ings 136,339 381,701 447,750 431,435 410,088 382,308 321,005 508,175
Repayment of borrow ings -216,276 -146,124 -412,542 -447,750 -431,435 -410,088 -382,308 -321,005
Repayment of lease liability 0 -33,265 44,083 -9,983 -4,378 -30,965 -47,234 -66,401
Interest paid - lease liability 0 -62,859 -73,963 -72,646 -72,068 -67,983 -61,751 -52,991
Interest paid - borrow ings -42,024 -46,996 -73,675 -56,907 -46,414 -42,240 -38,047 -57,964
Redemption of preference shares 0 -148,189 0 0 0 0 0 0
Dividend paid -38,613 -133,046 -124,795 -172,822 -216,028 -253,551 -285,597 -296,595
Net cash used in financing activities -160,574 -188,777 -193,142 -328,674 -360,235 -422,519 -493,932 -286,781
Net increase/(decrease) in cash and cash equivalents -38,699 63,112 143,105 30,437 21,835 -11,468 -69,493 128,361
Exchange gains/(losses) on cash and cash equivalents 2,145 154 0 0 0 0 0 0
Cash and cash equivalents at the end of the year 53,012 116,278 259,383 289,820 311,655 300,187 230,694 359,055
13
APPENDIX 5: FREE CASH FLOW TO FIRM SCHEDULE
FCFF Schedule
(N'm n) 2018F 2019F 2020F 2021F 2022F 2023F 2024F 2025F
EBIT 266,114 395,297 383,865 450,413 519,137 580,420 627,992 655,382
Less: Operating Cash Taxes
Reported Tax 75,657 87,993 84,268 108,438 135,547 159,091 179,198 186,099
Substract/Add: Taxes on nonoperating income (expense)
Marginal Tax Rate 30% 30% 30% 30% 30% 30% 30% 30%
Effective 34% 30% 32% 32% 32% 32% 32% 32%
Finance Income 7,714 6,106 8,675 5,762 7,338 8,628 10,176 11,882
Finance Expense Tax 20,202 37,598 44,291 38,866 35,545 33,067 29,939 33,287
Operating Tax 88,145 119,484 119,884 141,541 163,754 183,530 198,961 207,503
Add/Subtract: Decrease or increase in Net Def f ered Tax

Net Def erred Tax 109,266 120,587 120,587 120,587 120,587 120,587 120,587 120,587
Increase/Decrease in Net Def erred Tax 22,089 11,321 - - - - - -
Operating Cash Tax 66,055 108,164 119,884 141,541 163,754 183,530 198,961 207,503
Operating Cash Tax Rate 0 0 0 0 0 0 0 0
NOPLAT 200,059 287,134 263,981 308,872 355,383 396,890 429,030 447,879
Add:Non-Cash Operating Expenses 180,248 236,340 272,095 307,242 347,869 385,413 425,929 470,925
Gross Cash Flow 380,307 523,473 536,076 616,114 703,252 782,303 854,959 918,803
Less: Reinvestment 1,803 521,537 (15,993) (3,331) 16,324 31,551 49,174 84,768
FCFF 378,504 1,936 552,069 619,446 686,927 750,751 805,785 834,036
% grow th 38% -99% 28412% 12% 11% 9% 7% 4%
Net Reinvestment Rate -89% 99% -64% -55% -47% -43% -41% -40%
FCFF to Sales 36% 0% 43% 43% 41% 41% 40% 37%
Sales to Invested Capital 200% 112% 124% 142% 159% 172% 182% 185%
ROIC 39% 28% 64% 62% 69% 76% 41% 44%
NOPLAT margin 19.2% 24.5% 20.8% 21.3% 21.5% 21.6% 21.1% 20.1%
NOPLAT Grow th 49.8% 43.5% -8.1% 17.0% 15.1% 11.7% 8.1% 4.4%
APPENDIX 6: FREE CASH FLOW TO EQUITY

FCFE Schedule
(N'mn) 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Net Income 145,686 202,111 179,069 230,430 288,037 338,069 380,796 395,460
(+) Non Cash expenses 180,248 236,340 272,095 307,242 347,869 385,413 425,929 470,925
Increase/Decrease in net deferred taxes 22,089.46 11,320.56 - - - - - -
Gross Cash Flow 348,023 449,771 451,164 537,672 635,906 723,481 806,725 866,385
(+) Net Non-equity claims (80,051) 753,762 79,292 (26,298.60) (25,724.28) (58,745.04) (108,537) 120,770
(-) Reinvestments (219,732) (228,499) (226,788) (288,492) (335,905) (392,059) (442,300) (519,636)
Free Cash Flow to Equity 48,241 975,034 303,667 222,882 274,277 272,677 255,888 467,519
FCFE growth -165.0% 1921.2% -68.9% -26.6% 23.1% -0.6% -6.2% 82.7%
Net Equity Reinvestment 97,445 (772,923) (124,598) 7,548 13,760 65,392 124,908 !(72,058!)
Equity Reinvestment Rate 66.9% -382.4% -69.6% 3.3% 4.8% 19.3% 32.8% -18.2%
FCFE to Sales 4.6% 83.3% 23.9% 15.4% 16.6% 14.8% 12.6% 21.0%
Non- Cash Return on Equity 138.0% 193.2% -436.6% -239.2% -472.9% 2936.9% 262.2% 185.4%
APPENDIX 7: FINANCIAL RATIOS

Financial Ratios 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Profitability ratios
Revenue grow th 17% 13% 9% 14% 14% 11% 11% 10%
EBITDA margin 44% 54% 52% 52% 52% 52% 52% 50%
Operating margin 26% 34% 30% 31% 31% 32% 31% 29%
Prof it bef ore tax margin 21% 25% 21% 23% 26% 27% 28% 26%
Net margin 14% 17% 14% 16% 17% 18% 19% 18%
Return on equity (RoE) 88% 111% 104% 101% 98% 91% 83% 71%
Dividend payout 27% 70% 70% 75% 75% 75% 75% 75%
Liquidity ratios
Current assets 0.34x 0.66x 1.09x 1.13x 1.16x 1.13x 1.00x 1.22x
Quick ratio 0.33x 0.66x 1.08x 1.12x 1.15x 1.12x 0.99x 1.21x
Efficie ncy ratios

Payables turnover 1.35x 1.23x 1.40x 1.44x 1.52x 1.60x 1.75x 1.95x
Return on assets (RoA) 15.20% 16.40% 11.00% 13.10% 15.80% 17.90% 19.90% 19.40%
Return on Invested Capital 38.50% 27.60% 25.80% 30.20% 34.20% 37.10% 38.30% 37.20%
Le ve rage /Ge aring ratios

Net debt/(EBITDA-Capex) -0.12x 0.28x 0.04x -0.02x -0.02x -0.02x -0.04x 0.11x
Debt to assets 0.19x 0.61x 0.58x 0.55x 0.51x 0.47x 0.41x 0.42x
Debt to capital 0.44x 0.87x 0.84x 0.79x 0.74x 0.68x 0.61x 0.60x
Debt to equity 0.80x 6.42x 5.07x 3.83x 2.91x 2.17x 1.55x 1.50x
Interest cover (FCFF) 5.62x 0.02x 3.74x 4.78x 5.80x 6.81x 8.07x 7.52x
Interest cover (EBIT) 3.95x 3.15x 2.60x 3.48x 4.38x 5.27x 6.29x 5.91x
Net debt/EBITDA -0.18x 0.38x 0.05x -0.02x -0.02x -0.03x -0.06x 0.17x
Financial leverage 4.29x 10.54x 8.69x 6.96x 5.67x 4.62x 3.77x 3.56x
14
APPENDIX 8: REVENUE DERIVATION
Revenue Forecast 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Population
Nigeria Population N'm 195.9 201.0 206.25 211.68 217.24 222.96 228.82 234.84
% growth % 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6%
Mobile Subscribers M 172.87 184.70 191.62 198.78 205.09 212.72 219.46 227.58
% growth % 19.2% 6.8% 5.6% 6.2% 5.9% 6.0% 6.0% 6.0%
% of Population % 88% 92% 92.9% 93.9% 94.4% 95.4% 95.9% 96.9%
Internet Subscribers M 111.63 125.73 159.18 167.12 174.48 183.09 189.99 198.16
% growth % 13.5% 12.6% 26.6% 5.0% 4.4% 4.9% 3.8% 4.3%
% of Mobile Subscribers % 64.6% 68.1% 83.07% 84.1% 85.1% 86.1% 86.6% 87.1%
Nigeria Nominal GDP N'm 127,736,828 144,210,492 160,155,131 177,862,690 197,528,085 219,367,786 243,622,195 270,558,293
% growth % 12.3% 12.9% 11.1% 11.1% 11.1% 11.1% 11.1% 11.1%
Telecommunications GDP N'm 9,667,308 11,890,912 13,205,631 15,732,889 18,657,565 22,036,646 25,934,862 30,425,700
% growth % 13.0% 23.0% 11.1% 19.1% 18.6% 18.1% 17.7% 17.3%
% contribution to total GDP % 7.6% 8.2% 8.2% 8.8% 9.4% 10.0% 10.6% 11.2%
MTNN Subscribers
Mobile M 58.20 64.30 76.50 84.52 92.54 96.69 96.20 93.78
% growth % 11.3% 10.5% 20.5% 10.5% 9.5% 4.5% -0.5% -2.5%
% of Total Mobile Subscribers % 33.7% 34.8% 39.9% 42.5% 45.1% 45.5% 43.8% 41.2%
Internet M 43.90 54.11 76.47 81.11 85.56 88.87 91.26 94.20

% of Nigeria Internet Subscribers % 39.3% 43.0% 48.04% 48.5% 49.0% 48.54% 48.04% 47.54%
MTNN Total revenue N'm 1,041,343 1,169,832 1,269,565 1,449,012 1,655,290 1,840,284 2,034,975 2,231,345
% of Telecomms GDP % 10.8% 9.8% 9.6% 9.2% 8.9% 8.4% 7.8% 7.3%
% growth % 17.4% 12.3% 8.5% 14.1% 14.2% 11.2% 10.6% 9.6%
ARPU N 1,491.1 1,516.1 1,383.0 1,428.6 1,490.6 1,586.0 1,762.9 1,982.8

% growth % 5.4% 1.7% -8.8% 3.3% 4.3% 6.4% 11.1% 12.5%
MTN Nigeria Revenue line items

Airtime and subscription N'm 681,911.4 725,448.2 726,309.7 810,243.8 895,563.1 980,630.7 1,063,329.3 1,140,963.8
% growth % 22.9% 6.4% 0.1% 11.6% 10.5% 9.5% 8.4% 7.3%
Data N'm 154,134.3 219,397.3 283,271.9 337,483.7 400,220.4 439,649.6 478,519.9 515,741.1
% growth % 32.0% 42.3% 29.1% 19.1% 18.6% 9.9% 8.8% 7.8%
SMS N'm 14,306.5 13,505.4 13,678.1 14,722.5 15,593.5 16,214.0 16,488.8 16,301.4
% growth % 13.3% -5.6% 1.3% 7.6% 5.9% 4.0% 1.7% -1.1%
Interconnect and roaming N'm 102,568.9 125,042.3 139,488.8 165,813.7 196,857.2 232,380.6 273,564.2 320,889.4
% growth % -1.0% 21.9% 11.6% 18.9% 18.7% 18.0% 17.7% 17.3%
Handset and accessories N'm 2,200.8 2,208.3 2,729.3 3,086.7 3,758.3 4,381.3 5,190.3 6,069.1
% growth % 246.1% 0.3% 23.6% 13.1% 21.8% 16.6% 18.5% 16.9%
Digital N'm 40,706.1 35,939.6 47,759.1 52,225.4 64,705.1 74,787.3 88,980.0 103,822.7
% growth % -41.4% -11.7% 32.9% 9.4% 23.9% 15.6% 19.0% 16.7%
Value added services N'm 32,275.9 37,167.6 42,683.1 50,014.1 59,808.1 70,346.7 82,963.4 97,228.0
% growth % 34.4% 15.2% 14.8% 17.2% 19.6% 17.6% 17.9% 17.2%
Other revenues N'm 11,014.0 11,026.0 13,645.1 15,422.5 18,784.0 21,893.9 25,938.8 30,329.5
% growth % 210.0% 0.1% 23.8% 13.0% 21.8% 16.6% 18.5% 16.9%
MTN Nigeria Revenue contribution to Telecoms GDP

