Good day, everyone, and thank you for joining this call to discuss our Q3 financial results. As you know, the results were released last Friday. I am Chima Nwaokoma, I am responsible for investor relations. Joining me on the call today are Karl Toriola, our Chief Executive Officer, Modupe Kadri, our Chief Financial Officer, Ayham Moussa, our Chief Operating Officer, Bode Abifarin, our MoMo PSB CEO. We are also joined by Roy Mutooni, who is the Group Investor Relations Executive. As usual, Karl will begin with the business overview and hand over to Modupe to cover the financial highlights. After that, Karl will return to outline the priorities for the remainder of the year before we proceed to the Q&A session. Please note that the call is being recorded and all participants are in listen-only mode. During the Q&A section, kindly use the Raise Hand function to speak or submit your questions through the chat function.
Finally, please note that the call is scheduled for an hour, and with that, I will hand over to Karl.
Good afternoon, everyone. Those in the African time zone, thank you for joining us. We appreciate your continued engagement and the opportunity to take you through our performance for the nine months ending 30th September 2026. As Chima has indicated, our format today is straightforward. I will begin with the business overview. As usual, Modupe will take you through the financial overview, and as usual, I will return to cover our outlook and medium-term framework before we take questions, but Modupe will add some analysis for you. With that, let me get to it, beginning with the key messages. There are three messages from these results. First, we are in growth, reversing the optical slowdown in quarter two, which was a once-off event due to the high base in quarter two 2025, rather than a change in the underlying trajectory of the business.
This is reflected in the 19.7% service revenue growth in quarter three, with monthly acceleration to 21.6% in the month of September, and the quarter-on-quarter growth for quarter three versus quarter two 2026 was 8.4%. What matters most is the quality of that growth, which is increasingly volume-led, driven by more users, deeper data adoption, and higher usage. Let me put my second system, which is beeping as messages are coming in, on mute. Thank you. The second messaging is, our nine-month EBITDA margin expanded by 5.5 percentage points to 56.9%, and the Q3 EBITDA margin was 58.7%. This reflects very disciplined cost management and continued delivery of our expense efficiency program, supported by a stronger naira and VAT input claims. Thirdly, our growth continues to convert into cash.
Free cash flow increased by 57.5% to NGN 1.2 trillion, even as we stepped up network investments and paid NGN 860 billion in dividends for the FY 2025 final dividends and the FY 2026 interim dividends. That is both of them combined were NGN 860.8 billion. Taken together, the results show that growth has regained momentum, margins remain resilient, and the balance sheet continues to provide full flexibility to invest for growth and sustain shareholder returns. In terms of the operating context, the operating environment, and it is nice to say this about Nigeria, became more supportive during the period. Inflation eased, interest rates declined, and the naira strengthened. Of course, we had strong FX liquidity and higher external reserves. Economic activity also remained resilient, with GDP growth accelerating to 4.4% in the second quarter, and with telecoms continuing to make an important contribution to the economy.
While the operating environment remains dynamic, particularly in relation to the energy cost of cost rates of our moves, et cetera, pricing behavior and customer affordability, the improved macro backdrop supported better visibility and stronger execution across the business. In terms of the key financial highlights, and Modupe will speak to most of this slide gives you the nine-month picture in one place. We delivered strong operating results across growth, earnings, and cash generation. Growth was broad-based, which reflects the resilience of our core business and the strength of the underlying demand of our services, which continues to grow. Data, as usual, was the main contributor, with home broadband becoming gradually an increasingly important driver within data, supported by our voice growth and digital services. That growth converted into stronger earnings and cash flow. Profit after tax grew 55.3% to NGN 1.2 trillion, rounded up.
With the profit after tax margin, and I would like to emphasize this, our profit after tax margin is 25.3%, and free cash flow generation grew 57.5% to NGN 1.2 trillion, even as we stepped up network investments and paid dividends. Modupe, as I said, will unlock this in more detail. Turning to service revenue, where many of you had focused on the 13.2% growth in the second quarter, this slide addresses those questions from the previous call directly. The growth expanded in the third quarter and accelerated month by month, with September being the strongest month. Two things explain quarter two, and we tried to communicate that, but we will emphasize it here.
The comparison base was higher due to the 2025 tariff adjustments, which we took almost all the tariff adjustments in quarter two, in the first instance, and then the airtime and data credit was suspended between April and June. That is why the two-year view is the best way to read the trajectory. It looks through the entire base of revenue and shows that service revenue compounding at approximately 40% a year. So nine-month service revenue is almost double what it was two years ago. Growth is increasingly volume-led, driven by more subscribers, deeper adoption, and higher usage. Moving on, quarter three clearly shows what is driving the business, resilient customer demand. As I stated earlier, service revenue returned to sequential growth, rising 8.4% in quarter three versus quarter two.
Growth was broad-based across data, voice, and digital, which together represent our core business, with data the main contributor as always. Data was up 12.1% on quarter two and delivered more than 80% of the sequential increase in service revenue. In the quarter, it made up about 61% of revenue. Voice also grew 9.3% in quarter three, supported by subscriber growth and targeted propositions, even as we are shifting from traditional voice to circuit switch to OTT voice. Together, this shows the depth of demand across customer base, and the next slide shows the metrics behind it. Our connectivity continues to show strong momentum, underpinned by user base growth, rising smartphone adoption, and higher data usage. We added 2.5 million subscribers in quarter three, bringing our base on RGS 90 basis to 94.7 million.
