MTN Uganda

FY2021 Results
Date: 7 March 2022

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MTN Uganda FY2021 Annual Results

7 March 2022

Speaker Narrative

Amanda
Good afternoon ladies and gentlemen. You’re most welcome to our full year 2021
results call. The presentation will be handled by Mr Wim Vanhelleputte, the CEO
of MTN Uganda, and our Chief Investment Officer, Mr Andrew Bugembe. We shall be
having a Q&A session after the presentation. Please look at your screens. There
is a tab for you to ask questions. You can ask the questions during the course
of the presentation and we will handle all of them. Thank you.

Wim Vanhelleputte
Okay. Thank you, Amanda, for the introduction. My name is Wim Vanhelleputte.
I’m the CEO of MTN Uganda and we are joined by Andrew Bugembe, the CFO. We will
take you through this afternoon the first annual results of MTN Uganda. I would
say welcome back to most of you. I’m sure a lot of you engaged with us in
October/November last year during the IPO. As you know, we successfully listed
on the Uganda Securities Exchange on 6th December of last year, so we are now a
listed company and it’s a real pleasure for us, the management, to present for
the first time our annual results to the general public. And of course we’re
starting with yourselves, the investor community, to take you through the
highlights of the 2021 results for MTN Uganda.

I hope you all have the presentation also in front of you, so I can take you
through some of the key highlights. MTN Uganda in 2021 has remained by far the
leading mobile and also fixed telecom operator in Uganda in the pearl of
Africa. A few highlights on the key fundamental financial and non-financial
figures. We grew our subscriber base by more than 1.5 million subscribers, so
we ended the year at 15.7 million subscribers. Over the last two or three years
that gives you a compounded growth rate of about 11.6% year after year in terms
of 90 day active GSM subscribers.

Now, out of those 15.7 million about 9.9 million were also 30 day active mobile
money subscribers, up from 8.5 million last year and up from 7.4 million two
years ago. So there is also a strong continuous growth on the active 30 day
mobile money subscribers. And in terms of the active data subscribers, 30 day
active data subscribers, we ended the year at 5.3 million, up from 4.6 million
in 2020 and from 3.4 million in 2019. So in terms of the subscriber growth I
would say everything is really on track. We keep on delivering healthy growth
in terms of the subscriber base, which of course as we all know is the building
block, the foundation of strong financial performance.

When we look at our market share, for the ones who were on the call with us a
few months ago, you know that a figure that we are reporting here is the self-

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declared or self-calculated figure purely based on the bidirectional

interconnect traffic. So we grew from about 59% a few months ago and we ended
the year at now 62% customer market share in Uganda, based once again as I
clarified on bidirectional interconnect traffic.

If we look at the financials on the right-hand side, our revenue grew to USh
2.06 trillion. Over the last two or three years that is a compounded growth of
9.5%. We are up from USh 1.878 trillion last year, and as I said in 2021 we
have now reached USh 2.06 trillion. That figure is very much in line with the
forecast or the projections that we gave in the prospectus that was part of the
IPO process. So we have hit our target of USh 2.06 trillion of revenue for the
full year 2021.

In terms of technology investments these are IAS 17 capex figures. Andrew, the
CFO, will take us through the IFRS 16 if need be. But in terms of the IAS 17
capex figures we put USh 270 billion as investment in the ground, which
corresponds with about 13.1% capex intensity. As we had announced previously
during the IPO, in 2020 there was a slight slowdown. We only did 12.5% capex
intensity. But that was only because of some delays that were encountered
because of the COVID pandemic in 2020 and there was a slight catch-up in terms
of the figure in 2021. But we remain at around 12% or 13% capex intensity and
we will talk about the figure going forward at the end of the presentation when
we have a forward looking view.

Where did that money go, the USh 270 billion? Well, you can see a very sharp
increase in the number of sites. We added more than 450, almost 500 new sites.
And we will see how those sites have contributed to the revenue growth and in
particular the data revenue growth. So there has been a bit of acceleration in
terms of the site rollout, which of course is the foundation of future revenue
growth as you all know. Our business is very capex intensive, but I think we
have managed to stay within reasonable capex intensity while at the same time
really delivering on a significant increase in terms of the sites, 3G, 4G. We
will go into the detail of how we spent the USh 270 billion on some of the
following slides.

In terms of data and digital, which as you know is very key to our heart in
terms of the new revenues, the growth that has to come from them, we ended the
year with more than 500,000 Ayoba users, one of the best performing I think in
the MTN footprint. We also had a very strong increase in the fibre to the home
and fibre to the building customers, more than 300% growth, of course from a
very small base but still a very significant growth in that particular segment.
And the home broadband, which is both mobile and fixed, we ended the year with
63,000 users or customers, which of course is also driven very much by the

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necessity from the pandemic to support our customers to work from home and
learn from home.

If we go to the next slide I want to give you a bit of a generic overview of

the operational environment in which we operated in 2021. Yes, the COVID-19
casualties in Uganda were rather limited, but that was probably thanks to a
quite severe lockdown. The curfew was only lifted in January this year, so we
basically operated the entire year 2021 in curfew mode, meaning nobody allowed
to move beyond 7pm in the evening. And that of course has had a severe impact
on the overall macroeconomic environment in which we have operated, resulting
in a reduced purchasing power. And the travel restrictions because of COVID
also continued with subdued roaming revenues.