Airtime and subscription % 7.1% 6.1% 5.5% 5.2% 4.8% 4.5% 4.1% 3.8%
Data % 1.6% 1.8% 2.1% 2.1% 2.1% 2.0% 1.8% 1.7%
SMS % 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Interconnect and roaming % 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1% 1.1%
Handset and accessories % 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% 0.0%
Digital % 0.4% 0.3% 0.4% 0.3% 0.3% 0.3% 0.3% 0.3%
Value added services % 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3% 0.3%
Other revenues % 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
Revenue was forecasted through a thorough analysis of each component segment taking into consideration both headwinds and opportunities facing these
segments. Whilst the historical of the 8 contributors to MTNN annual topline were carefully analysed, caution of the overall macroeconomic uncertainties and
mobile telecoms industry was taken projecting into the future. We recognize that MTNN revenue was primarily driven by (1) subscribers’ growth rate, (2) ARPU and
(3) the growth and size of Nigeria’s mobile subscribers. Modeling revenue drivers, we analysed the Nominal GDP of Nigeria and the contribution of Telecoms sector
to Nigeria’s Nominal GDP. Our choice of approach was necessitated by the fact that revenues are reported in nominal terms, hence our rationale for using nominal
instead of Real GDP. This approach affords us three (3) main benefits. Firstly, leverage on the contributions of MTNN’s topline contributors to Nigeria’s telecoms
GDP, secondly, subject the component of revenue to varying degree of competitive fierceness within Nigeria’s telecoms space and Lastly, examine the competitive
moat of each contributor within the telecoms GDP. For instance, our analysis suggests that the data and digital components will be the next battlefield for MNOs in
Nigeria, subduing MTNN topline. Nigeria’s population growth rate was projected at a 2.6% constant rate alongside the number of mobile subscribers in Nigeria,
allowing us to project the potential future subscribers. MTNN subscribers were forecasted based on Nigeria’s penetration (proportion of the population which are
mobile subscribers) and cognizance of increasing flexible tariffs by its major competitors. ARPU was modeled in tandem with MTNN’s subscribers and topline growth.
15
APPENDIX 9: DuPont ANALYSIS
DuPont Analysis
Three-step Method 2018A 2019A 2020F 2021F 2022F 2023F 2024F 2025F
Net Margin 14.00% 17.30% 14.10% 15.90% 17.40% 18.40% 18.70% 17.70%
Asset Turnover 1.09x 0.95x 0.78x 0.82x 0.91x 0.98x 1.06x 1.09x
Equity Multiplier 5.75x 6.78x 9.47x 7.72x 6.24x 5.08x 4.15x 3.66x
Five step Method

Tax Burden 65.80% 69.70% 68.00% 68.00% 68.00% 68.00% 68.00% 68.00%
Interest Burden 83.20% 73.40% 68.60% 75.20% 81.60% 85.70% 89.20% 88.70%
Operating Margin 26% 34% 30% 31% 31% 32% 31% 29%
Asset Turnover 1.09x 0.95x 0.78x 0.82x 0.91x 0.98x 1.06x 1.09x
Equity Multiplier 5.75x 6.78x 9.35x 7.52x 6.07x 4.94x 4.03x 3.55x
ROE 87.70% 111.00% 102.90% 98.60% 95.80% 88.60% 80.10% 68.70%
APPENDIX 10: ALTMAN Z-SCORE

We conducted Altman Z-score to test the strength of MTNN Balance sheet and the
Altman Z-score Analysis probability of whether or not MTNN is likely to declare for bankruptcy.
(N'mn) 2019 Criterion: If Z-score falls between 0-1.8 points, the financial health of the company is in
Revenue 1,169,734.70 distress, and there is high likelihood to declare for bankruptcy. On the other hand, a Z-
Total assets 1,525,570.50 score greater 3points imply that the company operates in a safe zone with strong financial
Total liabilities 1,380,885.00 strength.
Current assets 262,463.50 Formula: 𝜻 = 𝟏. 𝟐𝑨 + +𝟏. 𝟒𝑩 + 𝟑. 𝟑𝑪 + 𝟎. 𝟔𝑫 + 𝟏. 𝟎𝑬
Total current liabilities 397,694.70 Conclusion: MTNN 2019 Z-score of 2.75 (~3) falls above the distress zone, approaching the
Working Capital -135,231.20 safe zone, indicating that MTNN possess strong financial strength with no likely concern
Retained profit 126,541.00 for bankruptcy.
Operating profit 395,297.20 NOTE: The market cap used in our analysis is the average of MTNN share price from IPO
Market Cap 2,571,106.10 till FY19, multiplied by its shares outstanding.
Derived Ratios
(A) Working Capital to Total Asset -0.09 2.75
(B) Retained profit to Total Asset 0.08
(C) EBIT to Total Asset 0.26
Safe
(D) Market Cap to Total Liabilities 1.86 Distress
(E) Revenue to Total Assets 0.77 Altman Z-score
Z-Score 2.75
APPENDIX 11: BENEISH M-SCORE ANALYSIS

Beneish M-Score Analysis
(in millions) 2015 2016 2017 2018 2019
Messod Beneish’s M-Score was also conducted to check whether or Revenue 807,448 793,673 887,180 1,039,118 1,169,735
not if MTNN was manipulating its financial reports. Beneish M-score Cost of Sales (223,899) (305,083) (396,165) (433,666) (382,078)
employed 8 indexes with different ratings to detect the possibility of Selling, Gen and Admin Expenses (149,630) (132,885) (144,621) (154,508) (157,835)
manipulation financial reports. Depreciation (140,407) (143,739) (150,467) (167,863) (234,622)
Net Income (80,290) 88,800 81,070 145,686 202,111
Formula: 𝑴 𝑺𝒄𝒐𝒓𝒆 = −𝟒. 𝟖𝟒+. 𝟗𝟐 ∗ 𝑫𝑺𝑹𝑰 + 𝟎. 𝟓𝟐𝟖 ∗ 𝑮𝑴𝑰 + Account Receivables 58,163 39,550 33,425 38,617 52,400
Current Assets 378,806 363,785 241,417 195,855 262,463
𝟎. 𝟒𝟎𝟒 ∗ 𝑨𝑸𝑰 + 𝟎. 𝟖𝟗𝟐 ∗ 𝑺𝑮𝑰 + 𝟎. 𝟏𝟏𝟓 ∗ 𝑫𝑬𝑷𝑰 − 𝟎. 𝟏𝟕𝟐 ∗ 𝑺𝑮𝑨𝑰 +
Property,Plants, & Equipment 450,873 494,670 582,439 607,024 625,096
𝟒. 𝟔𝟕𝟗 ∗ 𝑻𝑨𝑻𝑨 − 𝟎. 𝟑𝟐𝟕 − 𝑳𝑽𝑮𝑰
Long-term investment 16,828 18,450 13,683 15,727 12,145
Total Assets 992,889 1,026,806 969,608 941,740 1,525,571
Criterion: Beneish M-Score hypothesized that if the point is greater Current Liabilities 441,148 487,429 541,547 580,948 397,695
than -2.22, there is every likelihood that the firm is manipulating its Total Long-term Debt 250,480 189,783 135,545 31,438 861,523
earnings reports. On the other hand, a M-score less than -2.22. a firm Cash Flow from operations 530,027 149,821 357,306 445,905 630,677
is less likely to manipulate its earnings report.
Ratio Indexes 2015 2016 2017 2018 2019
Conclusion: Our analysis shows that over the year (FY15-19), MTNN Days Sales in Receivables Index (DSRI) - 0.69 0.76 0.99 1.21
has scored a M-score of less than -2.22 implying that there is less Gross Margin Index (GMI) - 1.17 1.11 0.95 0.87
Asset Quality Index (AQI) - 0.99 0.93 0.96 3.14
likelihood that MTNN is manipulating its financials.
Sales Growth Index (SGI) - 0.98 1.12 1.17 1.13
Depreciation Index (DEPI) - 1.1 1.18 0.91 0.64
SGA Index (SGAI) - 0.9 0.97 0.91 0.91
Leverage Index (LVGI) - 0.95 1.06 0.93 1.27
Total Accruals toTotal Assets (TATA) - -0.06 -0.28 -0.32 -0.28
Beneish M-Score -2.92 -3.89 -3.85 -2.81
16
APPENDIX 12: VALUATION SUMMARY
VALUATION SUMMARY
Our 12 months’ target price of N201.25 representing a 22% upside was computed via four valuation methods: Valuation Methodologies Prices Weights WP
Discounted Cash flow (DCF), Dividend Discount Model (DDM), Residual Income Model and Comparable multiples;
Discounted Cash Flow 266.12 30% 79.83
P/E and EV/EBITDA multiples. We employed intrinsic and relative valuation approach to measure the
fundamentals of the business and market expectation respectively. Our income benefit methods (DCF, DDM and FCFE Income Model 153.76 0% 0
Residual Income) yielded N266, N137 and N190 at 30%, 25% and 25% weights respectively. We also valued MTNN Dividend Discount Model 137.92 25% 34.48
using the free cash flow to equity holders weighted at 0% to emphasize our DDM and its gives a share price of Residual Income Model 190.6 25% 47.65
N153.7 (1% downside). Our Terminal values were modelled explicitly using key variables to ensure congruency
in our variables. A stable growth rate of 5% was proxied as our perpetuity growth rate. Mid-year adjustment Comps trading Multiple 196.43 20% 39.29
factor was applied on all income benefit approach. This adjustment allows us to convert our income stream from Fair value 201.25
discrete to continuous in order to match MTNN business model. Our relative valuation method includes
financially robust wireless telecommunication companies. Our comps multiples were valued on a one-year
forward basis using EV/EBITDA and P/E with equal weights. Our relative valuation yielded a share price of N192.
Stable Growth Rate
A stable growth rate was established to account for all cash flows post FY25 into perpetuity. In computing our analysis, 2 metrics were taking into consideration; (1) Nigeria’s GDP
growth rate and (2) Inflation rate. In principle, a sustainable/stable growth rates should broadly be lower than long-term GDP growth, but larger than inflation. In context, it is
assumed that a company growing slowly than the inflation rate is not a creating value. Thus, we expect MTNN perpetuity growth rate above Nigeria’s long term inflation rate of
3-5%. This assumption is explicit as Nigeria’s rising inflation primarily driving by cost-push and structural bottlenecks. Similarly, a company cannot outgrow its host economy,
hence we estimate MTNN perpetuity growth below Nigeria’s long-term GDP of 7% Overall, we established a stable growth of 5%.
APPENDIX 13: COST OF CAPITAL
The weighted average Cost of Capital (WACC) was employed in computing MTNN cost of capital. The book value of both debt and equity was used in our analysis. Given that
MTNN cleared its preference shares from its capital structure in 2019, it was reasonable to exclude the weighted cost of preference share from our WACC computation.
𝑬 𝑫
𝑾𝑨𝑪𝑪 = 𝑹𝒆 + ( ) + 𝑹𝒅 + (𝟏 − 𝒕)( )
Weighted Average Cost of Capital 𝑽 𝑽
Explicit Terminal 12.1 Cost of Equity
Cost of Equity 15.50% 9.00% The cost of equity was calculated using the Capital Asset Pricing Model (CAPM) weighting 100% in both the explicit and
Weight of Equity 30.24% 30.00% terminal period. The model utilized the Risk-free rate (Rf), Beta (β) and Equity Risk Market Premium (ERMP).
𝑹𝒆 = 𝑹𝒇 + (𝜷 𝒙 𝑬𝑹𝑴𝑷)
Cost of Debt 10.71% 6.80%
Risk Free Rate
Weight of Debt 69.76% 70.00%
Explicit Horizon: The 10-year Nigerian Government Bond (FG) was used as a proxy for risk-free rate. Theoretically, for an
WACC 12.16% 7.46% instrument to be truly risk-free, it must display negligible default and reinvestment risk. Although, the 10-yr FG bond
displays negligible default risk, it is not an absolutely risk-free rate proxy due to reinvestment risk, hence the need for year-specific zero-coupon bond. The 10-year bond was eventually
preferred as it is the benchmark bond and sufficiently liquid such that its price is a reflection of the market forces. Consequently, the current spot rate of the 10-year bond was utilized
as our risk-free rate as it is more indicative of the current low yield environment currently prevalent which we expect to persist.
Terminal Horizon: We employed Nigeria’s long term Nominal GDP as a proxy for our terminal risk free rate. Our choice was necessitated by the of notion cash flows being reported
in nominal terms.
Beta
Explicit Horizon: The levered beta was computed using four methods;
1. An historical regression of MTNN’s stock returns in excess against the market (NSE-ASI) was computed. The assumptions included:
 The NSE-ASI is the broadest index to measure the relatively return on the Nigerian equity market.
 1-yr daily data return was utilized due to the availability of data set from May 2019, (MTNN IPO) against the orthodox 2-year weekly data.
2. Blume Adjusted Beta methodology was also utilized on our stock historical regression to revert MTNN beta with the overall market return (1).
𝟐 𝟏
𝜷= (𝑺𝒕𝒐𝒄𝒌 𝑯𝒊𝒔𝒕𝒐𝒓𝒊𝒄𝒂𝒍 𝑹𝒆𝒈𝒓𝒆𝒔𝒔𝒊𝒐𝒏) + (𝒎𝒂𝒓𝒌𝒆𝒕 𝒓𝒆𝒕𝒖𝒓𝒏)
𝟑 𝟑
3. Comparable company betas of global telecommunications companies were used. Betas were telecommunications companies in Sub-Saharan, MENA and emerging markets.
The beta parameters were identical to those computed with other methods. The betas were unlevered by the specific capital structures (debt-to-equity) and
tax rates of each respective company, before re-levering to meet
MTNN’s capital structure and tax rate. Cost of Equity
5. Refinitiv’s 2Y weekly beta was used to proxy the Explicit Horizon Terminal Horizon
company’s relative risk measure with reference to the
Proxy Weight Proxy Weight
market. Risk-Free Rate Risk-Free Rate
Terminal Horizon: The adjusted beta was weighted in the terminal 10-year FG bond 5.24% 100.00% Long term Nominal GDP rate 6.0% 100.00%
period given the assumption that MTNN relative risk measure will
converge to the market average of 1 in the long term. Weighted Average 5.24% 100.00% Weighted Average 6.00% 100.00%
Equity Risk Premium (ERP)
Explicit Horizon: the historical premium approach, where the Beta Beta
average actual returns earned on the NSE- All Share Index was Stock Regression (1Y) 1.16 0.00% Stock Regression 1.0 100.00%
computed from 1984-2019, compared to the average actual returns Blume adj. Beta 1.05 100.00% Blume adj. Beta 0.0 0.00%
earned on a bond during the same period. The difference between Comparables Method 1.44 0.00% Comparables Method 0.0 0.00%
the two was proxied as our historical risk premium. However, this Refinitiv (2Y) 1.07 0.00% Refinitiv 0.0 0.00%
approach is on an annualized basis failing to account for risk Weighted Average 1.05 100.00% Weighted Average 1.0 100.00%
aversion trait during the year. We however included a synthetic
equity risk premium (Damodaran) as a proxy in our calculation with Equity Risk Market Premium (ERMP) Equity Risk Market Premium (ERMP)
40% weighting assigned to it. Historical ERP 7.5% 60.0% US equity risk premium 3.00% 100%
Premium 0.0%
Terminal Horizon: Our terminal ERP is based on our finite historic
Damodaran 13.3% 40.0% Weighted Average 3.00%
premium approach adjusted to reflect in Nigeria’s long term
Weighted Average 9.8% 100.0%
macroeconomic risk, risk appetite of investors, liquidity and level of
Capital Asset Pricing Model (CAPM) Value Capital Asset Pricing Model (CAPM) Value
access to information. We estimate Nigeria’s macroeconomic
Risk Free Rate 5.24% Risk Free Rate 6.00%
climate to stable through perpetuity, unlimited access to
Beta 1.05 Beta 1.00
information, increased liquidity and most importantly, appetite to
Equity Risk Market Premium (ERMP) 9.81% Equity Risk Market Premium (ERMP) 3.00%
tolerate risk through increased participation in equity market.
CAPM Cost of Equity (Ke) 15.50% CAPM cost of Equity 9.00%
Hence, we estimate Nigeria’s terminal ERP in tandem with US-
equity risk premium. 17
12.2 Cost of Debt:

