We update our model on Maroc Telecom (MT) following the release of its FY19 results, reducing our TP by 4% to MAD150.91, but retaining our HOLD recommendation. This is mainly due to our assumption that MT will pay the ANRT (National Agency of Telecommunications Regulation) issued fine of MAD3.3bn in FY20. We note that the Inwi lawsuit case remains unresolved, with damages sought of MAD5.7bn. While we think it is unlikely that the lawsuit will grant damages higher than the ANRT fine, we point out that the impact of a MAD5.7bn fine would lead to another 4% decline in our TP to MAD145.72.
Flat performance excluding provision charges, trend to persist over forecast period. PAT grew 0.4% yoy to MAD6bn excluding the impact of provision charges of MAD3.3bn relating to the ANRT fine. Reported EPS declined 55% yoy to MAD3.10. MT also cut dividend per share by 19% yoy to MAD5.54. We still expect flat underlying performance in EPS growth from FY20 to FY24, attributable to limited revenue growth in Morocco and sustained weakness in international subsidiaries revenue growth.
International subsidiaries beat Morocco in subscription growth and absolute revenue, but Morocco to maintain lead in revenue growth. We forecast a 5-year CAGR of 3% for Morocco subscriptions compared to 8% in international subsidiaries. However, we still expect Morocco to lead in revenue growth (2% on average yoy), driven by strong data growth offsetting weakness in voice revenues. We expect International subsidiary revenue to be muted at -0.2% on average, due to persisting competition and regulatory risk arising from continued drops in mobile termination rates.
Limited EBITDA margin expansion post IFRS 16 implementation. MT benefited from the implementation of IFRS 16, which improved its EBITDA margin by 1.3ppt. We forecast muted performance in EBITDA margin for the FY20-FY24 period, and maintain our margin forecast at 51%. This is because we still expect the benefits of dropping call termination rates to be offset by taxation regulatory pressure in the international subsidiaries.
Capex intensity of 21% for the forecast period. While we note a slowdown in capex deployment in Morocco, we anticipate future capex demands for deployment of 5G seeing as 4G penetration is at 99%. In addition, the international subsidiaries still require investment in 3G and 4G network coverage, with 4G licences yet to be acquired in Mauritania.
Anticipated further debt uptake in FY20 to cover regulatory risk. The debt to capital ratio spiked from 50% to 61% despite a 21% increase in borrowings due to erosion of equity following the ANRT fine provision. We maintain our debt to capital ratio at 61% for FY20, to cover costs relating to the Mauritania 4G licence and to provide a buffer as we are assuming the fine is payable in FY20. Post FY20 we drop our debt to capital ratio forecast to 58%.
Our valuation methodology and sensitivity analysis is available on pages 3-4 of the full report.