Another downside I would say or headwind is the introduction of the 12% excise
duty on mobile data on 1st July. But at the same time there is also good news
because at the same time the OTT, the famous OTT tax, the daily tax of USh 200
per day per user was lifted. So the tax authorities decided to remove the OTT
tax, and that has allowed us to build up more active data subscribers. But at
the same time that OTT tax was replaced by an additional 12% excise duty on
mobile data.

On the upside the overall macroeconomic KPIs in Uganda are positive. Very low
inflation. Very stable exchange rate. Macroeconomists will argue that the
strong exchange rate is actually a result of a reduction in demand because of
reduced imports, which are actually due to the reduced economic activity. So
every upside also has a downside, but at least there is low inflation and
exchange rate really was quite strong over the last 12 months. So all in all I
would say a mixed bag, more downside than upside I would say in terms of the
operating environment.

And we do hope and we do already see since the lifting of the curfew a few
weeks ago there is more increased overall general economic activity. The big
thing that we all in Uganda hope for is of course the real beginning of the FDI
when it comes to the oil exploration and the construction of the pipeline which
is now very imminent and is really getting into full swing. So looking forward
I would say the 2022 operating environment should be significantly better or
more favourable to us than the 2021 that we just went through.

I want to emphasise an important point around the capex. As you have seen in
the previous slide, we spent USh 270 billion in capex, a 13.1% capex intensity.
And the bulk of that investment went into new sites. Now, why is that
important? It’s because we do have on the one hand a license obligation to
provide additional landmass coverage. So 136 of the 459 new sites actually

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contributed to an improvement of the landmass coverage in line with meeting the

license obligations.

But those sites, 136 sites, are actually still profitable on a standalone basis
because of the densely populated areas in which we are still rolling out these
new coverage sites. Usually in a lot of other markets, a lot of other countries
coverage license obligation actually reduces the profitability because you have
to roll out sites in areas where you would not normally do it. They are not
commercially viable. But in Uganda we have a quite unique situation that up
till now and even till 2023 we do expect new rural coverage sites still to be
profitable. That of course is because of the densely populated country in which
we are operating.

The other 323 sites that we rolled out contributed to a massive increase in the
capacity of the LTE, the 4G and the 3G data network. More than 7 million
Ugandans got on 4G coverage compared to one year before. The population
coverage increase on 4G is quite impressive from 45% in 2020 to almost 63% in
2021. So that is quite a significant increase of almost 17.5% in terms of the
4G population coverage.

As you probably know, in 2019 and 2020 we were lagging behind a little bit in
terms of 4G rollout because we strongly believed that we needed to invest in
the areas that were 4G ready, meaning where there are 4G handsets, where there
are 4G customers. So we have started a catch-up movement, and that has resulted
in quite a significant improvement in the data network quality.

So on top of that accelerated rollout of additional sites and additional

capacity we also were blessed, if I may say so, with additional spectrum. The
regulator, the UCC, the Uganda Communications Commission assigned us additional
spectrum, 1.8 MHz at the end of 2020, 5 MHz additional on the 1800 band, and 5
MHz additional on the 2.1 GHz band in October/November 2021. So this increased
spectrum allowed us really to be more efficient. Extra sites with additional
spectrum really allowed us to build up a better, more resilience and also more
high capacity data network.

And that has translated into two significant impacts. We were ranked number one
by Rohde & Schwarz which is an international technical audit firm. We were
ranked number one in terms of overall network performance with a 19% year on
year improvement in our score. And also our customers through our NPS, net
promoter score survey ranked us number one in terms of the network experience.
So all these investments together with the additional spectrum definitely
translated into a better network with more capacity, which of course is needed
to carry that additional data traffic that is coming from the additional data

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users and usage on our network.

If I take you to the following slide, slide eight for the ones who are
following the numbers, it is about that data story. We have put a lot of money
in the data network and it has translated into a significant increase in the
active data users on the one hand, but even more importantly on the data
traffic. Over the last three years we are having almost a 50% increase in terms
of data volumes.

And what is important which I didn’t highlight on the previous slide, more than
50% of that data traffic is now carried on the 4G network while before it was
only 35% or 40% on the 4G network. As you all know, of course carrying data on
the 4G is much more efficient than carrying data traffic on the 3G network. And
at the same time because of the additional spectrum we’re also now carrying
more than 20% of our voice traffic on 3G network, while before it was 15% or
16%. So the additional spectrum has also made us more efficient and has really
created the network experience that has allowed just to carry this additional
50% overall data traffic.

Now in terms of the commercials we have invested a lot in the increase in

smartphone penetration through device financing. We are very active ourselves
and with device financing partners to make sure that we get that smartphone
penetration up. Last year it stood only at 23%. Today we are already at 31%. So
that is quite a remarkable increase in smartphone penetration, which of course
is one of the building blocks of driving your data revenue growth. You need to
have a network. You need to have the smartphone users. So the network was
there, or we have invested massively in the network. We are also now investing
and pushing hard to get the smartphone penetration up so that more Ugandans
have access to the data network and to the data usage and services that we
offer.