The cost of debt was calculated by weighting a range of methods as summarized below.
Explicit Horizon:
Cost of Debt
Interest Yield: MTNN 5-year historic interest expenses on its average borrowing was proxied for cost of debt in our
Explicit Horizon Terminal Horizon analysis as it best signals the nominal interest expense MTNN incur on its borrowings. As it was expected, MTNN
Proxy Proxy cost of debt was at premium over government bond.
5-yr historic yield 15.7% Risk free rate 7.00% Credit spread: Cognizance of MTNN default rate (credit spread) was also factored in, a BB- rating1 and a credit
Premium 3.00% default risk rate of 0.05%. The default risk took into consideration the overall macroeconomic condition of Nigeria
Cost of Debt 15.75% Cost of Debt 10.00% impacting MTNN cost of borrowing.
Tax rate 32.0% Tax rate 32% Terminal Horizon: We employed the risk-free rate as a proxy for MTNN terminal cost of debt. Factoring in the fact
After-Tax Cost of Debt 10.7% After-Tax Cost of Debt 6.8% that debt is tax free, we consider the risk-free rate (Government bond) as the appropriate proxy for our terminal
cost of debt. Consequently, we placed a premium on the risk-free rate as a sweetening to debtholders in our terminal
cost of debt computation.
APPENDIX 13: FREE CASH FLOW TO FIRM (FCFF)

We estimated MTNN FCFF using the NOPLAT (Net Operating Profit Less Adjusted Taxes) approach. This approach affords us the luxury of estimating MTNN cash flow from after-
tax cash-flows accruing to all stakeholders; (1) Shareholders and (2) Debtholders. The NOPLAT approach of estimating FCFF normalizes the effects of MTNN capital structure,
incorporating MTNN cost of debt and tax shield benefit. The FCFF was preferred to FCFE analysis as it seems as the most fitting for MTNN owing to its relatively new equity stake
with high leverage with over 80% debt financing, and being that most of MTNN competitors are not publicly traded, it would not be useful to value the equity if we cannot compare
this figure to that of its competitors. FCFF is forecasted to grow at 8.6% CAGR during our explicit forecast horizon. (See: Appendix 5)
APPENDIX 14: DISCOUNTED CASH FLOW MODEL (FCFF)
We conducted a DCF valuation, with an objective of determining the fair value of an MTNN, given its cash flow, growth and risk characteristics. Our DCF method yielded a
fair value of N266.12, an upside of 72%, compared to last closing price (December 3,2020). We employed FCFF as appropriate cash flow accruing to all capital providers
discounted with the appropriate cost of capital (WACC). Our DCF analysis was conducted on both two phases - Explicit and Terminal Horizon with explicit WACC and terminal
WACC used as discounting factors respectively. We arrived at an equity value of N5.42trillion.
Continuing Value(CV): Our CV was modelled using key driver model against the orthodox perpetuity model because it explicitly models the reinvestment rate needed to
generate the predicted stable growth over the long term ensuring congruence among the parameters. Our CV was computed using the formula;
𝒔𝒕𝒂𝒃𝒍𝒆 𝒈𝒓𝒐𝒘𝒕𝒉 𝒊𝒏 𝑵𝑶𝑷𝑳𝑨𝑻
𝑹𝒆𝒗𝒆𝒏𝒖𝒆𝒕+𝟏 𝒙 𝒔𝒖𝒔𝒕𝒂𝒊𝒏𝒂𝒃𝒍𝒆 𝑵𝑶𝑷𝑳𝑨𝑻 𝑴𝒂𝒓𝒈𝒊𝒏 𝒙 (𝟏 − )
𝑪𝑽 = 𝑹𝑶𝑰𝑪
(𝑾𝑨𝑪𝑪 − 𝒔𝒕𝒂𝒃𝒍𝒆 𝒈𝒓𝒐𝒘𝒕𝒉 𝒊𝒏 𝑵𝑶𝑷𝑳𝑨𝑻)
Revenuet+1: MTNN FY26 revenue was projecting the same way our explicit revenues were forecasted.
Sustainable NOPLAT Margin: we employed a rate below the average historic NOPLAT Margin (14%) of MTNN from FY15-19 arriving at 12% which we estimate is reasonable
to perpetuity.
Stable Growth in NOPLAT: Theoretically, growth was computed multiplying returns (ROIC) by reinvestment. We arrived at a growth rate of 48% into continuity. In reality,
this growth rate is unsustainable, consequently, a stable growth rate of 5% was proxied as our stable NOPLAT growth rate. We computed MTNN average ROIC (FY15-19)
arriving at 24.45%. However, this rate is not sustainable into perpetuity. We assumed through continuity, MTNN will generate 2.5% excess return on its terminal cost of
capital (terminal WACC-7.46%), thereby arriving at a terminal sustainable ROIC of 9.96%. Ergo, we arrived at a continuing value of N6.34 trillion ~>90% of our Enterprise
Value. Overall, our DCF was weighed 30% in our fair value per share.
APPENDIX 15: FREE CASH FLOW TO EQUITY
To accentuate the value of equity arrived at using DDM, we measure the intrinsic value of MTNN using the free cash flow distributable to equity holders with cost of equity
being the appropriate discounting factor. We arrived at a fair value of N153.76, a 1% downside. The sustainable Net margin, sustainable growth rate, excess return and ROE
assumptions corresponds with that used in our DDM below. A 0% weighting was assigned in our overall valuation due to its similarity with our DDM.
APPENDIX 16: DIVIDEND DISCOUNT MODEL
We employed DDM to corroborate our DCF model. Our DDM was modelled on two-phases – explicit and terminal with appropriate cost of equity as discounting factor. Our
DDM model computed an equity value of N2.82bn yielding an intrinsic value per share value of N137.92. Our computed intrinsic value yielded a 11% downside to the
current market price. We expect MTNN dividend to grow 5% CAGR through 2025 owing to its ability to control cost and generate strong EPS. Payout ratio was forecasted
to range 70%~75% through FY25. Our forecasted dividends were discounted using the appropriate discounting factor (cost of equity).
Continuing Value: Our CV was computed using the key driver model for the above mentioned rationale. Our CV utilised
𝒔𝒕𝒂𝒃𝒍𝒆 𝒈𝒓𝒐𝒘𝒕𝒉 𝒊𝒏 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅
𝑹𝒆𝒗𝒆𝒏𝒖𝒆𝒕+𝟏 𝒙 𝒔𝒖𝒔𝒕𝒂𝒊𝒏𝒂𝒃𝒍𝒆 𝑵𝒆𝒕 𝑴𝒂𝒓𝒈𝒊𝒏 𝒙 (𝟏 − )
𝑪𝑽 = 𝑹𝑶𝑬
(𝒄𝒐𝒔𝒕 𝒐𝒇 𝒆𝒒𝒖𝒊𝒕𝒚 − 𝒔𝒕𝒂𝒃𝒍𝒆 𝒈𝒓𝒐𝒘𝒕𝒉 𝒊𝒏 𝒅𝒊𝒗𝒊𝒅𝒆𝒏𝒅)
Revenuet+1: MTNN FY26 revenue was projecting the same way our explicit revenues were forecasted.
Sustainable Net Margin: A sustainable net margin of 11% was proxied in line with that of companies in matured markets and well below its current and historic average.
We believe this rate is sustainable irrespective of the competitive landscape owing to MTNN continued reinforcing of its moat. Hence, our assumption of 11% sustainable
net margin into continuity.
Stable Growth in dividend: Growth in dividend was computing multiplying returns (ROE) by retention rate. We utilised the average historic ROE (88%) and retention
(25.88%) yielding a growth rate of 23.07%, above the long-term growth. We employed stable growth rate of 5% as continuing growth in dividend. The computed ROE is
very unlikely into perpetuity, hence we recomputed our ROE with the proxied stable growth arriving at a sustainable 12.5% ROE. Overall, our DDM was assigned a 25%
weighting.
18
APPENDIX 17: RESIDUAL INCOME MODEL

