WHERE TO INVEST: MTN rides African tailwinds and smartphone penetration

MTN hosted a capital markets day this week, 10–11 June, where it leant into a clear structural tailwind: a statistic that smartphone penetration in Africa is expected to jump from 53% in 2025 to 84% in 2030. In other words, there are good reasons to believe that MTN can grow even if it doesn’t gain market share. Assuming the macroeconomics play ball, of course. More on that later.

MTN has far more impressive plans than a desire to merely maintain market share. These plans were set out in detail in its Ambition 30 strategy, accompanied by comprehensive slide decks that are available to any investor willing to spend the time working through them.

A capital markets day is a treasure trove of information for investors. I always applaud companies for hosting such events.

One of the key insights is that MTN is organising itself around three platforms:

The traditional connectivity business;

The fintech business, to which MTN had already attracted Mastercard as an investor a couple of years ago; and

Infrastructure, with MTN having taken the transformative step of acquiring 100% of IHS Towers.

Do these three platforms really belong in the same group?

I strongly suspect that the medium-term strategy at MTN includes achieving separate listings for these platforms, allowing investors to pick and choose the exposure they want. For example, the infrastructure business offers completely different risk/reward trade-offs to the fintech business. By splitting these out, MTN can optimise the cost of capital differentials and follow the classic “value unlock” strategy.

The shift in thinking at MTN is reflected in the expected evolution of the group’s sources of revenue. This is where the statistic around smartphone penetration becomes critical, as adoption of this technology changes how consumers actually use their phones.

MTN shows voice calls down, data revenue up

Voice revenue is expected to be less than 15% of total revenue in 2030, as compared to 29% in 2025. The really astonishing analysis is to go back to 2020, when voice was still 54% of MTN’s revenue. As the world went into lockdown, MTN was still deriving over half of its revenue from traditional voice calls.

It’s incredible to think about the world’s technological shift in the aftermath of Covid. After all, when last did you call someone, other than on WhatsApp? When last did you receive a “normal” phone call that wasn’t a spam call? Even courier notifications are integrated into WhatsApp these days.

Naturally, this means that the relative decline in voice revenue has been accompanied by an explosion in data revenue. In 2020, data was just 28% of MTN’s revenue. By 2025, that contribution was 46%. By 2030, the company expects it to be 55%.

As any consumer knows, data has become cheaper over time. As data usage has increased, the price per unit has come down considerably. This has been a significant business risk for the telcos, particularly when accompanied by extensive capex to respond to changes in how the technology is being used.

In South Africa for example, growth for the leading telcos is very hard to come by. There are several reasons for this, one of which being that they are competing heavily against broadband internet providers.

If you make all your calls on WhatsApp from a home or office environment with Wi-Fi, then the leading telecoms players may not be getting any share at all of your cellphone activity. It’s little wonder that they are pushing hard in areas such as fibre and related services to try to extract growth ahead of inflation from the South African market.

This is why the growth story in Africa is so important to MTN (and Vodacom, as its main competitor). Instead of worrying around the disruptive impact of broadband access, they can participate in the transition from voice to data revenue as smartphone adoption increases.

Fintech and smartphone penetration

But there’s another source of revenue that is even more exciting for these companies: fintech.

The telcos have invested heavily in various value-added services that aim to take advantage of themes such as underbanked populations. These consumers are tough to reach for traditional brick-and-mortar banks. But every smartphone in a pocket has the potential to be a distribution point for financial services products such as payments and insurance.

This is a competitively crowded space, as the profit pool is lucrative and growing rapidly. MTN is well positioned though, as it is integral to why that smartphone is in that consumer’s pocket in the first place. You don’t need a creative imagination to think through the opportunities around product bundling and the like.

This comes with risk though, ranging from government interference (e.g. digital transaction taxes) to the sheer extent of competition and how this can delay the earning of true economic profits.

The excitement around the African growth story is also the biggest source of risk for MTN. It was less than two years ago that MTN’s share pr…