We have also been very keen on making data bundles more affordable. We have
done some remarkable price adjustments especially for the bottom of the pyramid
where new data users are just exploring the new data services. We have offered
them quite affordable new small daily data packages which also allowed us
really to widen the base of more active data users. So that is on the mobile
data side. More devices, more attractive small daily bundles, while on the
high-end side I would say the big users, especially the home broadband users,
we’ve also made some very big improvements in terms of the number of home
broadband users. As I said before, we are now at 63,000. And we also had a very
big 300% increase in the fixed connectivity business. So we have two flagship
products. One is called WakaNet Max. The other is called WakaNet Pro. Whether
you use 4G, or 4x4 MIMO 4G, or you use fibre, you are now getting very good

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high speed data connection in your home.

And then lastly we also keep on pushing hard on the digital and on the
entertainment. As I said, Ayoba we have more than 500,000 active users. It’s
the first instant connection super app made by Africa for Africans. Of course
everybody else can also download it, but we are very proud on that achievement.
And 500,000 active users is the evidence that this app is relevant and is
really welcomed by a lot of our users in our market.

On the right-hand side just to conclude, as I said the active data users are
going up by more than 25% year after year. And even more important, the usage
is going up by 47% year after year. Andrew will talk about how all of that
translates into the data revenue growth. The second part of our exciting story,
as you know, is about mobile money. So the two drivers of growth that we have
projected during the IPO days was mobile data and mobile money. So we’ve spoken
about mobile data. Now mobile money, the second driver of growth in Uganda.

Our basic revenues are still growing. We are up about 14% year on year in terms
of cash-out and P2P. So there is still a healthy organic growth, and that
despite the fact the informal economy was in a real slowdown. As and when the
curfew got lifted a few weeks ago, we actually only realised then how much our
mobile money business has been affected in 2021 by the general slowdown in the
informal economy.

Mobile money is a key indicator of how money is flowing. And when the informal
economy, the night economy or the evening economy, as soon as it gets dark at
7pm in 2021 we had a curfew. There is an entire part of that informal economy
that just didn’t happen. And when the curfew was lifted we actually saw quite a
good uplift. So despite all those challenges of the curfew and the quite severe
lockdown restrictions, we still got a healthy 14% growth on our basic revenues
and a 20% growth on our advanced revenues.

Let’s talk about these advanced revenues. We’ve got a very exciting story and
we’ve got a less exciting story. Let me first talk about the exciting story.
The exciting story around the advanced mobile money revenues really comes from
the bill payments, up 27%. And even more exciting is the MoMo Pay. Of course
from a very small base we did a 210% increase. That is three times. We grew by
a factor of three over the last 12 months in terms of MoMo Pay revenues driven
by more merchants and driven by more users, more customers. And also the
vlauers transacted equally increased by a factor of three over the last 12
months. So looking forward a very exciting driver of growth will be MoMo Pay.
So we have the fundamentals right. We are now on an exponential growth path. We
will keep the momentum going.

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On the other hand a bit of a downside we encountered on our saving and loan
products. In particular our MoKash product in partnership with NCBA got a bit
of a hit. There was a reduction in our revenues and that was entirely due to an
accumulation of bad debt because of the pandemic. So a lot of our customers
took up loans before the pandemic or during the moments of the restriction or
the softening of the lockdown, and then we found ourselves in lockdown
situation. Customers couldn’t pay back their loans and NCBA had to intervene.
Their bad debt was building up too much, so they had to intervene.

They had to redo some credit scoring fundamentals which actually translated in
a reduction, quite an important reduction in the number of customers that were
eligible to take up loans. When you get your feet wet in the lending business I
think there’s an important learning. COVID really disturbed us in terms of the
micro loans we were giving out through our NCBA partner. But no worries.

We have launched new products in the last quarter of 2021, two very exciting
new products that are actually picking up very well. We have launched a similar
micro loan product but with Jumo. I think Jumo is well known in South Africa
and also beyond in some MTN markets. They have a very advanced credit scoring
facility or capability. And the initial results of the [unclear] new loan
products are very encouraging. So we do believe that we will be able to catch
up quickly in terms of our lending portfolio.

And the second new product that we launched in the last quarter of the year is
MoMoAdvance. MoMoAdvance is an overdraft facility and the initial indicator
since we launched in November/December is we are doubling basically every month
in terms of the users, the usage. It is really micro lending. For example you
want to do a small payment of $3. You only have $2 on your wallet. MoMoAdvance
will offer you that $1 that you are missing to complete your payment. It is the
equivalent – they are not operating in Uganda, so I can mention it – of Fuliza
in the Kenya market. We call it MoMoAdvance and it is growing more than
exponential I would say.

So we do believe going forward in 2022 in terms of the mobile money advances

revenues we should be in a good space despite the challenges we have seen with
our original five year old MoKash lending product that did have a bit of a
downside because of the bad debt accumulating during the COVID pandemic. On the
right-hand side the mobile users are of course growing 16% and the value also
growing 18% year on year.

Before I hand over to Andrew to take us through the figures I want to re-
emphasise the importance of ESG at MTN globally but also at MTN Uganda. I just

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want to share with you a few of the highlights aligned to the development
targets. So on the eco responsibility we migrated 52 sites from 24/7 diesel
generator to the grid. 52 might not sound a lot for 2021 indeed, but it has
given us the appetite because of the reduced emission and because of the
reduced operating cost. We have now embarked with Umeme, the national grid
provider, on a very ambitious plant to migrate more than 200 sites in the
course of 2022 from diesel to the grid.