Our active data users are growing faster than the RGS 90 base, and smartphone penetration continues to rise with about a third of customers still to move onto a smartphone. Each data user is also doing more. Monthly usage per active subscriber averaged 15.3 GB over the nine months and reached 17.2 GB in quarter three, representing an increase of 12% on quarter two. Sorry, reached 17.2 GB in quarter three, representing an increase of 12.7% in quarter two. Revenue per customer is also rising while we keep adding customers, which is reflected in the stronger blended ARPU. Voice remains resilient and cash- generative as subscriber growth and targeted propositions more than offset the lower minutes per subscriber as usage shifts to data. We continue to invest in coverage, capacity, and quality to support demand and improve customer experience.
In terms of our fintech, it shows strong underlying progress that the nine-month headline does not reflect yet. The core mobile money business is scaling, and the airtime and data credit service is recovering. Core fintech revenue, which excludes airtime and data credit commission, more than doubled, driven mainly by higher floating income, as well as balances more than quadrupled since December. In August, our MoMo PSB business moved to its new Alipay+ platform. It is built for reliability, flexibility, and scale, and it is the foundation of a scaled digital financial services platform. Monthly active users are now measured on the new platform only, i.e., we are only counting our monthly active users as subscribers which are on the new Alipay+ platform, and are still growing as legacy wallets migrate and new customers are onboarded. Quarter three transaction volumes rose 69% on Q2, reflecting robust underlying engagement.
The nine-month headline fintech revenue was lower because of the airtime and data credit service suspension between April and June. It resumed under a new multi-partner model, with revenue up 78.5% on Q2. Our priority is to sustain that recovery to expected levels by the end of November and continue building from there. The structural separation of the fintech business is progressing and is subject to regulatory approvals which we are pursuing. With that, I'll hand over to Modupe to take us through the financial overview. Thank you.
Yeah, thank you, Karl, and good afternoon to everybody. Thanks for joining us. I will now take you through the financial performance, cash generation, and capital structure for the period. As Karl highlighted, revenue growth remained strong and continued to outpace cost growth by a wide margin. This reflects disciplined cost management and the continued delivery of our expense efficiency program, supported by stronger naira and VAT input claims under the new tax laws, which took effect in January this year. Under the new tax laws, all input VAT we pay is offset against the output VAT we collected, and we recovered about NGN 116 billion in cash in the nine months. Under the previous law, VAT and CapEx was capitalized into the cost of assets. Now the operating portion of laws are OpEx, and the CapEx portion were the cost of the assets we built.
In terms of EBITDA, it grew by 36.8% in the nine months, and the EBITDA margin expanded by 5.5 percentage points to 56.9%, which is within our guidance. Just for out of interest, the third quarter itself reached 58.7%. Energy costs remain an important consideration. Diesel pricing under our tower contracts follows a lagged mechanism, which I've explained previously. In other words, the diesel prices for the subsequent quarter is based on the average of the previous quarter. That lag helps in cushioning the impact. It gives us good visibility of the fourth quarter cost, which we know, and supports our confidence in our full-year margin outlook as we enter the final quarter of the year.
We also stepped up our network investments with CapEx excluding leases up 14.2% to NGN 864.8 billion, and the CapEx intensity of 18.7% in line with our target range. We're investing in new sites, capacity, and home broadband. It gives our customers better coverage and a more reliable experience as data demand grows. In terms of free cash flow, which Karl highlighted earlier, it grew by 57.5% to NGN 1.2 trillion, with the third quarter alone contributing NGN 457 billion, or 39% of the nine months total. Our higher earnings and disciplined capital allocation delivered this growth. Overall, the performance demonstrates our ability to convert top-line growth into earnings and cash, while continuing to invest for future growth. In terms of our capital structure, our balance sheet remains a source of strength and resilience and provides significant financial flexibility.
Total borrowings are down 36.8% since December to NGN 333.3 billion, and the effective borrowing rate has come down to 16.1% from 17.5%. Interest earned exceeded the interest cost on borrowing in the period, which gives us a net interest income position, the first time in recent years. All borrowings are naira-denominated, and there was zero forex exposure in terms of debt. The borrowings itself are at fixed rates, and fixed tenure too, long-term by 7-10 years bonds that we took some years back. We closed September with a net cash position of NGN 47.7 billion, compared with NGN 104.8 billion in December, after paying approximately NGN 261 billion in dividends, which covered the full-year dividend for 2025 and the interim dividend of NGN 26 for FY 2026. We also increased our network investments.
We de-risked our funding profile, which reduced our market risk and gives us the flexibility to continue investing for growth, manage volatility, and sustain shareholder returns. In terms of our guidance, I would hand you back to Karl to talk about that.