Residual Income method was also employed to measure MTNN residual income (surplus value in excess of the capital employed. Whilst cost of equity should have been
the appropriate discounting factor, we utilised the Weighted Average Cost of Capital (WACC) to accrue us the benefit of valuing MTNN at firm level. Similarly, we employed
NOPLAT to normalize MTNN capital structure and tax shield benefit. Whilst we arrived at firm level valuation, adjustments were made to normalize our valuation to equity
level. Overall, our residual income yielded a share price of N190.6 commanding 25% in our overall weighting.
Continuing Value: Our continuing value was computed using key variable approach using:
𝒔𝒕𝒂𝒃𝒍𝒆 𝒈𝒓𝒐𝒘𝒕𝒉 𝒓𝒂𝒕𝒆
𝑬𝒄𝒐𝒏𝒐𝒎𝒊𝒄 𝑷𝒓𝒐𝒇𝒊𝒕𝒏+𝟏 𝑵𝑶𝑷𝑳𝑨𝑻𝒏+𝟏 𝒙 ( 𝑹𝑶𝑰𝑪
) 𝒙 (𝑹𝑶𝑰𝑪 − 𝑾𝑨𝑪𝑪)
𝑪𝑽 = +
𝑾𝑨𝑪𝑪 𝑾𝑨𝑪𝑪(𝑾𝑨𝑪𝑪 − 𝒈)
Residual Income (Economic Profit)n+1: Residual income was computed using three (3) variables: Invested capital, ROIC and terminal WACC. Residual income for FY25 was
grown with our stable growth of 5% to arrive at our economic profit for FY26.
NOPLATn+1: FY26 NOPLAT was projected multiplying FY26 revenue which we modelled explicitly by our sustainable NOPLAT margin. Sustainable NOPLAT utilized corresponds
to that of our DCF analysis. This approach affords us the luxury of valuing MTNN value creation. Overall, our residual income modelled weighed 25%.
Discounted Cash Flow Model 1 2 3 4 5 6

N'million 2020F 2021F 2022F 2023F 2024F 2025F
Discount factor 0.89 0.79 0.71 0.63 0.56 0.50 Valuation Drivers
Explicit WACC 12.16%
FCFF 552,068.70 619,445.65 686,927.41 750,751.45 805,785.05 834,035.52
Present Value(PV) of FCFF 492,219.90 492,419.55 486,865.46 474,417.11 453,993.26 418,967.94 Terminal WACC 7.46%
Sum of Explicit FCFF 2,818,883.23 Reinvestment 48.32%
Continuing Value(CV) 6,340,941.99 ROIC 24.45%
Present Value of Continuing Value 3,185,297.67 Grow th 11.81%
Sum of Present Value 6,004,180.90
Stable Grow th 5.00%
Mid-year Adjustment Fctor 1.06
Value of Operating Assets 6,380,527.82
Adj. Reinvestment 50.20%
Non Operating Assets - Sustainable ROIC 9.96%
Excess Cash 44,503.20 Sustainable NOPLAT Margin 12.00%
Enterprise Value 6,425,031.02 Excess Return (ROIC-WACC) 2.50%
Less: Non Equity claims
Borrow ings 447,750.01
leases 560,617.52
Total of Non Equity Claims 1,008,367.52
Shares outstanding 20,354.51 20355F
Value Per Share 266.12
Incom e Approach (FCFE) 1 2 3 4 5 6
N'm illion 2020F 2021F 2022F 2023F 2024F 2025F
Discount factor 0.87 0.75 0.65 0.56 0.49 0.42
Valuation Drivers
Net Incom e 179,069.32 230,429.94 288,037.17 338,068.62 380,796.08 395,460.21 Explicit Re 15.50%
(+) Non Cash expenses 272,094.84 307,242.42 347,869.02 385,412.68 425,928.79 470,924.60
Increase/Decrease in net deferred taxes - - - - - -
Terminal Re 9.00%
Gross Cash Flow 451,164.17 537,672.37 635,906.19 723,481.30 806,724.87 866,384.81 Reinvestment rate 78.34%
(+) Net Non-equity claims 79,291.54 (26,298.60) (25,724.28) (58,745.04) (108,537.02) 120,769.58 Non-cash ROE 25.80%
(-) Reinvestments (226,788.45) (288,491.69) (335,905.12) (392,059.19) (442,299.93) (519,635.80) Grow th 20.21%
FCFE 303,667.26 222,882.08 274,276.79 272,677.07 255,887.91 467,518.59
PV of FCFF 262,906.91 167,064.14 177,992.28 153,202.11 124,471.51 196,889.75
Sustainable Grow th 5.00%
Sum of Explicit FCFF 1,082,526.70 Sustainable Net Margin 11.00%
Continuing Value 4,306,944.22 Payout 60.00%
PV(Continuing Value) 1,813,816.99
Stable Non-Cash ROE 12.50%
Sum of PV 2,896,343.68
Mid-year adjustment factor 1.08 Excess Return (ROE-Re) 3.50%
Shares Outstanding 20,354.51
Value Per Share 153.76
Dividend Discount Model

N'million 2020F 2021F 2022F 2023F 2024F 2025F
Discounting factor 0.87 0.75 0.65 0.56 0.49 0.42
Valuation Drivers
Revenue 1,269,565 1,449,012 1,655,290 1,840,284 2,034,975 2,231,345 Explicit Re 15.50%
Net Margin 14.1% 15.9% 17.4% 18.4% 18.7% 17.7% Terminal Re 9.00%
Net Income 179,069 230,430 288,037 338,069 380,796 395,460 Retention rate 25.88%
Payout ratio 69.7% 75.0% 75.0% 75.0% 75.0% 75.0% ROE 91.43%
Dividend 124,795 172,822 216,028 253,551 285,597 296,595 Grow th 23.67%
PV of Dividend 108,044 129,541 140,192 142,456 138,923 124,907
Sustainable Grow th 5.00%
Sum of PV of Explicit Dividend 784,064
Sustainable Net Margin 11.00%
Terminal Value 4,306,944
Payout 60.00%
PV of Terminal Value 1,813,817
Stable ROE 12.50%
Sum PV of Dividends 2,597,881
Mid-year adjustment factor 1.08
Excess Return (ROE-Re) 3.50%
Equity Value 2,807,276
Shares outstanding 20,355
Value per Share 137.92
19
Residual Income Model

N'million 2020F 2021F 2022F 2023F 2024F 2025F
Discount factor 0.87 0.75 0.65 0.56 0.49 0.42
Invested Capital 1,025,108.3 1,021,777.1 1,038,101.3 1,069,652.6 1,118,826.5 1,203,594.4

ROIC 25.8% 30.2% 34.2% 37.1% 38.3% 37.2%
Valuation Drivers
NOPLAT 263,980.7 308,872.0 355,382.6 396,890.0 429,030.2 447,878.8
Explicit WACC 12.16%
WACC 12.2% 12.2% 12.2% 12.2% 12.2% 12.2%
Capital Charge 124,642.5 124,237.4 126,222.3 130,058.6 136,037.6 146,344.5 Terminal WACC 7.46%
Economic Spread 13.6% 18.1% 22.1% 24.9% 26.2% 25.1% Retention rate 3.99%
Economic Profit 139,338.20 184,634.56 229,160.35 266,831.45 292,992.59 301,534.25 ROIC 30.56%
PV of Explicit Economic Profit 120,635.25 138,395.21 148,713.91 149,917.79 142,520.33 126,987.47 Grow th 1.22%
Continuning Value 6,386,232.30 Sustainable Grow th 5.00%
PV of Continuing Value 2,689,483.78 Sustainable NOPLAT Margin 12.00%
PV of Economic Profit 3,516,653.74 Sustainable ROIC 9.96%
Invested Cap at beginning of forecast period 1,041,101.48
Excess Return 2.50%
Invested Cap plus present value of economic profit
4,557,755.22
Mid-year adjustment factor 1.06
Value of Operations 4,843,439.01
Enterprise Value 4,887,942.21
Debt (1,008,367.52)
Shares outstanding 20,354.51
Value per share 190.60
APPENDIX 18: COMPARABLES COMAPANY VALUATION
Comparable Company Valuation Model

In addition to intrinsic (income benefit) valuation Models, we conducted relative valuation using forward trading multiples. The forward multiples are more indicative of future
expectations of the market and appropriately infer MTNN’s valuation in comparison to historical book metrics. EV/EBITDA and P/E multiples were ultimately utililsed in our
valuation, with equal weighting assigned to both metrics. In our comps analysis, we carefully selected financially robust and well positioned comparables in emerging markets.
We recognized the absence of perfect comparable to MTNN due to differences in macroeconomic climate, value, and management structure. Therefore, in our selection, we
employed three metrics as a proxy for suitable comparables (1) financial strength (2) business characteristics (3) Market capitalization as a better reflection of MTNN financial and
value characteristics.
Business and Geographic Characteristics: We began with wireless telecommunications companies in Sub-Saharan Africa, MENA, and then in emerging markets. We filtered out
companies in distress markets and telecos that operates in a country with dissimilar consumer profile. Whilst MTNN operates in Nigeria, trends in the telecommunications space
are global, influenced by increasing advancement in technology, accruing similar operational risks to telecos. We were also careful not to compare MTNN with its parent company
MTN Group (MTNJ.J). Similarly, Airtel Africa PLC (LON: AAF), the only competitor of MTNN listed on the Nigerian local bourse (NSE) was excluded as a comparable due to its
presence in other countries trespassing our defined business profile.
Financial Strength: Furtherance to the geography criterion, we carefully selected comparables to match MTNN financial strength, with a threshold on companies’ turnover.
Comparables with an annual turnover between $2bn and $7bn were filtered (MTNN $3.8bn) in a normalized 2019 financial year. Cognizance of EBITDA margin was also taking
into consideration in selecting comparables. Telecos eventually selected had an EBITDA margin ranged 34% and 50% (MTNN 49.3%).
Market Capitalization: Beyond financial and business characteristics, we screened comparables based on market capitalization. Comparables with market capitalization between
$6bn and $15bn (MTNN $8.2bn). Our selected comparables was confirmed with a median market cap of $8.8bn.
Comps Valuation Statistics Capitalization Enterprise Value / Enterprise Value /