And as you know, 99% of the power generated in Uganda is hydro, so it’s not
like we’re replacing a diesel generator on the site by a thermal power plant
that is generating that electricity. It is hydro power. So whenever we go from
diesel generator to the grid we actually really contribute to the CO² emission
targets that we’ve given ourselves.

As part of our Uganda is Home campaign in the last few months of 2021 we also
contributed and planted actively 220 hectares of forest. You know that
deforestation is a big issue in Uganda, so we have contributed to that and we
plan to continue doing that.

On the other hand, our foundation of course is still very strong, more than $1
million investment in our foundation. And through the IPO we have been able to
increase our Ugandan local ownership from previously 4% to now 16%. So 16% of
MTN Uganda shares are owned by Ugandans. As you probably know, a big
shareholder is the NSSF, the National Social Security Fund. So indirectly we
also have now 2.2 million Ugandan workers that own a share of the company.

In terms of the governance our reputational index went up 81%. Diversity for a
telecom company is always a challenge because we are very technical orientated.
It’s not always easy to find all the skills sets. But we are now 47% of our
employees are female. And we also take governance and integrity very high on
our list of things that we stand for. We also had to let go four of our staff
for issues of fraud and lack of integrity.

In terms of the economic value added we contributed USh 830 billion to the URA,
the Uganda Revenue Authority. With that figure of course we remained the number
one tax contributor in the country. And in terms of job creation we had a
strong increase in the number of mobile money agents. We are now more than
170,000. And of course we keep on growing, thus creating employment. We are
giving back to the community through our foundation but also by creating
employment for thousands of people who have millions of people within their
families who depend on their daily income from MTN. on that note I would like
to hand over now to Andrew who is going to take us through the financials for
2021. Thank you.

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Andrew Bugembe
Good afternoon to you all. It’s a pleasure to present to you our 2021 financial
results. Just quickly going through a quick understanding of our PAT or profit
impact, this year was a bit unusual – that’s 2021 – where we had a few once-off
transactions. If you were to look at our EBITDA performance, the real
performance would have been 15% above year on year. That’s if you adjust for
the once-off termination fee of $3 million, which is about USh 11 billion. And
then also the once-off license fee of $14 million. So this would give you a PAT
growth of about 20%. And if you had to look at our EBITDA margin or the
adjusted EBITDA it would be almost 52%, which is an increase of 2.4 basis
points for the EBITDA.

So if we go through our revenue growth, on average we’ve been growing about

9.5%, which we believe is a good growth if you compare the last two years,
especially for Uganda where we’ve pretty much been locked down. It’s just
growth in key services like data and fintech that have supported the 9.5%. So
that continues. We will speak about the revenue in just a few slides.

When you look at our EBITDA I think this is quite important that we’re now over
the 50% barrier at 51.3% if not adjusted. This is a lot driven by our
efficiency programme that we spoke to you about before. The beauty about this
programme is we are focussed on sustainable savings. That’s why we are able to
have EBITDA growth of 15% adjusted versus 9.4% revenue growth. And this will
continue next year. This year the savings based on this programme were about
USh 42.8 billion.

The PAT, I’ve just discussed that. The main driver, that USh 387 billion that
you see here is the adjusted. That shows the real growth of the PAT over the
years. I think it’s quite important to understand that the last two years if
you are looking at the PAT perspective is in 2020 we had a refinancing where we
got new loans of $100 million. It’s the same year we paid our license fees and
started amortising it from July 1st 2020. So when you look at the growth year
on year, that’s quite decent given the circumstances.

When we look at our revenue profile it’s worth noting that for the first time
for MTN Uganda our voice revenue is now below 50%. And this is in line with our
investment strategy and focus on data and fintech. So the capex that was
accelerated and started investing is starting to pay off, and that’s where the
direction is. For sure with insights on data because of working from home and
fibre to home, these are new initiatives we believe the customers have now
picked on, especially working from home where there is still a lot more demand
for fibre to home. So that will keep growing.

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Fintech also grew. A focus again here is going to be pretty much on the
advanced revenues as Wim just spoke to. We did launch a few of them towards the
end of the year, so really the impact of these advanced revenues will be seen
in 2022. For sure despite voice being below 50%, if you look at the smartphone
penetration in the country in Uganda we are still religiously defending our
voice revenue share through various CVM campaigns and defend value segmented
offers.

When you look at our cost of sales this grew about 7.2% year on year. Again you
can see interestingly fintech contributes almost 52% of the cost of sales. And
this is why it’s very key to grow the advanced revenues that come at higher,
better margins. When you look at our interconnect again as part of our
efficiency expense programme we were able to change our ratings for the ONA
region. This was quite significant. We were saving on average over USh 1
billion per month. Then also we had advantage of roaming cost which is more
driven by the currency appreciation, and also of course restricted travel
during COVID. But the key driver here was the interconnect.

Another important item to mention is the regulatory fees. As we separated our

FinCo business from June that meant a portion of the 2% doesn’t apply to the
FinCo company anymore. So that’s why we have the savings on the regulatory
fees. On other costs I think what’s important to mention here is you obviously
have subscriber acquisition cost where we are very aggressive on the
acquisition. But more importantly also the devices. We increased our smartphone
penetration to 30.8% and that grew quite significantly and was part of the
reason supporting data growth. Part of that was through subsidies and various
partnerships with M-KOPA and our own device strategy where our customers are
able to pay in instalments.