Thank you very much, Modupe. Let me conclude our medium-term framework and quarter four priorities. Our medium-term framework remains unchanged, and our nine-month performance shows that we are delivering within it. Over the medium term, we remain focused on average service revenue growth of at least low 20% and an EBITDA margin in the mid to high 50% range. CapEx intensity remains stable in line with our target range of high teens as we invest in network capacity and quality. One important point of context on our margin guidance, it assumed an exchange rate of NGN 1,400 -NGN 1,700 per dollar and mid-teens inflation. Diesel prices, however, have risen materially since our guidance was set, and the stronger naira together with VAT input claims and our efficiency program has helped absorb those increased costs of diesel. Energy costs, however, continue to remain an important consideration, and we will continue to monitor them.
Recent energy cost trends, together with the continued delivery of our expense efficiency program, give us increased confidence in our margin outlook. In terms of quarter four priorities, our focus in quarter four is to sustain growth and protect margins so that earnings growth converts into stronger cash flow and long-term shareholder value. For growth, we will keep building our subscriber and usage growth, and we will continue to deepen data adoption and scale our home broadband, digital, and enterprise services. In terms of fintech, we will complete the migration to the MoMo platform, deepen our wallet use, and sustain the airtime and data credit recovery. For margins, we will stay focused on the continued delivery of our expense efficiency program and monitor energy costs, inflation, FX pricing, and affordability. In terms of capital allocation, we will invest in network coverage and capacity, keeping a resilient balance sheet, and we will deliver sustainable shareholder returns.
With that, I would like to hand you back to Modupe to take you through what an investment in our 2021 public offer has returned to shareholders. Thank you. Modupe.
Thanks, Karl. To close, based on the feedback we received on the roadshow and the Capital Markets Day in South Africa, we would like to show what our performance has meant for our shareholders who invested at the 2021 public offer. Some investors asked us how much an investment in Nigeria has returned in real terms, so we have added this analysis as an investment of an investment in our 2021 public offer. An investment in the MTN IPO at the time has grown in real U.S. dollar terms, despite the massive naira devaluation and inflation. With dividends reinvested, the investment has grown in U.S. dollar terms after inflation, despite naira devaluation. Every investment in MTN Nigeria here beats both the Eurobonds and the naira treasury bills and delivered positive real returns in both naira and U.S. dollars. Naira treasury bills lost real value in both currencies.
Taking the 2022 final dividend as a scrip dividend added the further output because there are some shareholders who did not take the cash option and wanted to reinvest back. The analysis is there for you to use in your spare time. With that, I will hand over back to Chima for the questions and answers.
Thank you. Thank you, Karl, Modupe, for the overview. We will now move on to the Q&A. We have 15 hands up, so we will take the questions in twos. Please, let us keep our questions brief and to the point and avoid repeating questions that have already been addressed. With that, we will start off with Madhvendra, followed by Cesar. Madhvendra, over to you.
Yes, hi. Thanks a lot. Can you hear me okay?
Yes, we can hear you.
Thanks. Thanks a lot for taking my questions. I have a few very quick ones. The first one is on your revenue growth trend. Very good to see the acceleration, and you talked about the exit rate in September. If you could talk about the trends in October as well, and what I mean to ask is that, is the momentum getting better or it has stabilized? The second question is on the core fintech business that is up only 11% quarter-on-quarter. Is that in line with your expectations and plans, or is that something which you think can actually be done better? The final question is on the VAT input contribution during the quarter.
If you could talk about what was the impact on the margins purely from the VAT input credits you got, and is all the input credits now captured or is there more to expect in the future? Thank you.
Thank you. Cesar, over to you. Cesar?
Yes, hi. Am I audible?
Yes.
Great. Good afternoon. Thanks for the opportunity and congrats on the numbers. So two questions from me. Why are you so cautious on revenue growth? Because it looks like 22% was delivered in September, although you still have a massive headwind from fintech. Let me ask you the question another way. If fintech was running at full steam and if XtraTime advance was running at full steam, wouldn't your revenue growth be closer to maybe 25% or 27% in September, hypothetically? Second question, was there any one-off item in the cost side? I think that there was a small provision reversal, et cetera, but anything else on the cost side? I mean, obviously the EBITDA margin was significantly higher than expectations. Anything to watch on the cost side which was of exceptional nature? Thank you so much.
Okay. Karl?
Chima, may I?
Yeah, go ahead.
So first, Madhvendra, we are not going to comment on trends in October. You have been at this game for way too long to expect otherwise. I will leave Bode to discuss the only 11% quarter-on-quarter. The question was, was it in line with expectations or can we do better? And the VAT input, do we expect more? I will leave Modupe to answer that. For Cesar, why are we so cautious? Your question was, if we had fintech running at full steam, would we be closer to 25%? So first things first is that we have gotten quite a bit of momentum in terms of fintech already in Q3. So it is going to be better in Q4, but it is not like it is going from zero to 100 in Q4. So built in into that. We are not making a restatement. We do not make restatements.
Our guidance is at least low 20%, and we maintain that guidance. The second question was there any one-off cost items? I think perhaps we did not do, and I think maybe you said explicitly, the margins were surprising. I will leave Modupe to answer that, but I mean, the strength of the naira and the efficiency program are two big things, but no exceptional one-offs. Okay? So Modupe, you want to go first and maybe let Bode wrap up this set of two questions?