Equity Enterprise Revenue EBITDA P / E Multiple
Company Name Value Value FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY21
Eti ha d Eti s a l a t Compa ny SJSC 7020.SE Sa udi Ara bi a 6139.50 9748.70 2.7 x 2.6 x 2.4 x 7.6 x 7.2 x 6.5 x NM 35.3 x 27.1 x
Ti m SA TIMS3.SA Bra zi l 6183.00 7439.30 1.7 x 2.4 x 2.3 x 4.0 x 5.0 x 4.6 x 6.9 x 22.2 x 17.3 x
Fa r Ea s Tone Tel ecommuni ca ti ons Co Ltd 4904.TW Ta i wa n 6997.40 9574.10 3.4 x 3.4 x 3.3 x 17.2 x 10.2 x 9.2 x 24.0 x 24.9 x 27.5 x
Sa fa ri com Pl c SCOM.NR Kenya 11676.60 11817.60 4.7 x 5.1 x 4.6 x 9.2 x 9.7 x 9.0 x 16.7 x 18.6 x 16.0 x
Mobi l e Tel ecommuni ca ti ons Compa ny KSBC ZAIN.KW Kuwa i t 8750.30 13820.90 2.5 x 2.6 x 2.5 x 6.0 x 6.0 x 5.9 x 12.2 x 14.4 x 13.4 x
PLDT Inc MXSC.KL Ma l a ys i a 9660.90 11648.40 5.1 x 5.1 x 5.0 x 13.3 x 12.9 x 12.3 x 26.0 x 27.1 x 25.2 x
Mobi l 'nye Tel es i s temy PAO MTSS.MM Rus s i a 8442.60 13999.30 1.8 x 2.2 x 2.1 x 4.0 x 4.8 x 4.8 x 9.2 x 9.9 x 8.5 x
Voda com Group Li mi ted VODJ.J South Afri ca 15246.60 13997.30 2.8 x 2.3 x 2.2 x 6.7 x 5.8 x 5.3 x 16.0 x 12.7 x 12.0 x
Iti s s a l a t Al Ma ghri b Ste SA IAM.CS Morocco 13881.40 16192.00 4.2 x 4.0 x 4.0 x 8.5 x 7.7 x 7.6 x 48.7 x 21.5 x 19.3 x
Ma xi mum 11676.60 13999.30 5.1 x 5.1 x 5.0 x 17.2 x 12.9 x 12.3 x 26.0 x 35.3 x 27.5 x
75th Percenti l e 9205.60 12819.30 4.1 x 4.3 x 4.0 x 11.2 x 10.0 x 9.1 x 22.2 x 26.0 x 26.2 x
Median 8442.60 11648.40 2.7 x 2.6 x 2.5 x 7.6 x 7.2 x 6.5 x 14.4 x 22.2 x 17.3 x
25th Percenti l e 6590.20 9661.40 2.2 x 2.5 x 2.4 x 5.0 x 5.5 x 5.4 x 10.0 x 16.5 x 14.7 x
Mi ni mum 6139.50 7439.30 1.7 x 2.2 x 2.1 x 4.0 x 4.8 x 4.6 x 6.9 x 9.9 x 8.5 x
MTN Nigeria Communications Ltd MTNN.LG $8,180 $10,352 2.7 x 3.0 x 2.7 x 5.1 x 6.0 x 5.6 x 12.4 x 13.3 x 13.9 x
20
P/E multiples analysis ranged 16.47x and 26.02x. Our P/E multiplies generated an EV/EBITDA multiple
implied value per share value between N144 and N228.89, while our median multiple
was preferred projecting a N195.73 per share. N'm except share price Multiple Range
Lower Comps Median Upper Comps
Our EV/EBITDA multiples generated an equity value between N2.9trn and N5.8trn. The
median comps multiple was preferred with an equity value of N3.9trn. we arrived at EV/EBITDA multiple 5.50x 7.20x 9.97x
an implied value per share vale ranged N140 to N284 with a median of N195. Forward EBITDA 655,959.41
Enterprise Value 3,605,045.24 4,719,938.36 6,537,527.56
With 50% equal weighting, our comps trading multiple derived an implied value of
N196.41 for MTNN. Net Debt -707,414.82
Equity Value 2,897,630.42 4,012,523.54 5,830,112.73
P/E multiple Implied per share value 142.36 197.13 286.43
Multiple Range
Lower Comps Median Upper Comps Comps Multiple Price Weight
P/E multiple 16.47x 22.25x 26.02x EV/EBITDA multiple 197.13 50%
Forward EPS 8.8 P/E Multiple 195.73 50%
Implied per share value 144.93 195.73 228.89 Implied Comps Value 196.43
APPENDIX 19: SENSITIVITY AND SCENARIO ANALYSIS

Sensitivity Analysis
Terminal WACC and Stable Growth rate:
We conducted sensitivity analyses in order to flex the key drivers of our income benefit valuation methodologies. Inherently, these analyses were conducted on MTNN risk and
growth assumptions, embedded in our WACC and growth rate which are fundamental to MTNN business model. On our base case, we flexed our terminal WACC by 0.5% in such a
way that the upper and lower band generated an excess return ranged 1.5%~3.5%. Whilst our growth rate was varied by the same rate-0.5%, enabling our lower band to vary with
long-term inflation rate whilst the upper band varied with GDP long term growth rate. This analysis is fundamental to our analysis due to the significant impact of our continuing
values on our overall analysis. our WACC was varied our sample across while holding growth constant caused MTNN share price to range from N189.77 to N224.38. Similarly, varying
our Stable growth rate, ceteris paribus, we arrived at a ranged fair value per share of N186.06 to N233.08. Our sensitivity analysis supports a BUY recommendation.
Cost of equity and stable growth rate:
Whilst our FCFF was discounted with the appropriate cost and risk factor (WACC), we utilized cost of equity as appropriate risk factor to FCFE or dividend. Our DDM valuation
weighed 25% in our overall weighting, hence the need to sensitive our cost of equity (Re).
Varying our terminal Re (Cost of equity) across sample whilst growth rate was held constant, we derived share price ranged N197.39~N207.41. Similarly, varying our growth while
Re was held constant, we derived N197.51 to N212.48 share price.
Terminal Re and stable growth rate Terminal WACC and stable growth rate
####### 8.0% 8.5% 9.0% 9.5% 10.0% 201 6.5% 7.0% 7.5% 8.0% 8.5%
3.0% 200.90 199.06 197.51 196.17 195.01
4.0% 198.58 191.37 186.06 181.95 178.67
4.0% 203.34 200.95 199.00 197.38 196.00
4.5% 208.65 198.92 192.22 187.27 183.44
5.0% 207.41 203.93 201.25 199.12 197.39
5.0% 224.38 209.73 200.65 194.39 189.77
6.0% 215.56 209.27 205.00 201.87 199.47 5.5% 253.40 226.74 213.01 204.50 198.63
7.0% 239.98 221.76 212.48 206.81 202.93 6.0% 331.66 258.16 233.08 220.17 212.17
Scenario Analysis
Bull Case
In our bull case scenario, cognizance of MTNN competitive moat was varied our valuation. We estimate that MTNN will sustain its leading market share in Voice (Airtime subscription)
and data space. Whilst the emergence of Orange into Nigeria’s data space is expected to increase competition driving prices of data bundles down, we maintain MTNN quality
network coverage and brand loyalty to rally its bullish momentum. Primarily, we are optimistic of MTNN coming into the PSB space (Fintech) to drive its margin going forward as a
pioneer teleco with wide vendor coverage in Nigeria. Similarly, we acknowledge the tight regulatory and macroeconomic uncertainties surrounding the Nigerian economy, we are
optimistic that MTNN will successfully proffer buffers to macroeconomic uncertainties and continued compliance with regulatory and consumer data protection law. Overall, in our
bull case, we arrived at a share price of N219.88 (42% upside compare to N155.00 closing price at Dec., 03, 2020).
Bear Case
Whilst the emergence of a new player into Nigeria’s oligopolistic telecomm space will increase competition, we expect stringent regulations by NCC due to increased competition
and the need to protect consumers from exploitation and data protection. In our bear analysis, we estimate the impact of Orange on MTNN market share, especially in the data
space. Similarly, as experienced in 2015, we estimate increased new regulatory framework by NCC on Nigeria’s telecom space, especially with the advent of new technologies (5G,
IoT, porting service) to shrink MTNN market share. Furthermore, the introduction of flexible data and voice packages by Airtel and GLO, we forecast MTNN revenue share of
Nigeria’s telecom space to decline to 9.11% (compared to 9.61% in our base case). Consequently, our bear case forecast ARPU to decline 50bps CAGR to N1,468. Overall, our bear
case arrived at a fair value of N140.05, a 10% discount compared to the market.
N200.00
N219.88
N180.00
N160.00
N140.00
N120.00 N140.05
N100.00
N80.00
N60.00
N40.00
N20.00
N0.00
21
APPENDIX 20: IMPACT OF RISK ON OUR VALUATION

Covid-19 based risk and valuation:
Covid-19 based risk could affect MTNN’s selling, distribution and marketing expenses. Due to lockdown and some restrictions on movement, marketers would have to go extra mile
to get new subscribers on board. This would increase her selling, distribution and marketing expenses thereby increasing MTNN operating cost and reducing its EBITDA. The
reduction in EBITDA would affect EBIT, FCFF, and EV/EBITDA multiple that serve as major parameters in our valuation.
Regulatory risk and valuation
Regulatory risk could no doubt affect MTNN’s profit after tax just like it did in 2015. The regulatory fine paid in that year made MTNN had a negative profit after tax of -80.29billion
naira. Subsequent profit after tax of between 88-202billion naira through 2016 to 2019 shows that a lot could be lost to regulation. Our NOPlAT is inherent in profit after tax. The
corresponding effect of this is that it would affect the NOPLAT value employed in our FCFF calculation thereby altering our overall projected share price.
Inflation risk and valuation
Inflation risk could have a significant effect on MTNN’s revenue in the sense that subscribers have little to nothing left to purchase airtime, data and other services MTNN provides
due to a hike in cost of major food items. Since MTNN’s service is not one of the basic amenities of life, individuals would take care of what they need to survive first. A fall in
demand for wireless services would affect revenue, revenue having impact on MTNNN performance thereby affecting the overall valuation.
Foreign exchange risk and valuation
Foreign exchange risk can affect MTNN’s total liabilities through its foreign currency dominated borrowings. In 2019, 7 out of 8 are USD dominated borrowings. This shows that the
recent increase in exchange rate 1$/380₦ can affect MTNN’s debt refund for payments to be made at this period. This would increase obligation on borrowings; the increase would
reduce capital to be reinvested; reduction in reinvestment would affect FCFF, a changed FCFF would affect the DCF model thereby altering the overall projected share price. Hence,
an affected valuation.
APPENDIX 21: BRIGHT STRATEGY
Source: MTNN
APPENDIX 22: SWOT ANALYSIS
Strengths Weaknesses
1 Underpinned by its high-value brand name, MTNN is Nigeria's pioneer 1 Increased awareness of porting service introduced by NCC could see
telecommunication provider since 2001 with 40% market share ( 26.9% subscribers easily switch between MNOs in cause of any network downturn
Airtel Africa, Glo 26% and 9% 9mobile)
MTNN is a market leader in the providing ‘network application and Exposure to FX loans due to lack of access to long term domestic funding
services' to Enterprises, Governments, SMEs and SOHOS , Conglomerate
printing N132.8bn and N46bn (in FY19) revenue from EBU and WBU
respectively
Backed by strong technical expertise of MTN Group with operations in over MTNN main revenue driver (Airtime Subscription-Voice) accounts for 69%
21 countries in West Africa and MENA to deliver world class (Q1'20) of MTNN topline compared to South-Africa's 37%. High revenue from
telecommunications service in Nigeria voice is unsustainable into the future
Net Promoter Score (NPS) of 62%, No 1 position in Network, Brand, and Regulatory fines and tax litigations from Nigerian Authorities could dent
Distribution with consistent improvement in value perception and service customers' perception of the company
delivery, positions MTNN as a go-to for new subscribers.
Expansive fibre network (29,000km+), only MNO with 2,600MHz spectrum, Under-diversified revenue stream exposes MTNN to uncertainties.
only MNO with 3,500MHz spectrum with nationwide coverage
Opportunities Threats
1 Young (18yr median age) and rapidly growing population (2.7% per annum) 1 Young (18yr median age) and rapidly growing population (2.7% per annum)
with a expected population of 400million by 2050 will spur subscribers with a expected population of 400million by 2050 will spur subscribers
growth rate growth rate
Low internet (broadband) penetration in Nigeria (38%) and smartphone Pricing competition especially in the saturated mobile (voice and data)
penetration 43% (Q1'20) with opportunity to drive data and digital space will continue to lead to subdued subscriber growth and lower ARPU;
revenue effect is accelerated by emergence of new player in the data space (Orange)
Low Banking penetration and financial inclusion in Nigeria, presents Rising inflation (Oct 14.23%) and economic downturn will reduce subscribers
opportunities in the area of PSB and MTNN MoMo (Mobile Money) real income and consuption spending within the economy
Upside in mobile penetration 90% in Nigeria compared to S.Africa 213%, Regulatory fines and tax litigations from Nigerian Authorities could dent
Egypt 111% and Kenya 100% (FY19) could spur growth in digital and data customers' perception of the company
revenue
22
APPENDIX 23: PESTEL ANALYSIS