If we look at our opex, interestingly again you can see 4.5% year on year
growth is great, even before you adjust the once-offs which would put it to
about 2.4%. This gets back to the efficiencies that we are trying to drive and
maximise, especially if you look at the acceleration that we have on the cape
side that we just spoke to. It’s very important that suddenly we are ramping up
our capex programme to support 3G and fibre, so it’s important that our
efficiencies are pulling through. You can find for rent and utilities our
increase in sites is 21%, but in cost growth it’s just 10%.

For maintenance and transmission we did have savings through the efficiency
programme, retiring some servers and equipment and other stuff that we don’t
need. Employees are pretty much driven by inflation. A bit of an increase I
would say in our NSO share appreciation provisions. And then if you look at

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other, a bit of a drop. Just to remind you that last year we had a once-off tax
settlement of over USh 50 billion. And we still have costs under other that
relate to IPO, and we still have the same under professional fees and
management fees which it increased quite significantly because of the once-off
professional fees for the IPO.

Now, if we look at our capex, if you see over the years obviously we spent less
in 2020 given the environment. And that was mainly driven by COVID. We ramped
up and stepped up in 2021. Again the focus is on 3G, 4G, fibre and in other
areas more of capacity growth. And that’s where we’ll continue to spend. This
capex does exclude any license. It’s the real capex. So our intensity is
averaging at about 13%, which is not so far off from where we were in 2019. I
will talk to the expected intensity shortly for what we expect 2022 to be. The
focus here will be more on 3G, 4G and fibre.

If we look at our capital structure I think what I can add is at least we’re
within our debt covenants. There are two main debt covenants. Debt service
coverage ratio we are above the 1.5x, and also our net debt to EBITDA we are
way below the 2.5x. So we have enough leverage or room if there is any
opportunity to keep financing if we needed to.

When you look at our gearing ratio this would include the finance leases at
52%. But if you look at our traditional debt from the banks it’s just USh 364
billion. If you look at our total debt including finance leases, which is over
USh 1 trillion, that increase in finance leases, which are standing at USh 636
billion, is driven by increase in sites. We have put over 450 sites. We will
continue to do so. It’s quite a significant ramp-up from where we were coming
from in 2020 to where we are today, and not just because we do have licence
conditions and minimum quality of data for our subscribers, but also the future
of our business and where we are going. It’s very important that we invest and
put enough assets and capacity in our network.

Then again when you look at our short-term debt it’s about USh 198.7 billion.
Just to remind you again, USh 110 billion of that is a revolving credit
facility which we can draw down as and when we want to, which revolves within
three months. The real short-term debt is just about USh 88 billion, so our
real debt has been dropping year on year.

Now, if we look at our dividend, as we mentioned in 2020 we paid less because

of the license fee. Our dividend pay-out ratio and policy still stays at least
60%. So this USh 336 billion includes the final recommended dividend to the
shareholders. At the last board meeting we had the dividend approved by the
board that will be recommended at the next AGM on the 27th May where we will be

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recommending USh 105.4 billion, which should be about USh 4.706 per share. This
comes up with a final dividend of USh 336 billion. But to put into context the
real pay-out ratio again it’s important to remove the once-off adjustment. So
you have your pay-out ratio using the adjusted PAT, and that will give you
about 87% pay-out ratio. This is still in line with our prior recommendations
and currency dividend policy to pay at least 60%.

So just to summarise before I hand back to our CEO, Wim. For service revenue
growth if we look at Ambition 2025 where we are still targeting at least the
low double digit, again this is going to be driven pretty much by data and
fintech. As I mentioned, we will still drive voice aggressively. But a lot of
focus this year is going to be on improvement on our smartphone penetration.
That’s very key because the stats we see today as our customers move from
feature phones to smartphones you have your ARPU increasing, in some cases
doubling.

We still continue on our efficiency programme. As I mentioned, we were able to

save USh 43 billion last year in 2021. Of course I would say that is where we
almost maxed, because we had USh 11 billion in 2020. And in 2022 we are looking
at about USh 23 billion, but we still continue to look for these savings. For
our capex programme, as we mentioned we continue to invest and are looking at
an intensity close to 14%. Last year was 13.1% and we are looking at about 14%,
pretty close to where we were in 2019.

It’s very important that at least the next two years and almost three we ramp
up our investment. And obviously the years ahead this will reduce because then
a lot of the focus will be more on our capacity and less coverage. Coverage
will be towards the end of meeting of license conditions. Focus now is on
coverage, especially in new areas where there is opportunity. And then lastly,
of course, we keep focussing and will add more this year on our working
capital. It’s a key focus area that we are looking at to improve and support
our free cash flow. Thank you once again. I’ll now hand over to Wim.

Wim Vanhelleputte
Thank you, Andrew, for that very comprehensive explanation around the
financials. Allow me to wrap it up and remind you also for any questions please
you can enter them on the link. Amanda will go through them and then we will
take them one by one before we close it off. In terms of the investment case,
just a conclusion of our presentation. Without any surprise of course Uganda
remains a very young country, young population, fast-growing population. We
still have more than 1 million Ugandans that turn from 17 to 18 years old every
year. So it gives you an amazing growth opportunity tapping into those
additional users or potential users.