Okay. So yeah, so on the VAT input, we have explained roughly was NGN 116 billion for the nine months. So overall, that is about 2.2%, so 2%- 2.3% impact on EBITDA in terms of that. So in terms of whether there were one-offs, what we have explained is that we were trying to be efficient in terms of looking at our expenses. And maybe perhaps one of the things you may not have anticipated, Cesar, we are doing that, the impact on diesel. So for instance, even though the diesel prices were heightened in the month, but for the average for Q4, it ended up being less than NGN 1,700, and for the same thing happens for Q3 at less than NGN 1,800. So all these things helps improve our margins in addition to our expense efficiency program and our cost optimization here and there. So that is how I leave it.
I think it's safe to keep it at that. Bode?
All right, thank you. I will just speak to the point Karl had mentioned in terms of our Alipay+ migration. I think for us, what we have done is really establishing this platform across our wallets and financial propositions. Moving to Alipay+, prior to now, if you wanted to onboard on our platform, it was a closed loop to MTN. Now it is open to everyone. We are working with the best in the industry. When you think about our partners, Ant Financial, Alibaba, Longshine, we have really worked on that foundation that enables all the growth that we want to see. Things around our app, our USSD, our savings, and I think most importantly, like we always say, that payment is partnership.
Using our platform and being that infrastructure, you will be seeing a lot more in terms of partnership aligned to where you find Nigerian customers paying for things around transport, delivery. We are working on a lot of partnership. If you looked at this past Dangote shares that happened, we also had a mini app on the platform, giving our customers access to all of these things. I think for us, it is really enhancing everything we have in terms of the team, our technology, our systems, our processes, our security, AML, that is the foundation that we have set. Also, realigning our merchants and our agents' proposition is this foundation that we are embedding, and we are pretty much very excited about the journey in terms of how we continue to move forward. Thank you.
Thank you. We will move on to Modi and Jonathan. Modi, over to you.
Hi, hope I am audible. Thank you for the opportunity, and Karl, congratulations on your 20th anniversary at MTN Nigeria. Just two quick follow-up from my side and one question on wallets. Well, follow-ups basically on service revenue growth. You mentioned last quarter that it was tougher comps which was kind of impacting your growth rate. Now, there is such bit of a step down in tougher comps from 2Q to 3Q last year, but you have further step down and your comps get much more easier for the fourth quarter. It is kind of [inaudible], the kind of improvement that you are seeing in terms of comps getting easier. Do you see the similar kind of improvement given on the back of tougher comps that you spoke on last quarter? Hope I am clear. Second question is on the margin exit, 58.7%.
You mentioned, just confirming if diesel prices get lower from here or if you see any movement and better movement in oil prices, do you expect further margin improvement? Or there is a kind of seasonality here and you continue to expect your mid-50% kind of margin evolution. And third question is basically on the wallets. I understand you have moved switch to the new wallet, new platform, but in aggregate, did you add any wallets in the quarter or just kind of, do you still have a lot more on legacy platform?
Okay, thank you. Jonathan.
Good afternoon. Thanks for the opportunity to ask questions. Just two from me on, given your very rapid growth in terms of data volume and traffic, how should we think about CapEx intensity over the next 6 - 12 months, and do you have sufficient network capacity and headroom to match this kind of demand growth? I presume you are offloading some of this traffic into the fiber network. If you could give us a sense of where you are investing more heavily in the network, whether it is RAN and Fibre-to-the-Home, some color would be appreciated. And then obviously, your free cash flow generation has meant your balance sheet is now in a net cash position. I know you are limited in terms of dividend payouts by the retained income balance on your balance sheet.
Would you consider paying out all of the retained income balance given how under-geared the balance sheet is?
Okay, thanks. Karl, over to you.
Okay. There is a bunch of questions. First of all, thank you, Modi, for the anniversary congratulations. That became public, unfortunately for me. I think I will just speak maybe to the margin exit quarter three, and then Modupe speaks to. I will speak a little bit to the CapEx, then Modupe speaks to the balance sheet dividend payout, which Jonathan seems to like the idea of, and then let Bode speak to the questions on mobile from Modi. So look, our exits on quarter three was 15.7%. There are three, four things that really, really drive this. Part of it is VAT inputs. I think that has been discussed by Modupe. The second one is diesel prices, and our diesel prices is at the ex-depot price, is set for the quarter at the ex-depot price of the last day of the previous quarter.
So for quarter three, it was set on 30th of June. For quarter four, it was set on 30th of September. You are asking me to forecast what is going to happen to diesel prices in the future. Very hard to do that with current leadership in the U.S., but I think you can see clearly the sensitivity to diesel prices. The other two things that affect our OpEx level that is outside of our control is foreign exchange, which has been a tailwind, and our internal expense efficiency program, which has been very effective. Sometimes we do not really talk much about gross margins, but we have seen significant gross margin expansions over the last few years. So that is a very strong output. Jonathan, your question, CapEx intensity, we maintain our guidance as it is. Do we have headroom? In some locations, we do. In some locations, we do not.
