Why MTN is Now More Valuable than All Nigerian Banks and Insurance Companies Combined

MTN now more valuable than Banks and Insurance Companies Combined

Nigeria’s telecommunication giant, MTN is now worth over Five trillion naira. This makes MTN more valuable than all the banks, insurance companies, and in fact all other financial services companies listed on the Nigerian Stock Exchange combined. This is according to market valuation data as of May 20th, 2022, monitored from the Nigerian Stock Exchange.

As of Friday, MTN Nigeria closed with a total market capitalization of N5.068 trillion making it the third most capitalized stock on the Nigerian Exchange. On the other hand, the entire Nigerian Financial Services sector which includes banks, insurance companies, and other financial institutions is valued at a combined Four trillion naira.

With an over N1 trillion gap between MTN’s valuation and that of Financial services companies, the telecom giant is now firmly more valued than all of them. And it will take a 20% dip in the share price of MTN for its valuation to go lower than that of the banks, insurance companies and all other financial services combined.

Does the valuation of Financial Service Sectors in Nigeria Include FinTechs?

No. The financial services sector we are referring to here only include the companies that are trading publicly in the Nigerian Stock Exchange. So this does include the valuation of most of Nigerian Fintechs like OPay, Flutterwave, InterSwitch, PayStack, PiggyVest and others. As you probably know already, Flutterwave alone being the most valuable Fintech in Nigeria has a valuation of $3B. This also means that it is more valuable than any Nigerian bank (but this is a story for another day). And not even the recent Flutterwave scandal has had any effect on this (at least for now). In the same vein InterSwitch has a last known valuation of $1B.

The Trend leading to MTN Being More Valuable Than Banks

It is said that every decade comes with a major shift in the trajectory of the Nigerian economy. We can trace this back to at least the 1970s or 5 decades ago.

The decade of 1970s to 1980s

It was a 5 year period between 1977 to 1982 that major conglomerates Dangote Group, Innoson Motors and Coscharis Group were formed. Their focus was trading and later on manufacturing. These guys were among key contributors to the Nigerian economy for at least 2 strong decades. And despite the emergence of the banks and tech driven businesses their relevance and contributions  have not waned.

The decade of 1990s

The decade of the 1990s gave us the new generation banks. The generation that rewrote the history of the Nigerian banking system with the use of technology.

Zenith Bank was founded in 1990 by Jim Ovia and you recall he came purely with technology as his differentiating factor. Today, it is difficult to argue that Zenith is not the biggest bank in Nigeria. GTCO, another leading bank today was also founded within that period and it has largely been driven by technology and innovation. What about Access Bank? It is the same story.

The decade of 2000s

Then came the decade of 2000s. It was the era of GSM Phone. It brought the emergence of telecommunication giants MTN, Globacom, and Airtel. They brought a new ordinance in communication and they changed the economy to what we have 20 years after. Yes, every other shift has been built on the services of these telecommunication giants. So this is probably the most important decade in history in the growth of the Nigerian economy.

The decade of 2010s

In the decade of 2010s, it was a time for mobile internet. Yes, our phones became computing devices with access to the internet. New vistas were unlocked. We could literary perform any office or business function with our phone alone. This decade is the decade where smart phone become basically the only phone available and in use. It is this decade that it became a necessity to have data in one’s phone 24/7. And at any point you run out of data the device in your hand becomes almost useless.

The decade of 2020s

What about the 2020s? I mean the 2 year old decade we are into now? You can refer to it as the application utility era. This is an era where software and service systems will unlock values out of those connected devices at scale. The transformation this brings is huge, and it across all industries and territories.

It has disrupted almost all industries and still doing more. From logistics-tech to fintech, from agtech to edtech, and indeed all sectors, software systems will change everything for good. And guess who is driving this? Telcos. And it automatically mean more revenue for them. Yes, it is more revenue for them because it is their data that is powering the future – and everyone else is working for them. Whatever you do that needs data, you are expanding the world of telcos. And I guess almost all you will ever do going forward will require data. So Telcos are the kings in the market and will remain so for a very long time.

Is MTN the Most Valuable Company in Nigeria?

No. MTN is not the most valuable company in Nigeria. By the records of the Nigeria Stock Exchange as at Friday May 20, 2022 there are at least 2 companies that has more valuation than MTN. Though MTN was briefly the most capitalized stock two weeks ago when the share price was trading at N264 per share valuing it at N5.3 trillion. However, Airtel Africa and Dangote Cement prices have since risen while MTN shed some of its gains.

The first of those companies with a valuation more than that of MTN is Airtel Africa with a valuation of N5.5 trillion. The next is Dangote Cement with a valuation of N5.1 trillion. These three companies are the leading members of what Nairametrics describes as SWOOT.

Why is MTN Valuation a Big Deal?

Well, not really. Not that it is a big deal. But it is still a great statement considering the fact that most of the banks in Nigeria are at least several decades older than MTN.

Airtel is another telecom giant that is also more valuable than all the banks and insurance companies combined. In fact ts valuation is more than that of MTN. But MTN own is more significant as the company’s financials represent income generated from the Nigerian Market alone. So it excludes revenue from other African countries.

Airtel’s income on the other hand includes that of other sub-Saharan African countries. Even though we must acknowledge that the revenue from Nigeria is dominant accounting for about 40% of total revenues.

Why is MTN more valuable than Banks and Insurance Companies?

Why is MTN and even Airtel now more valuable than all the banks and insurance companies in Nigeria combined?

MTN Market Capitalization compared with those of banks and insurance companies
MTN Market Capitalization compared with those of banks and insurance companies

Well, there is a combination of factors why this is so. And here are some of the reasons as reported by Nairametrics:

  1. While banks have been declaring impressive profits, telcos have gone further by not just declaring profits but achieving double-digit growth projections for other sectors of their market, especially data.
  2. With over 199 million active mobile subscribers, telcos have the customer base and demand that will continue to drive up revenues and profits in years to come.
  3. Apart from data, Telcos also have the capacity and funding to veer into other sectors of the economy starting with banking. The recent MOMO license obtained by MTN opens up a new source of revenue for the organization.
  4. Asides, from their growth prospects, telcos also have better control of their margins and returns. Unlike the financial services sector, Telcos deliver over 100% return on average equity of about 20%. MTN reported a return on average equity of 134% in 2021.
  5. Apart from fundamentals, Nigerian banks also have billions in shares trading with much higher liquidity when compared to telcos.
  6. This is due to the high proportion of single owners of the shares of the banks compared to telcos. For example, Zenith has about 643, 965 shareholders compared to MTN’s 10,931 as of the end of 2021. Also, whilst 2 shareholders own 15% of Zenith Bank, one shareholder owns 76% of MTN.

Final Word – On Why MTN is now More Valuable Than Banks and Insurance Companies Combined

So obviously MTN is now more valuable than banks, insurance companies and all other financial services companies combined. The question now is what do the bank need to do to catch up? What can the banks learn from the MTN and Airtel? Do they need to improve their services or introduce something new?

What is likely to be the situation ten years from today?

Do you know my prediction? The gap will increase. Yes, it will because the telecos are becoming banks too. So commercial banks in Nigeria should be worried already.

What is your take? Share with me.

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