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The penetration levels or the adoption levels in terms of data, fintech and
digital remain relatively low. During the IPO we’ve spoken a lot about regional
comparisons with neighbouring countries. We are still below the average of the
region on most of these KPIs or these adoption or penetration levels, which
means that it’s still a lot of catch up to be done. As MTN of course definitely
now that we are a locally listed company we remain a partner of choice in the
socioeconomic development of our beautiful country.

So the country is the right place to be. The population, the economy, very
stable currency, low inflation, so Uganda is the right place to invest in.
Telco and fintech are also the right industries to invest in because of the
relatively low adoption levels in the regional comparison. And then MTN within
that industry within Uganda is still the number one, very strong number one in
terms of market share, a strong leader in a very competitive market. We are
holding on very strongly in voice, data and in fintech. In the three major
segments of the business we remain a solid, strong number one.

The company MTN Uganda keeps on generating attractive, solid financial results.
2021 of course is an example of that. We keep on generating strong cash flows.
We pay out consistent dividends. There was a bit of a drop in 2020. We managed
to catch up on 2021. As Andrew has guided, we do expect a continuous growth of
our bottom line. And despite still some very healthy or strong investments to
capture the data revenue growth opportunity we do believe that the dividend
policy of 75% or 80% we will be able to achieve in the latter years. And we are
still actually moderately leveraged, so it means there is still opportunity to
take additional debt if that would be required.

Now looking forward, Andrew has spoken about looking ahead in terms of the
financials, service revenue growth, the margins and also the dividends and the
profits. The underlying reason why we are confident about this continuous
growth story is our investment. Investing today is guaranteeing the revenue
growth of tomorrow. We are investing heavily in 4G, in fibre. That of course
will further continue to grow our data revenues. We do have the best network
both perceived by our customers and also by Rohde & Schwarz, the independent
technical auditor.

We now have more spectrum than we had a few years ago. Of course we always need
more. More is better, so we keep on engaging with the regulator to get access
to more spectrum. As you know, we still don’t have a 700 or 800 MHz access,
which means that we only have 900 MHz in the sub-1GHz band which we are now
using still for 2G and 3G services. So as and when we will get access to 700 or
800 MHz that should further improve the capex intensity because we will be able

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to deliver much more capacity and coverage with a similar kind of investment
portfolio. So we keep on engaging the regulator to get access to more spectrum,
but we already got some good additional spectrum in 2021.

We have the strongest brand, MTN, especially now also with the rebranding. It’s
a strong brand, admired by all as evidenced by the very successful IPO. We got
a lot of positive feedback in the market, especially now that we are really
perceived as a local company. We do expect that the brand awareness and the
love for the brand will further increase.

Where is the revenue growth going to come from? The story is the same. One,
mobile and fixed data underpinned by strong investment and further investment
in the smartphone penetration uptake. And number two, mobile money. We are at a
tipping point. There is a lot of competition on mobile money. There are a
number of new players coming into the market. So we are transitioning from the
traditional cash-out revenues into the more advanced new Banktech revenues. The
Banktech revenues are growing exponentially. MoMoAdvance, MoSente [?]. Despite
our shortfall on MoKash we do believe that there’s very strong growth ahead of
us in the payments and in the saving and lending together also with the
insurance portfolio.

All of that of course is guided also by a very good enhanced regulatory

framework. As you know we have split the mobile money company into a separate
company, of course 100% part of the listed company. But it has its own
regulator, Bank of Uganda, so we have a strong regulatory environment. And that
is good because it creates visibility and transparency for the investors and
for the management to run the company.

And then very importantly I think on that note I want to end with our
discipline around capex remains very high. We are not rolling out network for
the sake of rolling it out. We are rolling it out in a smart way. We put 4G
capacity and 4G coverage where there are 4G handsets. And if there are no
handsets, then we embark on a very targeted smartphone device financing
programme so that we have the right users at the right place. So the right
capex at the right time at the right location, we will continue with that smart
capex plan because it allows us to pay out healthy dividend ratios by being
smart on the way we allocate our capex.

On that note I would like to thank all of you for the attention you have paid
during the presentation and I would like to hand over to Amanda who will have a
few questions that have come from the interactions on the Zoom site. Thank you
so much.

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Amanda
Thank you, Wim. For further clarity, you will be able to get this from our
annual release statement which is uploaded on our website under the investor
relations segment. We will also upload the investor presentation tomorrow so
that you can be able to have further clarity and also digest the information
better. So our Q&A has started, and I’m pleased that we have a few questions
already.

We have Kenneth Owera from NSSF. The first question goes to you, Wim. Please
comment on the competitive environment in the payment space, especially with
additional players getting licenses from the central bank.

Wim Vanhelleputte
Thank you Kenneth. That’s a very smart question, as usual, from you. Yes, there
is enhanced competition for sure. You are seeing that the NPS Act has created a
licensing environment where new players can enter the market. There are quite a
number of new players that have entered the market that have obtained a license
from BOU, so there is enhanced competition. That’s why it’s so important that
we shift gears. We have been benefitting a lot and for a long time from the
cash-out revenues. Those cash-out revenues definitely are under pressure. There
is also enhanced competition from the new entrants in the market that are
offering far reduced pricing. So we will definitely fight back in the next
weeks and months. We are not going to let the cash-out revenues just disappear
like that.