I think the most significant part of our CapEx is still going to be taken up by radio, but radio also includes the backhaul, which is transmission backhaul, which could be by fiber -to- the- site or microwave. We have ramped up investment in our Fibre-to-the-Home, and we will continue to do so. We are very happy with how that business is going. Yes, it does offload some traffic from the mobile network, but you need to get to a certain scale before you start to see materiality in that. Our Fibre-to-the-Home connections do anything from 400 GB a month to 1 TB a month. Huge opportunities there for offloading. No, look, we always have a little bit of congestion here and there, and it is always something that we are addressing on an ongoing basis. How do we address it?
The first option, the cheapest option, is always spectrum acquisition, so that is always something that we look at, but we have done a lot of those in the last few years or so. The second one, we try to push as much traffic onto 5G as much as possible, and then, of course, we spend money on investing on a 4G network expansion, and spectrum refarming as well, away from 2G to 3G. That is how we focus on it. I hope I have answered the question. The balance sheet versus dividend, I will leave to Modupe. I think that is the question for Modupe, and then Bode can wrap it up on more questions. Thank you.
Okay, let me circle back to one of Modi's earlier questions, where he said, "Do we expect further improvement in diesel prices or trading?" Do we expect further movements, improvement in our margins if diesel prices are to go? Well, look, the easiest way to look at it is that, if diesel prices for quarter three and quarter four are about the same levels, which is going to be baked into the accounts. I can tell you that, for instance, the average diesel cost for the full year now is going to be sub-NGN 1,400 based on the Q4 prices. We can also say that energy costs for the first nine months, on average, is less than 40%, and that rose in Q3 to over 50% in the impact. It does tell you that with the diesel prices being higher, it has an impact on the margins.
What is clear is that at least the diesel story for FY 2026 is done because we know how diesel prices are, and that is what I have just explained. In terms of Jonathan's question, well, the dividend policy is clear. Minimum of 80% of your retained earnings. The Board has to apply its mind as to whether it wants to go higher than that, as to whether to pay 100% or 90%. Bear in mind that we also have to look at the volatility in the market and make sure that we have enough earnings to cover such volatilities anyway. But at least for now, the commitment is 80% of the retained earnings. Bode?
All right, thanks. I think the question on, as opposed to the migration, how many new customers are we adding? I think one of the interesting things about our new platform is, since we cut over in August, coming into October, if we are signing up, if we have 10, for as an example, 10 new customers on the platform, seven out of those 10 are new customers. I think a lot of the things that we are now doing in terms of the onboarding, the platform itself, the intuitiveness, and we are just starting coming out of hypercare. But overall, just 75% jump in activation overall. Thank you.
Okay, thank you. Next is Jono and Samuel.
Chima, I think we need to just look. We have so many hands up, and we need to give everybody an opportunity to ask questions. We will appeal to the next question as to whether they limit their questions to allow other colleagues to have opportunity to ask their own questions. Thank you.
Thanks. Okay, Jono, back to you.
Good afternoon. Thanks for the call, and congrats on a strong quarter. I will limit mine to just two. Firstly, can you just tell us what the penetration level of airtime advance was in Q3 or at the end of Q3 compared to the pre-suspension levels, and if there has been any teething issues or integration issues with the three additional airtime credit providers? Then the second question, I wonder if it is possible for you to split out what the impact was from the higher diesel costs and then the VAT inputs, and the FX and cost efficiencies separately on looking at the margins on a quarter-on-quarter basis. Q3 versus Q2 margins, that uplift, if you can kind of split those different factors out, that would be great. Thank you very much.
Thanks, Jono. Samuel?
Good afternoon, everyone. Congratulations to the team for the results and your 25th anniversary. First question is on debt, right? I know Mr. Modupe has repeatedly said there is no guidance for what borrowings could look like. My question is, since we have seen over 30% reduction in debt, are we fair or correct to assume that it is possible you are going to be carrying zero borrowings in 2027 or maybe even this year, right? We just know that your key liability will stem from lease liabilities itself. That is the first thing I am trying to get a sense on. The second one is, we saw some bit of improvement in effective tax rates relative to Q2. That came in at 35% relative to 35.4% that was reported in Q2 2026. I just want to know what exactly you are doing that is bringing about that relief to effective tax rates.
One last one, if you allow me to squeeze that in. The net finance costs recorded improvements and on the debt front, positive for finance costs, but also the finance income showed material upliftment, and we saw that stemming from your placements with banks. I just want to know, is this a new trend, or it is just a one-off or something that we should not pay too much attention to? Thank you.
Okay. Thanks. Karl, Modupe, back to you.
Okay, let me let Ayham answer question number one. Penetration levels of XtraTime in Q3 versus pre-suspension and any integration issues with new vendor. The other questions are really for Modupe, so I will allow him to go through them. Thank you.
Yeah. Okay. Thanks, Karl. On the penetration level, before the suspension, the general industry level was around 20%. Today, I will need to get back to you with the exact number, but it is something between 12%, 15%, something like that. But I advise that you do not use it as anchor for revenue, voice data, because people change their behavior. Some of them, they stop borrowing, some people come new. That is it. On the integrations, everything is up and operational now. Basically, you have three vendors. They are operational, licensed, plus Optasia as well. Also, we have four. All of them are operational, all the channels, whether buying bundles, CVM, or when you do via Facebook purchase or Instagram, they are all live and operational. Thank you.