Political Economical
New Legislations on taxes, for instance, the Police Trust Fund and raising Downturn in economic outlook could undermine consumer and private
existing ones could undermine business growth spending
Ministry of communication and the digital economy- 2025 broadband Rising prices (Inflation, 14.89% Nov. 2020) weakens the real disposable
plan for 80% broadband penetration and specialised funding for fibre income of consumers whilst support the rising cost of operations
optics cable installation could pose opportunities for growth
Government regulations and policies on entry into the telecom space Forex illiquidity weakens Naira leading to rising prices of inputs, cost of
could largely sharp the competitive landscape importation, and foreign exchange risk
Inconsistencies in government policies and regulations could undermine Large Market size, GDP of $400bn pose opportunities for continued
growth growth in topline
Increasing Urban migration and over-reliance on data services to carry
out business activities and stay connected
Social Technological
Rapidly growing population (2.7% annually) supports new household and Rapid growth in smartphone users supports an increase in demand for
increased demand for telecoms service digital and data service
Rise of Gen Y and their distinct demand for digital and data services Improvement in 4G LTE technology with less than 37% penetration could
support topline
Large market of over 200 million population expected to reach 400 The emergence of IoT, Artificial intelligence, and surge in demand for high-
million by 2050 speed streaming services currently experienced
A shift in demand from voice to data spur new topline segment for telcos The emergence of 5G technology could expose new opportunities for
telcos to grow topline
Legal Environmental
Absence of functioning industrial courts amidst long litigation process Push towards incorporating ‘going green’ in corporate strategy
Regulations and regulatory sanctions by NCC without proper oversights Incorporating carbon emission reduction in office and industrial spaces
APPENDIX 24: KEY MANAGEMEN MEMBERS
Dr. Ernest C. Ndukwe, OFR Ralph Mupita Michael Ajukwu Ifueko M Omoigui Okauru, MFR
He is the Chairman, Board of Directors Ralph Mupita is part of the Ad Hoc He is an Independent Non- On September 2 2019, he was
appointed on the 1st of June, 20018 as a committee on the listing of MTNN on Executive Director who was appointed as a Non-Executive
non-executive director and as a the NSE and also member of Board appointed on September 2, 2019. Director. He is part of the board
chairman in Sept. 2019. He holds B.Sc Audit Committee, Risk Management He is Member of board committee on Audit; Remuneration,
degree, Electronic and Electrical and Compliance Committee. He was committee: Risk and Compliance Human Resources
Engineering from Obafemi Awolowo appointed as a Non-Executive Committee; Nomination and and Social and Ethics Committee and
University and extend its prowess to Director in April 13, 2017. With B.Sc., Governance. With B.Sc. Finance Board representative on Tier 1
holding D.Sc. Hon. Degree and other MBA, he steers his other directorships from University of Lagos, he Sourcing Committee. He holds BSc.
great qualifications in business from as Member, Board of Directors; continued his advancement for Accounting from University of Lagos;
renowned institutions e.g. Harvard Association for Savings & investment MBA in Stern School of Business, MSc. Management Science, Imperial
Business School. Her served as Non- SA, Business Leadership South Africa, New York University. He is also College; MPA, Harvard Kennedy
Executive Director in Systemspecs UAP Holdings Ltd. and Brand the Chairman, Broad Street School, Institute of Chartered
Limited; ICT Research Africa Network as South Africa. Capital Partners; Independent Accountants of Nigeria (ICAN) and
a member of board and Chairman in Non-Executive Director, Sterling Chartered Tax Practitioner, Institute
Openmedia Group. Rhidwaan Gasant Bank PLC; Independent Non- of the Chartered Institute of Taxation
Apponited as Independent Non- Executive Director, Tiger Brands (CITN).
Ferdi Moolman Executive Director on April 1, 2015.
The Chief Executive Officer (CEO) South Africa; Non-Executive
He is the Chairman of Board Audit Director, International Breweries SOME KEY OTHER EXECUTIVE
appointed July 1, 2014. He is a member Committee and until November 2019 Ltd and Non-Executive Director, MANAGEMENT
of Ad hoc Committee on the he headed Audit, Risk Management Novotel Hotel. Mazen Mroue
Listing of MTNN on the NSE. He hodls and Compliance Committee. He as Chief Operating OfficerHe is an
B.Sc., B.Comm. has B.Sc., and B.Compt degrees. Dr. Omobola Johnson
He was appointed on Septmeber Lynda Saint-Nwafor
Modupe Kadri His Other directorships extended to
2, 2019 as Non-Executive Director. Chief Enterprise Business Officer
He is the Chief Financial Officer (CFO) AngloGold Ashanti Limited (AGA) as a
He is Member of board (CEBO)
appointed on March 1, 2020. In 2007, member of board of director, Rapid
African Energy Holdings Group, and committee: Risk and Compliance Esther Akinnukawe
he joined MTN as a financial manager
Edcon Limited. Committee; Nomination and Chief Human Resources Officer
and since then has held various
Governance. He possesses BA, (CHRO)
positions in finance divisions. He is a
Michael Ajukwu Electrical and Electronic
B.Sc. and M.Sc. holder. Other Mohammed Rufai
He is an Independent Non-Executive Engineering from University of
directorship as Scancom PLC (MTN Chief Technical Officer (CTO)
Director in MTNN appointed on Manchester and blessed it with
Ghana), MobileMoney Limited and Hajj
September 2, 2019. He is a Member: MSc, Digital Electronics at King’s Rahul De
Mabrur Ventures Limited (Nigeria).
Risk and Compliance Committee; College, London including DBA Chief Marketing Officer (CMO)
Nomination and Governance. He from Cranfield University. Adekunle Adebiyi
Karl Toriola
He was appointed as an Executive holds B.Sc., and M.Sc. degrees. Chief Sales & Distribution Officer
Director in January 14, 2016. He is part (CSDO)
of the board committee member Uto Ukpanah
responsible for Audit, Risk Management Company Secretary
and Compliance. He holds B.Sc., and
M.Sc.
Source: MTNN 2019 ANNUAL REPORT
23
APPENDIX 25: SOCIAL RESPONSIBILITY

Project Name Project Name Project Name Project Name Project Name Project Name
Anti Substance Youth The initiative is a behaviour change intervention hinged on To contribute to the reduction of first time and habitual IMPACT: Over 74,000 people impacted directly. 13.5 SDG3
Abuse Empowerment Awareness creation, Advocacy, Information & resources substance abuse amongst young peopled aged between million people reached through paid media platforms Good Health & Well-
Programme dissemination, Stakeholder engagement and Empowerment 14 and 19 years in urban and semi urban Nigeria. (ASAP micro-site, TVC, Print media, Social/digital media Being
(ASAP) as tools to curb the prevalence of substance abuse in Nigeria. and Radio). RESULTS: ASAP endorsed by Federal and
participating States’ Ministries of Health.
MTNF Youth Provision of scholarships to eligible 300 level students Creating a community of young and vibrant advocates for IMPACT: In 2019, 300 students were awarded the SDG4
Scholarship Empowerment studying Science & Technology related courses and 200 level the MTN Brand. Contributing to the development of the Science and Technology scholarships, while 60 Blind Quality Education
Schemes blind students studying in public science and technology sector. Contributing to positioning students were also awarded scholarships. Graduating SDG8
(Science & tertiary institutions across Nigeria. The sum of N200,000 is MTN Nigeria as one of the few organizations with a students benefitted from Employability workshops to Decent Work and
Technology and awarded to each student till graduation as long as they structured approach to the socioeconomic development prepare them for the workplace. Graduating students Economic
Blind continue to meet the required CGPA. and inclusion of blind students. inducted into Scholarship Student Alumni. RESULTS: To Growth
Students) date 9,644 Scholarships worth N1.93 billion have been SDG9
awarded since the inception of the project in 2009. 50 Industry Innovation
Alumni to benefit from MTNF Youth Entrepreneurship and
Development Program where small loans will be Infrastructure”
granted to Alumni to expand or set up businesses.
MTNF Theatre Arts & Culture Drama competition amongst secondary school students, Shining a spotlight on the abundance of talent present in IMPACT: Over 1,600 attendees at both regional and SDG4
for Schools coached and mentored by university students in their locality. our Secondary Schools across the different regions. national competitions. RESULTS: Participating Quality Education
Project Participating schools are adopted by the Foundation as MTN’s Stimulating real and genuine interest to pursue a career in secondary schools students were coached by students SDG1
Arts & Culture Schools. Regional winner participated in a theatre arts in the hearts and minds of the participating from Universities’ Arts Departments within their No Poverty
National Competition with the overall winners given cash students. locations, on skills in acting and stage management.
prizes. Participating secondary schools were provided with
lighting equipment to enhance their Theatre
productions.
Maternal Ward Maternal & ChildMTN
Health
Nigeria Foundation seeks to contribute to the creation of Contribute to the reduction of maternal deaths in Nigeria IMPACT: 6,624 families impacted annually. RESULTS: Project
SDG3endorsed by participating St
Support unhindered access to health care systems and skillful birth through enhancement of adequate health systems Good Health & Well-
Project attendants for pregnant women in Nigeria through the MTNF Contribute to the reduction of new born mortality by Being
(Enhancement) Maternal Ward Support Project Upgrade and provision of improving access to quality maternal and child health
equipment to maternal wards e.g. beds, incubators, medical care services.
consumables etc. to 24 maternal wards (Abia, Kaduna, Cross
River, Niger, Sokoto, Oyo States) and commissioning of delivery
room in Niger State.
APPENDIX 26: MTNN ECONOMIC, SOCIAL AND GOVERNANCE
ESG Rating
Examining MTNN ESG scope, we employed Refinitiv ESG score methodology to compute an ESG score for MTNN based on public disclosures and information gathered by
the team. Similarly, we employed Refinitiv score grading to assign grades to both individual pillars of ESG and ESG overall scores. The result of our finding are discussed
below:
ESG Summary
MTN Nigeria Communications PLC is a Telecommunications Services company located in Nigeria. For the fiscal year ended in December 2019, We computed an ESG Score
of 76.67 graded A- .
ESG score is calculated as a sum of weighted individual pillar scores. For MTNN, Environmental, Social, and Governance pillars are weighted
20.32%, 53.17%, and 26.51% respectively in ESG score weighting, consistent with companies within the Telecommunications Services industry groups. MTNN’s
controversy score of 11.82 (Grade: D) is calculated based on total count of controversies (one: AGF case) related to the company, as collected by the team which
occurred in FY19 and normalized based on company’s market capitalization. Discounted by its controversies, MTNN
received an ESG Combined score of 42.05 (Grade: C+) for the year.
ESG Methodology
The 10 key areas under which ESG is classified are weighted in the overall computation. Boolean data were assigned 0 or 1 rating which numerical estimates found within
public disclosures are weighed in percentages. For instance, Board Gender diversity under governance is based on ratio of female to male; 9males, 3 females (.25). A
total of 149 data points distributed under 10 sub-categories were utilized as our basis for screening.
ESG Performance
Environmental
Under this category, 37 data points were utilized with 3 sub-categories. With 56.8% reporting, an Environmental score of 76.2 (A-) for MTNN. Issues surrounding green
energy, e-waste, energy efficiency, climate change and many more.
Social
The social aspect of this report focuses on Workforce, Human rights, Community and product responsibility. A total of 54 data points were utilized with 76.6% reporting
scope. For instance, 85 rating was assigned under customer satisfaction in line with MTNN 2019 filling. Similarly, issues surrounding diversity, disability, Gender pay gap
were also taking into cognizance in our analysis. Overall, a rating of 79.08 (A-) was assigned.
Governance
The final pillar of ESG, Governance was evaluated using Management, Shareholders and CSR. 58 data points were used in assessing MTNN with 98.3% reporting. For
instance, issues around board gender diversity, high remuneration to revenue, CEO-chairman separation, average board tenure were all factored in our overall rating.
Overall, we rated MTNN a Governance pillar score of 72.2 (B+).
ESG Controversies
The FY19, the team tracked data and reports on MTNN within the public domain. One major controversy surrounding MTNN trending within the media involving MTNN
and the AGF of Nigeria over unpaid taxes. On that basis, we rated MTNN a B- ESG controversy grade. Downgrade of MTNN controversy score affect our ESG combine
score.
24
APPENDIX 27: MTNN NETWORK LICENCES
Details of MTNN Network Licenses