And at the same time we need to accelerate. There are a lot of payment
solutions, but we have 9.9 million active mobile money users. We have the
largest subscriber footprint by far. We have the largest agent footprint by
far. And we have the largest merchant footprint by far. So we have the
customers, we have the agents, we have the merchants, and we have the brand,
and we have the capital. We are offering very attractive value propositions to
the agents, to the merchants, and we are very innovative in terms of our
portfolio of new products and services especially around the saving and lending
that we are offering.

So we also need to look at it not just on what we have today but where we are
going in the future. The battle of mobile money is shifting away from the
traditional cash-in, P2P, cash-out and shifting to payments, saving, lending,
insurance, a whole range of new Banktech products and services. So we are
shifting gears towards that. And we are confident despite the competition that
is now coming up that we will be able to get our fair share of that new
business that is expanding for everybody here in the Uganda market.

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Amanda
Thanks Wim. We have another question from Tracy Kivunyu of SBG. Also the same
question is asked by Darren Smith of Frontier Capital. What is the split in
mobile money revenues between advanced and basic revenues? And then also, could
you give us an indication of the market share in the mobile money space?

Wim Vanhelleputte
Okay. Let me first start with the market share. The market share is an
estimate. There are no official figures from the regulator, Bank of Uganda,
around the exact value or number of transactions or number of users. We all in
the market use different definitions. But we believe that we have at least 60%
of the market share in terms of mobile money in Uganda. Of course we were a bit
more five or ten years ago when we original started because we were the only
players. So we have gone down in terms of market share. But we are now pretty
stable I think for the last two or three years around at least 60%. That is our
estimate based on the data that we have available.

The other question as around the revenue split for mobile money. So the basic
revenues for cash-out fees and P2P still represent about 75% of the total
revenue mix of mobile money, which means that the advanced revenues are about
25%. It has not been growing as much in 2021 as we were expecting mainly or
entirely due to the MoKash problems that we had with NCBA and writing off a lot
of the bad debt and then adjusting their credit scoring. So the 25% advanced
revenues actually was a bit flat, but we do expect it to start growing
massively in the near future. The basic revenues will be under pressure, but it
will be largely compensated by exponential growth in the advanced revenues
driven by MoMoAdvance, MoSente [?], the revived MoKash and the insurance
products and services that have been launched that are already growing
significantly.

Amanda
Thanks Wim. Lastly in the mobile money space we have five questions on Wave.
Could you just give us an indication of what’s happening in that space in the
mobile money space and Wave?

Wim Vanhelleputte
Thank you Amanda. I think it would not be professional from my side to
specifically make comments about a competitor, a direct competitor operating in
the same market. I would say any questions around competitors should be
directed to those competitors. What we do see is that there are a number of new
players entering the market. It’s a very competitive space. It reminds me a
little bit of the competitiveness that we have known on the mobile telecoms
side on the GSM side five or six years ago. It was six or seven licenses.

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Everybody was going to attach MTN and going to reduce MTN’s market share and
profit. They were going to offer crazy, amazing data packages.

The reality today is that there are two players that are very active still in
the telco space. Most other operators have come and have gone. I’m not saying
that that is exactly what is going to happen in the fintech space. We do take
competition very seriously, and we do react to them, and we will react further
to them to remain very competitive. This is a new era. The NPS allowed for
quite a number of new players to enter the market. But it is not because a new
player that is entering the market and is making very bold statements and with
very deep pockets that they are just going to wipe us out like that, as they
might claim.

We have been here for 23 years. We have a very solid business. We have very
strong people who know what they’re doing. We have also deep pockets – not to
throw money left, right and centre but to invest in a smart way. We have a very
strong brand. We have a very good network. And having a very good network on
the telco side is as important for the fintech because when you look at our
market research people trust MTN. And in the fintech the trust factor is the
number one reason why you would join a network or a service. The trust factor.

The customers in Uganda trust MTN. They trust the network. They trust MTN that
they are not going to run away with their money. It’s a big issue in the
market, the trust factor. So we are also investing heavily to remain that
number one trusted brand. And a lot of the customers that we have we will do
all the necessary to keep them to remain loyal to MTN by giving them more value
and more services for the same money. Yes, competition is good. Let’s bring it
on. We are ready for it and we are looking forward actually to it. Just like we
did well in the telco battle, we are now ready also to take our competitors on
in the fintech space.

Amanda
Thanks. The discussion is now moving to data. How is our data market? How were
the pricing wars? Are we seeing any price competition from Airtel and
Lycamobile? And then also the impact of Africell exiting our market. Are we
getting additional market share?

Wim Vanhelleputte
Thanks Amanda. So I will comment on Africell because they have left the market.
I cannot comment on the other two competitors that you have named, but I will
comment on the overall market dynamics. So Africell left the market in October.
By the time they left the market they had 2% or 1.5% market share, mainly data
users. Most of their users were already on multi-SIM. So a 1.5% market share

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player leaving the market in a very heavily multi-SIM environment doesn’t

really make a lot of difference in the overall KPIs of the market structure. So
we probably saw a small increase in some of the ARPU on some of the users who
would now shift most or all of their usage to the MTN SIM instead of splitting
it over an MTN and an Africell SIM.