Okay, the other questions, how to do. [Jono], it is not possible to split the uplift as you requested, it is too intertwined. They are all interrelated, so you cannot really strip it out. But like I have said, as a proxy, energy costs have gone up to about 50% of our Capex in Q3 alone, whereas the average for the year was about less than 40%. So, in terms of forex impact and all those things, I guess you have to come up with a model and somehow to figure that out in your models. We are assuming, in this case, we are assuming there is zero debt. Well, at least if the nine months results says that there is zero debt, then I think that is what it is for now. But, let us go back to why would you take debt? You take debt when you have some things to finance.
If there is a business case to do that, then you would take debt. The Board has approved different shelf programs, which will be communicated to the market at the appropriate time. But having a shelf program does not mean you are going to tap on it, except when you have a need to do so. On the ETR, yes, there was, I guess, the impact of the RITC, as you know. MTN is doing the Enugu-Onitsha expressway, and we got some tax credits for that. Of course, do not forget the way the RITC scheme works. Because of the MPR plus 2% uplift you have on your spending, you get that as an additional uplift or stuff, reduces your, offsets your tax. Sounds like a net finance cost.
Well, the reality is that the borrowings we have are at rates less than 14%, and the highest is about 14%, so 13.75%, I think, for the seven- and 10-year bonds. So when you have that cost base and your MPR is above the T-Bill, so it means that whatever excess funds that we have on our balance sheet and you place them, they are generally going to have a greater return. To the extent that we are not taking additional borrowing at this time, you can assume that has been the trend. Of course, we are already locked in on those finance costs for our borrowings. Thanks. Next [inaudible].
Okay. Thanks. We will move on to Ebuka and Linet.
Let me ask, as a result, let us just take four questions at once, okay? Because of time limitations. Is that?
Yeah. Ebuka, please go ahead.
Ebuka.
Ebuka.
Go ahead.
It is your turn. Okay, let us have Linet.
Can you hear me?
Yeah, we can. Go ahead.
Yes, we can now.
Okay. I am sorry, I was speaking. I did not know I was muted. First of all, congratulations on your 25th anniversary. I have just two questions. The first one is that we noticed that three or four items actually fell, okay?
Ebuka, your audio is freezing. I cannot hear you.
Can you hear me now?
It's better now.
It's better?
Yes.
I was saying that we noticed three cost items actually fell in your nine -months results. The interconnect cost was down like 4%, transmission cost 23%. If you look at the yearly trends, you will see upward trends year-on-year. That's unusual because your subscribers grew by 11% and your data traffic was up by about 30% in the same period. Normally, this cost should go up, not down. Can you help us understand what is happening in each of these line items, and how should we think about this? Is this a new normal going forward, or do we expect them to go back up as volumes keeps growing? That's the first question. The second question I have is that you launched FlyX ODU in September, which is like a fixed wireless broadband.
If you look at Airtel, Airtel already has a similar product on the market, which was also scaling. But I am not sure MTN had one ODU product till September this year. Was that a competitive response to Airtel? Then secondly, is FlyX going after the same customer as FTTH or a different one? What I mean by this is, is it just a different route to the same customer?
Okay, next.
Thank you all, and congratulations on the fantastic performance. I mean, excellent set of results. Two questions, please. The first is in relation to the PSB legacy wallets versus those on the Alipay platform. Is it possible to give a high-level geo split? That is the percentage of wallets registered and active in the metropolitan regions versus the rural or peri-urban wallets, and plus the growth patterns and possibly transactional volume and value drivers. The second question is, please guide on what the regulation is regarding PSB treatment of interest earned from wallet float, whether this varies from PSP fintechs, and how MTN treats and recognizes the interest income. Thank you.
Thank you. We move on to [Biwei].
Good afternoon, and congratulations on a strong result. My questions just center around the volume growth point. Where are these additional net adds coming from, and how are these customers monetizing? Are you gaining these customers through heavy promotions? What are the characteristics around the ARPU and churn of these new cohorts? Then the second one, just around the XtraTime normalization. How much more is left for the service to be fully recovered, and who is doing the heavy lifting between the new vendors and Optasia, and how are repayment rates looking like for XtraTime? Thanks. I will leave it there.
Okay. Karl, take the time. Take those questions.
I will take four. Four, four. There is only two. Four.
Okay. [Nadine].
We do not have time. We have to move fast.
Good afternoon, Karl and team. Congrats on the strong volume-led growth. Just two quick questions from my side on costs. Firstly, just wondering if Modupe could help reconcile the credit on the sponsorship for sporting events and youth engagement. I think it was a NGN 20 billion credit. I just want to understand the shape of that from Q1 to Q3. Secondly, just if you could give us some color on the NGN 2.2 billion litigation provision in this quarter's result. Thank you.