Network Licenses Type Date Granted/Renewed Term Years Renewable Terms Initiation Fee Annual License Fee Future Obligation
900MHz & 1800MHz 1 September, 2015 5 As ma y be N18.6bn Annua l opera ting None
determi ned l evy - 2.5% of net
revenue
3G Spectrum Li cens e 1 Ma y, 2007 15 As ma y be US$150m Annua l opera ting None
(Recei ved Frequency 1920- determi ned l evy - 2.5% of net
1930 MHz) (Tra ns mi t revenue
Frequency 2110-2120 MHz)
Uni vers a l Acces s Servi ce 1 September, 2015 15 5 N114.6m Annua l opera ting None
Li cens e (Incl udi ng l evy - 2.5% of net
Interna tiona l Ga tewa y) revenue
Interna tiona l Subma ri ne 1-Ja n-10 20 20 US$220.5m Annua l opera ting None
Ca bl e Infra s tructure a nd l evy - 2.5% of net
La ndi ng Station (WACS) revenue
700 MHz Spectrum Li cens e 16 Ja nua ry (Effective da te To be To be US$171m None None
for the s pectrum ha s been communi ca ted communi ca ted by
s us pended by the NCC til l by NCC NCC
of i nterferences ha s been
cl ea red)
Uni fi ed Acces s Servi ce 1 Jul y, 2017 10 10 N349.6 None None

Li cens e (Vi s a fone)
800 MHz Spectrum 1-Ja n-15 N2.87bn None None

(VISAFONE)
2.6 GHz Spectrum 1 Augus t 2016 ((Effective To be To be N18.9bn None None
da te for the s pectrum ha s communi ca ted communi ca ted by
been s us pended by the by NCC NCC
NCC til l of i nterferences
ha s been cl ea red))

APPENDIX 29.1: INTERNET SUBSCRIPTION
APPENDIX 28: MAJOR REGULATORY HIGHLIGHT
Major regulatory highlights
2013-2015
-NCC designate MTNN as a dominant operator in mobile voice and whole sale leased line and
transmission capacity market segment.
-MTNN was fined #330bn for not disconnecting 5.2m subscribers.
-MTNN acquired Visafone while facing ongoing dispute with NCC around usage of 800MHz
spectrum.
2016-2018
-NCC lifted suspension of regulatory services to MTNN Source: NCC
Fines reduced to N330bn with payment spread in 6 tranches over 3 years.
-MTNN was fined $8.1billion for illegal profit repatriation
-MTNN was fined US$2bn by the office of Attorney General of the Federation APPENDIX 29.2: INTERNET SUBSCRIPTION
-Obtained approval to use 700MHz spectrum acquired from the NBC for telecommunication
services
-MTNN paid US$52m as a settlement for illegal profit repatriation
Contries with highest number of internet
-Obtained approval to refarm GSM 900MHz spectrum to UMTS900MHz users in millions
-CBN issued Guidelines for Payment Service Bank
-NCC approved disconnection of MNOs and Clearinghouses for failure to settle undisputed
900
interconnect debt
800
700
600
2019-2020
500
-Obtained approval to use 800MHz spectrum acquired from Visafone 400
-MTNN finalize payment of US$5.2b (N1.04tn) with NCC. 300
-Obtained approval to refarm 5MHz of 800MHz spectrum for LTE nationwide 200
-The AGF withdrew the alleged US$2bn revenue indebtedness and transferred the matter to the 100
relevant tax and customs authorities. MTNN discontinued the legal action against the AGF and 0
look forward to a final resolution while.
Germany
China
Russia
Mexico
Usa
Turkey
Brazil
Japan
india
Indonesia
Philipines
Nigeria
Bangladesh
-Policy on SIM card registration and usage (Use of national identity number for SIM registration)
Source: MTNN, RMBN 2019
Source: STATISTA, 2020

25
APPENDIX 30: MEDIAN AGE AND POPULATION GROWTH APPENDIX 31: SUBSCRIBERS, PENETRATION RATE
Meadian Age and Population Growth Mobile Subscribers, Mobile Penetration Rate and Internet
Penetration Rate
200 180.00 200%
50 2.50% 2.20% 1.20% 0.30% 100%
191%
40 80%
1.40% 0.40%
30 2.30% 60% 150 150%
2.10%
108.00
20 40%
96% 93.78 103%
10 20 28 41 20%
100 94% 100%
19
79% 87%
0 0%
56%
Nigeria Kenya South Africa WE 50 47% 46.9% 43% 50%
48.00 54.56
Median Age
0 0%
Forecasted Population Growth CAGR in 5 years Nigeria Egypt South Africa Tanzania Kenya
Mobile Subscribers Mobile Penetration Rate
Historical Population Growth
Source: MTNN Internet Penetration Rate
Source: MTNN, Statista
APPENDIX 32: QOS KPI DATA
QOS KPI DATA AS AT JULY 2020 Consumer Complaints Report Quarter 1 2018
102 60%
7000
100 50%
6000
98 40%
5000
96 30%
4000
94 20%
3000
92 10%
2000
90 0%
Airtel Data 9mobile Data Globacom MTN Data 1000
Data
0
CSSR SDDCH TCCH DCR Airtel Data 9mobile Data Globacom MTN Data
Source: NCC Data
Source: NCC
CONSUMER COMPLAINT REPORT

The graphs shown above gives description of MNOs Quality of Service (QoS) KPIs in Nigeria's (Airtel, 9mobile, Globacom and MTN). According to NCC on their website;
Call Setup Success Rate (CSSR)
Call Setup Success Rate (CSSR) – this is calculated by taking the number of the unblocked call attempts divided by the total number of call attempts. A call setup is an
exchange of signaling information in the call process that leads to Traffic Channel (TCH) seizure.
Dropped Call Rate (DCR)
The Dropped Call Rate (DCR) - also called Call Drop Rate - is the number of dropped calls divided by the total number of call attempts. A dropped call is a call that is
prematurely terminated before being released normally by either the caller or called party (i.e., the call is dropped before the exchange of Released Message "RL_M" and
Released Complete Message "RLC_M" in the signaling flow).
Standalone Dedicated Control Channel Congestion (SDCCH)
The Standalone Dedicated Control Channel Congestion Rate is defined as the probability of failure of accessing a Standalone Dedicated Control Channel (SDCCH) during call
set up. The SDCCH is used in the GSM system to provide a reliable connection for signalling and SMS (Short Message Service) messages.
Traffic Control Channel Congestion Rate (TCCH)
The Traffic Control Channel Congestion Rate is the probability of failure of accessing a traffic channel during call setup. Traffic Control Channels (TCCH) are responsible for
transferring control information between mobiles and the BTS.
Source: NCC
APPENDIX 33: SURVEY SUMMARY
According to Thomas Berger, "the art and science of asking questions is the source of all
knowledge".
We carried out an anonymous survey to find out the interplay of network providers in Nigeria. The
survey was necessitated by the need to have a practical view of the numbers available on telcos in
Nigeria. The survey was based on a sample size of 150 respondents. Out of 150 respondents, 73.3%
of them fall under the age bracket of 18-25yrs, 19.3% 26-35yrs, 6% 36-45yrs; 34.9% resides in Lagos
state, others are traceable to other states in Nigeria; 54% are students while 46% are either
employed, self-employed, or not employed; 70.4% earn below 50,000naira and 29.6% of the
respondents earn above 50,000naira.
The following are some of the questions asked and how they were responded to:
Question 1
Which of the following network providers do you prefer?
(a) Airtel (b) MTN (c) Glo (d) Etisalat
Observation 1
61.3% of 150 respondents prefers MTN, Airtel begs for 20%, Etisalat 4% and Glo 14.7%.
26
Question 2
Would you still prefer your choice in question 1 despite a 20% increase in price?
(a) yes (b) no (c) maybe (d) not sure
Observation 2
20.1% of 150 respondents posited that they would still prefer their choice in question 1 if the cost
of usage increases by 20%, 46.3% no, 26.8% maybe, and 6.7% not sure.
Question 3
You would rather buy data from
(a) Glo (b) MTN (c) Etisalat (d) Airtel
Observation 3
38% of total respondents would rather buy data from MTN, 27.3% from Airtel, 28% from Glo, and
6.7% from Etisalat.
Question 4
Which factor has the highest influence on your choice of mobile network provider?
(a) cost (b) popularity (c) brand loyalty (d) indifferent (e) quality of service
Observation 4
The choice of network provider for 60.4% of the total number of respondents is influenced by
quality of service, 25.5% by cost, and and 14.1% by either brand loyalty, popularity, or indifference.
Question 5
Which would you prefer?
(a) mobile voice call (b) whatsapp call (c) others
58.8% of total respondents prefers mobile voice call, 36.5% whatsapp call and others 4.7%.
Conclusively, the observations above are consistent with our general description of MTNN in our
report. The following are some of the points of symmetry:
1.MTNN has the highest market share in terms of subscribers amongst other network providers in
Nigeria.
2.MTN is preferred by many not because it is cheaper but for its high quality service compared to
other network providers in Nigeria.
3. Mobile voice call accounts for the largest part of MTNN's revenue.
APPENDIX 34: TELECOM RISK.REWARD INDEX
SSA TELECOMMUNICATIONS RISK/REWARD INDEX, Q3 2020
90
80
70
60
50
40
30
20
10
0
South Africa Bostwana Cameroon Nigeria Senegal Kenya Congo Ghana Tanzania Rwanda Mauritius
Republic
Industry Reward Country Reward Industry Risk Country Risk

Source: Fitch Solution, Q3 2020
APPENDIX 35: PORTING ACTIVITIES OF MNO
Porting Activities of Mobile Network Operators (GSM)

15,000
10,000
5,000
0
2013 2014 2015 2016 2017 2018 2019 Sep-20
Airtel 9mobile Globacom MTN

Source: NCC 27
APPENDIX 36: BUSINESS DESCRIPTION
Consumer
High-Value clients, Midmarket/ Youth and the Mass market are comprised of the customer segment. Value ideas are
focused on an awareness of customer needs, in line with the "EPIC" concept: easy, customized, unregulated and linked
offers. In addition to connectivity (voice, data and SMS), product deals are also used by consumers of digital services over
the connectivity. Eight main categories are included in the digital portfolio: music, video, education, gaming, infotainment,
instant messaging, advertising and other value-added services focused on lifestyle. The Ayoba Instant Messaging App and
Music Time flagship digital products include (A music streaming service delivered via mobile app). MTNN provides fintech
products through a variety of partners, including mobile wallets, transfers, microloans, mobile commerce, micro-
insurance, universally accessible via app or USSD. The Super-Agent license enables an increasingly increasing network of
agents to expand the scope of distribution networks. In addition, the Lumos package, MTN's mobile electricity product, is
offered as a lifestyle bolt-on product that leverages our systems and channels to provide seamless renewable energy
across the country for all segments in the market.
Enterprise
All companies/organizations, including government and small, medium and large businesses, are served by MTNN. For
APPENDIX 32: PESTEL ANALYSIS business customers, it adopted a hybrid segmentation strategy, and the segments include Multinationals, Oil & Gas, Large
Companies, MDA and Government Departments, Education (Universities), Mall and Medium Scale Enterprises (SMEs) and
Small Offices/Home Offices (SOHOs). MTNN offers efficient, stable access to the Internet of Things (IoT) and has invested
in state-of-the-art IoT platforms to boost its offerings. Fintech offerings, particularly for SMEs and SOHOs, also extend into
the enterprise space.
Wholesale
MTN owns and operates the region's largest fixed and mobile infrastructure network and aims to take advantage of scale
to provide wholesale customers with high-quality services. It provides wholesale services and other long-distance
telecommunication services through MTN GlobalConnect, an agency within the MTN Community, including wireless
messaging, international networking, power, voice interconnection, mobility services, and international roaming through
MTN operations. MTN GlobalConnect procures and maintains the networks shared by operating companies of the MTN
Group (opcos) and makes it easy to channel traffic across the markets in which the Group operates. The establishment of
this business has increased the ability of MTN to open up networks to third parties, including other telecommunications
and technology firms in order to resell excess power.
APPENDIX 37: MARKET SHARE
Subscriber / Operator Data Market Share, Sept Percentage(%) Market Share by Technology
2020
27% AIRTEL
40%
9Mobile
6%
GLO
27%
MTN
Mobile (GSM) Mobile (CDMA)

