Mobile Money in Nigeria Could be Worth 25 Rand per Share to MTN- JP Morgan
JP Morgan, an American multinational investment bank and financial services company, said mobile money services in Nigeria could boost MTN’s valuation by 25 rand a share over time. Last year, the Central Bank of Nigeria (CBN) said it had agreed to allow network operators to apply for payment-service banking licences.
MTN aims to launch its mobile money product in that market by July. While Nigeria is MTN’s largest market, the operator had 58.2-million subscribers there at the end of December; it is also its most troublesome.
In 2018, Nigeria’s central bank ordered the network operator to return $8.1 billion worth of dividends, while the country’s auditor-general said it owed $2 billion in back-taxes.
A research note published by JP Morgan said if MTN Nigeria’s mobile money revenues reached 20 percent of total revenues in the next five years, the US bank saw a 25 rand a share “upside opportunity” for MTN Group. This was based on mobile money margins of 35 per cent.
The bank said the initiative represents an “attractive upside opportunity for MTN Nigeria, but may take time to scale.”
JP Morgan revealed that Vodacom’s Kenyan associate, Safaricom, launched M-Pesa in 2007. By financial year 2011, the service contributed more than 10 per cent of group revenues, and by 2015, it made up 20 per cent of sales. MTN generated 7.8 billion rand from fintech, or mobile money, in 2018, up almost 50 per cent from a year before.
Fintech now accounts for about 5.8 per cent of group revenues, from 2 per cent in 2016. JP Morgan said “for this to be a 10 per cent revenue contributor over the medium term, the company would need to generate around 16 billion rand on our forecasts”.