I am going to answer some of the questions and hand over the rest to. The question of FlyX ODU to Ayham, PSB wallets, et cetera, to Bode . Ayham, for you, the question from [Biwei], was it volume net growth? Where are the net adds coming from? Are we monetizing? Are we using promos? I will also come to you. Please, and then on [Nadine's] questions are for Modupe . Let me answer on the XtraTime. We will not give details on the relative performance of our vendors. We have said we expect to return back to normal levels in quarter four, and we will leave it at that. Ayham, maybe. Okay, and sorry, on the three cost items from Ebuka, interconnect costs down 4%.
Please remember that even as we are going data aggressively, voice ultimately is going to continue to decline relatively because people are moving from voice to data, and there are some interconnect costs, including international, outgoing, et cetera, that is going to reduce there. Transmission cost is primarily around the strengthening of the naira, so interconnect links that are contracted in U.S. dollars are going to become cheaper in naira, as the naira strengthens versus the dollar. I think those are the two drivers of why you see some of those interconnect and transmissions costs going down. Ayham, ODU, and where the net adds are coming from, how we are monetizing, are we using promos?
Yeah. Okay. Look, the ODU is simple. In our ambitions for the home, which Karl talked about always every quarter, there is, have been always a mix of fiber and fixed wireless access. It has never been 100% fiber. So basically, that campaign is to continue alignment with our ambitions, right? So there is certain ambitions in terms of number of fiber and FWA. And where we do them, definitely we don't do them in an area where we believe it's a fiber area. And every area have its own characteristics. Fiber works in heavy traffic area, urban areas, FWA working on different kind of areas. So that's how it's ongoing. There is no conflict between both objective. They go together to achieve the final end game. Now, in terms of the volume growth and net adds, it's all over the market. I cannot attribute it to certain geography.
They are all over the market. They are coming from new acquisition, plus from returnees and proper churn management. There is no one single promo that can achieve that. The churn we see is satisfactory. We don't see any alarm about them or anything unusual. They are like all our other base in terms of their marginal ARPU, in terms of their churn. So this is about it. I think, Karl, you answered the XtraTime. That's fine. Thank you.
Bode, just to refresh, there are some questions for you on legacy wallets versus Alipay. Are they coming from urban or rural? What's the split? What's the regulation on interest on wallet floats for PSB versus PSP license?
Okay. All right. So on the legacy wallets, I think one of the things that we did in August, that was the end of August when we were doing the migration, is the approach we took was a user-driven migration. By the end of next week, we're moving all the customers that haven't migrated to Alipay+, we're going to move them. There are a number of things that we've been doing with our partners. I think in the next two weeks, we won't have the legacy wallet anymore, and there are a lot of plans we have on ground as we make that move in terms of the migration. In the earlier question, I talked about the rate of activation that we're having, new customers versus legacy, which is about 75%.
Now, in terms of the splits, based on our current data, and of course, the mandate from the Central Bank of Nigeria, if you look at a lot of the customers we have, we have a split across the north, the west, just equal splits across, right? But more heavily around the south, west, and north as well. Now, because we are also changing proposition, we are changing also the way we are onboarding and some of the innovative products we are also taking to market, we are also seeing that shift because if you come to our platform, you can make your transfers, you can pay a bill, you can use any of the services through our partners on our platform. We are also seeing that mix change, but we are also very aware of just the huge amount of opportunity that we have seen, and we are following that trail across.
Now, in terms of the, for PSBs, right, on the transactions, we take a revenue on our transaction fees. I think the float you refer to, the interest on the floats and deposits, which are clearly separated. Thank you.
[audio distortion ]. Okay, thanks.
[audio distortion ]
Next speaker.
Let me answer the first question. On the provision of the NGN 20 billion, most of that is now reflected in the marketing cost. As for the litigation cost and legal cost, the Board will be reviewing that. We should move towards settling some of these cases rather than avoiding endless litigation. You are going to see that going out into the future, and this is just to reduce the legal exposure and everything. Okay, Chima. Maybe just let us restrict it to one question each and just take the last six, because we have to close out this call by 4:00 P.M.
Okay, thanks. This noted. Tajudeen.
Yes, thank you. Good afternoon.
Welcome.
Congratulations on your very solid numbers, and congrats on the 25th anniversary. Most of the questions I would have loved to ask have been asked, but there is one that I believe it would be useful if you can speak to. We see data being very solid in a segment of your business. Data is almost 2 x your voice revenue. I reckon that by next year, most likely, data can comfortably be about 2 x your voice. What would you consider as the major risk factors that can slow down the growth momentum of data, and how do you plan to address those risks so that they do not materialize? The second one, sorry for that, is on Mafab Communications.
Tajudeen, please, let's respect the order. There are six minutes.
Okay, thank you.
The next speaker, all protocols observed, we've taken your congratulations on 25th anniversary and congratulations on results. Just the question only. Okay?
Straight to the question. Won't be offended.
Okay. Thank you very much. My question is seeking an update on 5G. If you could just give us an update on the percentage of traffic that is now sitting on the 5G network, progress on population coverage, and the number of your 5G smartphones on the network. Thanks.
Thanks, [Odaiyah].
Yeah, sure. My question is, what was the reason for the software maintenance cost drop, and can you give us an outlook for that cost going forward, Modupe? Thanks.
We take [Sithnende].