Fixed (Wireless/Wired) VoIP
Source: MTNN
APPENDIX 38: MTNN vs AirtelNG

APPENDIX 39: WIDE RANGE OF SPECTRUM HOLDINGS
MTNN vs AirtelNG 6-months (Apr.-Sept,2020)
Total subscribers (m) 75.0 44.1
Operating profit (bn) N102.5 N53.6
EBITDA margin (%) 51.0% 53.8%
Data Rev (bn) N87.6 N51.3
Voice Rev (bn) N222.3 N82.1
Revenue (bn) N337.7 N143.3

Source: MTNN
MTNN Airtel Ng
NB: an exchange rate of N380/$ was used
to convert Airtel figures
Source: MTNN and Airtel Africa fillings
28
APPENDIX 40: PORTER’S FIVE FORCES

Existing Rivals (High)
Nigeria’s Telecoms space is dominated by 4 main players: MTNN, Airtel Africa, Globacom, and 9Mobile. With Industry
a leading market share of 40.39%, MTNN is a market leader although its closest rivals jointly control over rivalry
50% of the market putting MTNN leadership in check. With the entrant of Orange into the data and
broadband space, more strain is expected on MTNN market lead.
Bargaining Power of Buyer (High) Bargaining
Commoditization of data with readily available competitive pricing in the industry has put subscribers in the threat of
Power of
pole position to decide which of the MNOs they stick with. Putting MNOs under strain to maintain existing substitute
buyers
subscribers and gain new ones. The high churn rate currently experienced is a result of easy porting service
by NCC where subscribers can easily switch their MNOs has also influenced consumers' bargaining powers.
Threat of Substitute (Low)
Historically, there is no strong substitute for broadband technology in Nigeria. The increasing capabilities of Bagaining threat of
wireless technology to support both GSM and fixed wireless cannot be bypassed. Broadband technology power of New
currently supports 4G LTE for both GSM and wireless which MTNN is a major player in both technologies. sellers Entrants
Threat of new entrant (Low)
High capital outlay, technical know-how, stringent regulations mitigate against entrant of new players. In the
last decade, the only new model player in Nigeria’s telecoms space has struggled to survive.
Power of Supplier (Medium)
Although Nigeria’s telecoms space is fully deregulated, assigning spectrums, renewal of operating licenses is
the sole business of the NCC, wholly owned by the government. Outrageous hike in spectrum bidding fee,
licensing fees by NCC could spark public scrutiny which serves as a check.
APPENDIX 41: MTNN HISTORICAL HIGHLIGHT
Source: MTNN, 2019 Annual Report
APPENDIX 42: NIGERIA GDP AND TELECOM CONTRIBUTION
GDP vs. Telecom Contribution

14% 12%
12% 10%
10%
8%
8%
Nigeria economy forecasted 6%
6% Economy recovery Telecom sector
from 2015 recession maintains resilience to stabilize at 11.06% nominal 4%
4%
while telecom sector amid covid-19 GDP while telecom sector
2% 2%
maintains resilience headwinds poses growth
0% 0%
2016 2017 2018 2019 2020F 2021F 2022F 2023F 2024F 2025F
GDP Growth (Nominal) % of telecom contribution to total GDP
Source: CBN, NCC, Team Forecast
29
GLOSSARY ABBREVIATIONS GDP- Gross Domestic Product

NBS- Nigeria Bureau of Statistics
2G/3G/4G/5G – Second, Third, Fourth, GSM- Global System for Mobile
NCC- Nigeria Communications Commission
Fifth generation Communications
NCDC- Nigeria Center for Disease Control
AI- Artificial Intelligence GSMA – GSM Association
NGC- Nomination and Governance Committee
ARPU – Average Return Per User ICT – Information and
NGN- Nigerian Naira
CACOVID- Coalition Against Convid-19 Communications Technology
NOPLAT- Net Operating Profit Less Adjusted Tax
CAGR- Compound Annual Growth Rate IFRS – International Financial
NPS- Net Promoter Score
CBN- Central Bank of Nigeria Reporting Standards
PSB- Payment Service Bank
CDMA- Code Division Multiple Access IMF- International Monetary Fund
ROIC- Return on Invested Capital
EBITDA- Earnings Before Interest, Tax, IoT- Internet of Things
SIM- Subscriber Identification Module
Depreciation and Amortization IPO- Initial Public Offering
SSA- Sub Saharan Africa
EPS – Earnings Per Share LTE- Long Term Evolution
Telcos - Telecommunications companies
EV- Enterprise Value MENA- Middle East and North Africa
USSD- Unstructured Supplementary Service Data
FBN – First Bank of Nigeria ML- Machine Learning
VAS- Value Added Services
FCFE- Free Cash Flow to Equity MNO- mobile network operator
VOIP – Voice Over Internet Protocol
FCFF- Free Cash Flow to Firm NAFEX- Nigeria Autonomous Foreign
WHO- World Health Organization
Exchange
OPEC – Organization of Petroleum Exporting Countries
NBS- Nigeria Bureau of Statistics
MTNN - Mobile Telephone Network Nigeria
NCC- Nigeria Communications
References: Commission
Number of mobile subscribers (MTNN South Africa): https://www.google.com/amp/s/businesstech.co.za/news/mobile/444592/mtn-south-africa-picks-
up-subscribers-amid-sustained-turnaround/amp/
MTNN Investor Presentation 2020
Nigerian Communications Commission: www.ncc.gov.ng
RMB Nigeria Stockbrokers.
Nigeria National Broadband Plan 2020-2025
MTNN Nigeria Quarterly report 2018-2020
MTN Nigeria Annual Report, 2015-2019
Augusto&Co 2019 corporate Rating Report
https://nairametrics.com/2020/07/25/mtn-nigeria-ihs-ditch-cbn-rate-for-nafex-in-revised-tower-agreement/
https://m.guardian.ng/news/south-african-telecoms-giant-mtn-to-pull-out-of-mideast/
https://africabusinesscommunities.com/tech/tech-news/nigerian-communications-commission-approves-e-sim-trial-for-mtn-9mobile/
Afrinvest 2020 Report.
FBN Quest Q119 report.
https://m.guardian.ng/news/telecoms-industry-gets-n358b-direct-foreign-investments/
https://nairametrics.com/2020/03/19/telecoms-record-725-increase-in-foreign-capital-investment-in-2019/
Fitch Solution Report 2020.
https://en.m.wikipedia.org/wiki/MTN_$5.2_billion_fine
https://www.google.com/amp/s/www.thisdaylive.com/index.php/2018/09/05/with-2bn-tax-arrears-demand-by-fg-its-double-jeopardy-for-mtn/amp/
https://www.google.com/amp/s/www.africanews.com/amp/2018/12/26/s-africa-s-mtn-settles-repatriation-dispute-in-nigeria-with-53m-payment/
https://nairametrics.com/2017/11/02/cbn-ncc-sign-agreement-mobile-money-operations/
https://www.proshareng.com/news/Mobile%20Money%20and%20Telcos/MTN--9mobile-Get-National-Roaming-Service-Approval/54025
https://researchictafrica.net/ramp_indices_portal/
https://nairametrics.com/2020/06/25/imf-expects-nigerias-gdp-to-shrink-by-5-4-in-2020/
https://www.google.com/amp/s/punchng.com/breaking-nigerias-inflation-rate-hits-13-7-highest-in-30-months/%3famp=1
https://www.google.com/amp/s/mobile.reuters.com/article/amp/idAFKCN24O2D4-OZABS
https://www.reuters.com/companies/MTNN.LG/key-metrics
http://pages.stern.nyu.edu/~adamodar/
https://www.mtn.com/investors/shareholders/
https://www.investopedia.com/markets/
https://www.bloomberg.com/quote/MTNN:NL
https://www.google.com/amp/s/www.vanguardngr.com/2020/10/imf-reverses-forecast-for-nigerias-economy-to-4-3-in-2020/amp/
http://pages.stern.nyu.edu/~adamodar/New_Home_Page/datafile/ctryprem.html
https://www.ncc.gov.ng/statistics-reports/subscriber-data
https://www.cbn.gov.ng
https://www.proshareng.com/report/Annual%20Reports/December-2015-Annual-Financial-Statements----MTN/11515
https://www.mtnonline.com/foundation/news/
https://www.mtnonline.com/about-us.investor/financial-reporting/annual-results/
ESG Investing and Analysis: https://www.cfainstitute.org/en/research/esg-investing#
ESG Index: www.refinitiv.com
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Team 15 CFA Equity Research (MTN N)

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CFA Institute Research Challenge

hosted by CFA Society Nigeria

52 Wk High N 162 NSE-ASI MTNN

South Africa Nigeria

and stable economy going forward.

Continued Industry Growth Despite Drawbacks

Fig 23: Sensitivity and Scenario Analysis

N600 Return on Shareholders’ Fund

Source: MTNN Report, Team Analysis

Fig 31: Adj. Earnings and Dividend Per Share

ENVIRONMENTAL, SOCIAL RESPONSIBILITY

FINANCIALS VALUATION MISCELLANEOUS 28. SURVEY SUMMARY

APPENDIX 2: INCOME STATMENT

Dividends per share 95 7 6 9 11 13 14 15

APPENDIX 3: BALANCE SHEET

APPENDIX 4: CASH FLOW STATEMENT

Cash flow from operating activities

Adjustm ents for non-cash item s:

Changes in operating assets and liabilities:

Cash flow s from investing activities

Cash flow s from financing activities

APPENDIX 5: FREE CASH FLOW TO FIRM SCHEDULE

Add/Subtract: Decrease or increase in Net Def f ered Tax

APPENDIX 6: FREE CASH FLOW TO EQUITY

APPENDIX 7: FINANCIAL RATIOS

Efficie ncy ratios

Le ve rage /Ge aring ratios

APPENDIX 8: REVENUE DERIVATION

Internet M 43.90 54.11 76.47 81.11 85.56 88.87 91.26 94.20

ARPU N 1,491.1 1,516.1 1,383.0 1,428.6 1,490.6 1,586.0 1,762.9 1,982.8

MTN Nigeria Revenue line items

MTN Nigeria Revenue contribution to Telecoms GDP

APPENDIX 9: DuPont ANALYSIS

Five step Method

APPENDIX 10: ALTMAN Z-SCORE

APPENDIX 11: BENEISH M-SCORE ANALYSIS

APPENDIX 12: VALUATION SUMMARY

APPENDIX 13: COST OF CAPITAL

12.2 Cost of Debt:

APPENDIX 13: FREE CASH FLOW TO FIRM (FCFF)

APPENDIX 14: DISCOUNTED CASH FLOW MODEL (FCFF)

APPENDIX 15: FREE CASH FLOW TO EQUITY

APPENDIX 16: DIVIDEND DISCOUNT MODEL

APPENDIX 17: RESIDUAL INCOME MODEL

Discounted Cash Flow Model 1 2 3 4 5 6

Dividend Discount Model

Residual Income Model

Invested Capital 1,025,108.3 1,021,777.1 1,038,101.3 1,069,652.6 1,118,826.5 1,203,594.4

APPENDIX 18: COMPARABLES COMAPANY VALUATION

Comparable Company Valuation Model

Comps Valuation Statistics Capitalization Enterprise Value / Enterprise Value /

APPENDIX 19: SENSITIVITY AND SCENARIO ANALYSIS

APPENDIX 20: IMPACT OF RISK ON OUR VALUATION

APPENDIX 21: BRIGHT STRATEGY

APPENDIX 22: SWOT ANALYSIS

APPENDIX 23: PESTEL ANALYSIS

APPENDIX 24: KEY MANAGEMEN MEMBERS

Source: MTNN 2019 ANNUAL REPORT

APPENDIX 25: SOCIAL RESPONSIBILITY

Source: MTNN 2019 ANNUAL REPORT

APPENDIX 26: MTNN ECONOMIC, SOCIAL AND GOVERNANCE

APPENDIX 27: MTNN NETWORK LICENCES

Details of MTNN Network Licenses

Uni fi ed Acces s Servi ce 1 Jul y, 2017 10 10 N349.6 None None