MTN's Record EBITDA Margin Is Real — But So Is the Two-Currency Discount

MTN's Record EBITDA Margin Is Real — But So Is the Two-Currency Discount

MTN Group, Africa's biggest mobile operator, serving 317.7 million customers across 19 markets, told investors this week that the first half of 2026 was its most profitable stretch in over a decade: service revenue up 17.5% in constant-currency terms to R115.3 billion, EBITDA up 24.4%, and a 47.6% EBITDA margin — the strongest since around 2012. On the same release, it disclosed that adjusted headline earnings per share rose 21.3% to 793 cents, that it would start a share buyback of up to about 31 million shares worth R6 billion (about US$375 million), and that group leverage now sits at 0.3x EBITDA.

That reads like a story the market should be paying up for. Then check what it paid. The U.S.-listed ADR (MTNOY) trades near US$12, around 15 times trailing earnings, with a dividend yield near 2.5%, and it is up roughly 22% over the past year. Airtel Africa, built on the same West African growth story, is up about 55% over that same stretch and trades at a higher earnings multiple. Same region, same tailwinds, different prices. The gap between those two share prices — and what it says about the currency risk that still hangs over MTN — is the part of these results worth understanding before treating the margin record as a reason to chase.

Start with what the record margin is actually made of. The group's cost-to-revenue ratio improved from just under 56% to about 52%, and the efficiency program alone delivered around R1.2 billion of savings. Data revenue grew 29.2% and now sits close to half of service revenue, and MTN's fintech business processed US$330.5 billion in transaction value — up a third — with about 71 million active users. Slower inflation across the footprint, 9.3% versus 14.0% a year earlier, did its part as well. That is genuine operating leverage, not a one-off.

It is also, in part, an accounting level. MTN Nigeria reported an EBITDA margin of 53.3%, but under the older pre-2019 lease-accounting basis — the one that treated tower leases as below-the-line costs — the same stretch shows 44.2%. The company adopted the new lease standard in 2019, yet the "strongest since 2012" record compares today's numbers against years measured under the old rules. And the level is set to climb further when the IHS tower deal closes: taking full control of the tower group in a deal valuing it around US$6.2 billion, expected in the second half of 2026, replaces lease expense with depreciation and interest, which flatters reported EBITDA without adding an equal amount of cash on its own. The trend is real; the exact percentage is partly bookkeeping.

Second, look at who generated the growth. Nigeria and Ghana together contributed 66% of group EBITDA growth — Nigeria with EBITDA up 38.7% on 25.7% higher service revenue, Ghana with EBITDA up 40% and the group's highest margin at 61.8%. South Africa, the home market, managed just 1.5% service revenue growth and a 7.6% EBITDA decline. Strip out the naira and the cedi, and this half's record becomes a different, smaller story.

Now the balance sheet, because for a business like this that is where the margin of safety either exists or doesn't. As recently as 2023 the holding company was carrying 1.5x net debt/EBITDA. Today the group sits at roughly 0.3x, upstreamed R13.9 billion of cash to the holding company in six months, and turned the margin into cash: free cash flow rose 66% and equity free cash flow 32.7%. S&P's outlook is stable. Under the Ambition 2030 framework, MTN targets returning 40–60% of equity free cash flow to shareholders through dividends and buybacks; the 2025 dividend was 500 cents, up 45%. It pays once a year, so the absence of an interim dividend is policy, not a cut. A holding company that can absorb a cash acquisition of IHS, fund almost R20 billion of half-year capex at a 16.6% intensity, and still send cash upstream is not a company whose survival is in question. Survival isn't the debate anymore.

So what is the market charging for? MTN's own disclosure states it precisely: main market currencies "remained stable against the US dollar but weakened against the rand, detracting from rand-term earnings growth". Investors with a memory of 2023 and 2024 know what the naira and cedi collapsing did to rand- and dollar-denominated results, and they still price a standing discount — on top of the ordinary holding-company discount that applies to a 19-market group with separately listed subsidiaries.

That leaves the resolving question sitting on top of a 15 times multiple. On the current cash-flow trend — record margin, 0.3x leverage, cash upstreaming, and a payout framework that hands the cash back — the ADR is priced like a story that might break again, not like one that is working. The evidence here says the balance sheet is not where it would break; the naira and the cedi are. If those two currencies stay stable and the record margin keeps converting into rand and dollars at a reasonable rate, the discount has room to close. If either slides the way it did in 2023–24, the margin will still look healthy in local currency while rand and dollar shareholders carry the bill. Buying MTN at 15 times earnings is agreeing to be paid — in a growing cash return — to hold exactly that two-currency risk. The margin record is real. Whether owning it is rewarding is, in the end, an exchange-rate question that no margin improvement can answer.