My one is simple. Can you comment on competitive dynamics that is in the industry? My sense was that perhaps you lost some market share in Q2, and how much of that has been recovered to date?
Thanks, [Murian].
Thank you. My question is all on MoMo. What percentage is still USSD bearer? Secondly, on the MoMo app, when are you getting your microfinance license? OPay is eating this market there. Thank you.
Finally, [Usman].
Thanks. With Starlink Direct-to-Cell moving toward commercial launch to mobile smartphones, I would like to know what your internal assessment of the risk to your data market share is, and how will MTN prevent subscribers from migrating, especially in areas with coverage issues? Thank you.
Okay. Karl, give me the [inaudible ]. Then just answer [Odaiyah's] question straight for this.
Of course.
Then the rest you can do it.
[Don], strengthening of the naira, answered. I mean, let me cut through a few issues and then hand over to, what would you call it, Taju. What are the risks to our continued growth in data consumption? Handset affordability for people who just get into the market. Devaluation risks, which we don't see as significant at this point in time with the very excellent management of the Central Bank of Nigeria, could hamper some of our growth. If we are not present in taking the offloading from wireless to home broadband solutions, it could be a potential risk. But as you guys have seen, we have gone from number nine to number one on the Fibre-to-the-Home market, number one by a long margin, so we've mitigated that risk.
And of course, on the wireless home broadband solutions, we are very, very much present, and in spite of the noise around ODU, ODU is just an antenna extension on an existing 5G solution, which we've been telling since forever and a day. [Tracy], our population coverage on 5G remains around 20%. Total percentage of traffic is somewhere in the range of 13%, 14% and growing, but that's total. In sites where there's co-located 5G with 4G, where you have 5G coverage, it's in the range of 30%, 39% of our traffic is on 5G, and that's growing as well. In the highest sites that generate the highest amount of 5G traffic, 70% of the traffic on those sites are on 5G. So I hope that answers the question. Software is discussed.
Market share loss, before that, [Usman], with Starlink Direct- to- Cell, what's the internal assessment of the data market share? Look, we are very awake to Starlink and Elon Musk threats, but it's a very long way from being a significantly competitive solution. The solutions that are provided by Starlink, and we have one or two places where it's live DTC, very, very low- bandwidth solution. So it's not about to take over our urban market here. If you have a house in the village in the north and you want your kids to be able to watch Netflix and play their games, yeah, Starlink will be very useful as a home broadband solution. But in the urban centers, we are very much present with 5G and FTTH, and Direct- to- Cell is a long way of proposing a significant threat.
It doesn't mean we're ignoring it, but the kind of quality that you get out of that is a long way from anyone on this call, which accounts for 70%, 80% of our revenue, to bother using it. Then we can talk about the fact that that's going to be a dollar-denominated expensive solution. Ayham, the question was with market share loss from, for this review, with the market share loss in Q2, have we recovered? What's the outlook for that? You want to take that, and then Bode can take questions on the split of USSD, and when are we getting microfinance license? Thank you.
Thank you, Karl. Yes, market share, that is important portion of the market share loss we see in Q2 have been recovered, and I can see it basically in the revenue. As we said, the Q2 was majorly impacted by those who were borrowing money. So that's okay for now. Thank you. I think that's the only question, right? Market share only.
Yeah.
Yeah. You covered that.
Thank you.
Okay, good. Thanks.
Bode, USSD versus app split, and when are we getting our lending license? Those are the questions, I think, for you.
All right. On the USSD, I think prior to the migration and some of the foundation that we have set, I will say USSD versus app was almost 90%. We have seen that go to just about, the split is now about 65/35. We are seeing more people adopt the app. I think interestingly, because of some of the drives we are having from our rural channels, it is interesting to see that a lot of the customers actually have phones that they can actually use to download our app, similar to some of the competitors that you mentioned. Now, in terms of the microfinance license, you mentioned OPay, definitely. I think even as we see transaction fees continue to go down in the ecosystem, definitely value-added services becomes a must for anybody that wants to win in this market.
Those are surely a lot of the strategies that we are also pursuing in terms of licensing. Thank you.
Okay. We have come to the end of the call with one minute time overrun. Thank you very much for your time here. Just like to reemphasize, there was a lot of, I think, turbulence in the perception of the results in quarter two, and we kept saying this base effect 2025. I think we have shown clearly and demonstratively that that is the reality. As the base effects flush out, and there was probably still a bit of a bit even in quarter three, you will see the growth rates going back to normalization. The second thing that was a lot of question marks about XtraTime, we will be back to our normal levels in quarter four. That is also another exceptional situation. We have always said that, look, our revenue was not dependent on XtraTime.
Yes, it does have a 2%-3% impact on the top line, but the customers very quickly find alternative channels, and we have seen that happen, and what we are giving them the convenience of the return of the lending services. Thank you for your kind wishes on the 25th anniversary. We are very proud to be part of an institution that we are building to last, and proud of our impact to Nigeria as a whole and to you shareholders, for the question would be in dollar terms, what your returns were. We look forward to seeing some of you over the course of the next week or two, and hope you have a nice autumn/winter for those that are in cold climes, and summer for the people in South Africa. Nigeria, it is what it is. Thank you, guys.