MTN Rwanda Reports Strong Q1 Growth Despite Earnings Pressures
MTN Rwandacell PLC (MTN Rwanda) has released its first quarter (Q1) results for the period ended 31 March 2024 through the Rwanda Stock Exchange. The Company saw a strong growth of 7.0% year on year (YoY) in total mobile subscribers closing its customer base at 7.4 million. MTN Rwanda reported a service revenue growth of 2.3% YoY to Rwf 59.8 billion, mainly driven by our Fintech, Enterprise and Digital business segments, which was underpinned by the strong growth in our subscriber base. Mobile Money Rwanda Ltd (MMRL), MTN Rwanda’s subsidiary, demonstrated significant progress in its financial inclusion agenda, with a 16.8% increase in Mobile Money (MoMo) users, totalling 5.1 million and a solid revenue growth performance of 31.5% YoY, which was attributable to the continued growth of advanced services revenue, which grew by 52.9% YoY. Advanced MoMo services revenue has grown to contribute 26.1% to total MoMo revenues (up from 22.5% in Q1 2023). driven by the solid growth in merchant payments and remittance products. MoMo also showed tremendous growth in the active merchant base, which grew by 117% YoY to 427k (Q1 2023: 197k) with transaction volumes growing by 18% to 181 million and transaction value growth of 49% to Rwf2.3 trillion.
MTN Rwanda’s Q1, 2024 results recorded remarkable growth in smartphone penetration, to 29.2%, alongside a 13.6% increase in active data subscribers, closing at 2.5 million. This growth was boosted by the successful launch of the Connect Rwanda 2.0 initiative in March 2024, which saw the introduction of the affordable 4G-enabled smartphone, the Ikosora+. Priced at only RWF20,000, the Ikosora+ has propelled smartphone accessibility and reinforced affordability as a vital barrier to smartphone ownership, thereby contributing to bridging the digital divide. Earnings before interest, tax, depreciation, and amortization (EBITDA) however decreased by 10.4% to Rwf 24.2 billion, with a margin of 40.1%. The decline was primarily driven by the drop in voice revenue, impacted by the cut in mobile termination rates (MTR). In addition, our cost structure has been affected by the impact of interconnect costs related to permanent roamers in the One Area Network (ONA) region. The depreciation of the local currency contributed to a rise in transmission and maintenance costs increasing our overall expenses. These combined effects resulted in higher operating expenses by 11.8%.
The financial performance for the quarter ending 31 March 2024 reflects a strong growth in our subscriber base year on year. Despite this, we witnessed pressures on our earnings. This was mainly driven by a drop in voice revenue as a result of the MTR cuts implemented by the regulator in August 2023 as well as higher operating expenses The above factors have impacted our EBITDA performance with margins dropping to 40.1%, as our interconnect cost of sales during the period rose due to an exponential increase in One Network Area (ONA) traffic since the introduction of zero MTR. Despite this, we continue to remain focused on driving expense efficiencies in order to deliver strong results in the coming quarters.
Mark Nkurunziza, Chief Finance Officer, MTN Rwanda
Overall, we are very pleased to see the remarkable growth in our subscriber base, MoMo’s stellar performance and the efforts of our Connect Rwanda 2.0 digital inclusion initiative yielding positive results with the continued increase in smartphone adoption, as well as an increase in Data traffic, which grew 30% YoY, as a result of the consistent growth in demand as well as the continuous investment in network quality and coverage.
To support the continued commercial performance of the business, we embarked on our Radio access network modernization programme, as part of MTN Rwanda’s commitment to provide second-to-none network connectivity to our customers. We are pleased to have successfully completed the modernization of 140 network sites in different parts of the country during the quarter. In the period, we invested Rwf 9.3 billion of capex (ex-leases) in our network and platforms.
Our commercial and operational momentum helped to deliver a relatively resilient financial performance, driven by strong growth in our Mobile Money business, and a muted performance in our connectivity business, impacted by the introduction of zero MTR.
Despite the challenging operating environment, MTN Rwanda remains committed to executing its Ambition 2025 strategy and generating value for its shareholders. As we progress with our strategy, we will persist in investing in our network infrastructure to bolster capacity, broaden coverage, improve user experience and realize cost efficiencies, thereby enhancing the profitability of the business.
Mapula Bodibe, Chief Executive Officer, MTN Rwanda
As part of creating shared value, MTN Rwanda awarded outstanding participants of the 5th edition of the Connect Women in Business Initiative with a total of Rwf 8.7 million. The initiative reflects MTN Rwanda’s commitment to supporting and empowering women across various business sectors. In conclusion, MTN Rwanda remains committed to serving our customers and accelerating the growth of our business, enhancing network infrastructure and delivering value for our shareholders. As the company progresses with its Ambition 2025 strategy, it aims to maintain mid-teens service revenue growth and a stable EBITDA margin, while continuing to lead digital solutions for Rwanda’s progress.