But I cannot say that Africell’s departure of the market is a major event
because of the very small market share and revenue share they had at the moment
they left the market. I think the impact you really have to look at over the
last two or three years where they continuously reduced market share day after
day, month after month. So the impact of Africell leaving the market is
probably something that we need to look at over a two or three year period and
not over a one week period, because by the time they left they were already
very small.

In terms of the data pricing I would say data pricing in Uganda is still
healthy. Yes, there is a lot of pressure from the consumers. There is pressure
from politicians. They want to get data pricing down. We do follow to a certain
extent the downward trend of the data pricing, which of course is logic because
the more we carry data on 4G network, the more our cost of delivering that data
is also going down. So we can afford to take our data pricing down because also
our cost of delivering data goes down. We have much more volume and we are
carrying it on a much more efficient 4G network than two or three years ago we
were doing on the 3G network. So pricing is still very healthy. MTN Group, I
can assure you, will not allow us to sell data below cost. So we are
competitive while at the same time we are profitable with a healthy pricing.

Amanda
We have some questions for Andrew. One, kindly provide a sense of where the key
areas of savings were this year and any future savings which would be expected
in the future. There is also interest in knowing how we handle our MoMo float.
And lastly, what is an indication of EBITDA for our mobile money business?

Andrew Bugembe
Thank you. So a lot of our savings are coming from the technology side. That’s
where we pretty much spend most of our funds. So a lot of that is coming from
the maintenance, a couple of contracts that are foreign and also local. Then we
also have quite significant savings from the rent and utilities. Some of the
programmes we run are where we convert quite a number of sites from generator
to fixed power where there are good savings. So you will find a lot from our
technology.

We did get some savings also, as I mentioned, from our interconnect. That’s

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cost of sale line. But it is pretty much driven by our network. Not too much
from the marketing side. Next year for sure we will continue. We are still
running this programme. It’s a programme that has given us sustainable savings
and good margins, so we will continue. I think what we’re trying to clarify
this time is 2021 was USh 43 billion while we’re looking at about USh 23
billion this year.

Then in regards to MoMo float, this is disclosed both as an asset under current
assets and as a liability when you look at our consolidated results. So it’s in
and out. Then the other was EBITDA of the fintech. I would say we ordinarily
don’t disclose that, and the reason is fintech is still a new child, just a few
months old. So we have done a couple of cost allocation charges here or there.
We would say in a couple of months we would know pretty much where we sit and
will be able to give you plus minus where we think the EBITDA margin for the
fintech is. As you understand, when you separate it out from our telco we’ve
been sharing a couple of costs. So we are trying to complete and align on the
cost charges to get a fair view of what the EBITDA for fintech stands at.
Thanks.

Wim Vanhelleputte
Maybe, Andrew, if I can comment on that. EBITDA is very much a telco multiple
which has proven its relevance in the telco. But I think on fintech really it’s
EBIT. The figure that really drives the value is the EBIT figure. But we will
start disclosing in a few months’ time when we have at least one year or more
of full standalone financials. I suppose that that will then be the right
moment to start looking at the two businesses separately, with an emphasis on
EBITDA on the telco and an emphasis on EBIT on the fintech side.

Amanda
Okay. Thank you, Andrew. We have quite a number of questions, but we assure all
the investors that we’ll be able to send responses to your respective emails.
Maybe we can just close with where you see MTN in the next five years. That
question came from Sydney of SBG Securities.

Wim Vanhelleputte
Thanks, Sydney, for that question. The next five years, I would say let us
focus on the next two or three years to start with. The growth story is clear.
We have it here front of the slide. The demographics are there. The brand is
there. The network is there. The commitment to invest is there. So the next few
years are going to be mobile and fixed data. We’re just getting started. I
would say 2021 was the first year that we really saw some massive growth in
data. The growth has always been there, but from a very small base. Now we
start seeing significant growth from an always larger base. But we keep on

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having significant growth. So mobile and fixed data. The pandemic definitely
has changed the dynamics when it comes to data usage, and they are lasting.
One, mobile and fixed data growth for the next two to three years is definitely
going to continue.

And two, the mobile money. Mobile money, enhanced competition, a lot of new
players, so mobile money especially on the traditional or basic revenues is
going to be under pressure. Let us be straightforward about that. The basic
revenues, the cash-out and the P2P revenues, especially the cash-out revenue is
going to be under pressure. That’s for sure. But we strongly believe that if we
shift the battlefield to the advanced revenues, the payments, the saving, the
lending, the insurance and all these other Banktech related products and
services, we do believe that we are in the best position to capture and to tap
into that growth on the fintech side.

So one, mobile data and fixed data for sure. That’s the core of our traditional
telco business. We will keep on growing. And two, on the mobile money side, the
fintech side. Challenges for sure on the cash-out fees, but we will be largely
compensated with accelerated growth on the advanced revenues.

Amanda
Yes. So this brings us to the end of our question and answer session. I would
like to thank all of you for participating in the call. Please feel free to
send any additional questions to my email and also to our investor relations
email. Like I said, the presentation will be unloaded on the website. And for
further clarity there is also an annual release statement just giving clarity
to the numbers. Thank you, and please have a good day.

Wim Vanhelleputte
Thank you so much, and I hope to see you again in a few months’ time for our Q1
results. In a few months’ time I will take you through the first quarter
results again. Thank you so much, and see you soon. Thank you.

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