Johannesburg -
MTN Group [JSE:MTN] is tipped to produce "robust" half-year figures when the telecommunications giant reports its interim financials to end-June on Thursday, but the spotlight is most likely to fall on the identity of the telecommunication group's new CEO.
Analysts expect outgoing MTN CEO Phutuma Nhleko to name his successor. Nhleko will step down in March 2011.
MTN's Nigerian operations are expected to yield high revenues, even though the contribution from the South African market continues to dwindle.
In a trading update released on Monday, MTN said it expects an increase of between 18% and 23% in adjusted headline earnings per share for the period under review.
Attributable earnings per share are expected to increase by between 4.8% and 9.8%, and basic headline earnings per share by between 1.5% and 6.5%.
Kaplan Equity Analyst's Irnest Kaplan said key territories to look out for in the results are Nigeria, Iran and South Africa.
MTN has made headway in Iran, where it has gained subscribers.
"Quarterly numbers from Iran have been bullish and that market is performing above expectations for MTN," said Kaplan.
Back in Africa, Nigeria has been a star performer where MTN commands high margins. However, Kaplan questions the sustainability of the West African market for MTN.
"We know that Nigeria will have to slow down sooner or later, and we have seen signs of that beginning to happen, but the question is by how much will it slow down?" he asked.
"It would be bad for MTN if the Nigerian market emulated South Africa - so we're keeping our eyes on revenue growth in the country. Merely looking at customer numbers and average revenue per user can be distorting as these do not offer a true sense of performance. One has to look to actual growth in revenue."
South Africa, on the other hand, has become a tough market for MTN.
"Some people take the view that South Africa is a dead duck and others say that while it might not offer high growth, it will still tick along nicely," said Kaplan.
Nigerian market shows promiseKaplan said he believed South Africa would continue to perform consistently.
The regulatory environment, despite its threats, has not provided much interference for MTN, said Kaplan. However, the coming results would show the impact of mobile termination rate reductions for a four-month period, whereas previous results had only a month's worth of effects to reflect on.
Industry analyst at Frost & Sullivan Spiwe Chireka agreed with Kaplan's assessment of MTN's South Africa market, but added that the MTN Business subsidiary may stimulate local revenue growth in time.
"Over the last reporting period we've seen South Africa's revenue growth reduce to single figures. It's gone flat," Chireka said.
"The contribution from South Africa is likely to come from MTN managing the country in the cost space, and we're not expecting the revenue base to have increased much. We also expect MTN Business to have contributed more, but it is yet to gain significant foothold."
Chireka said the medium-term outlook for MTN Nigeria was positive, based on the entrenched market the operator has created in the country.
"We are not worried about sustainability for MTN in Nigeria," she said. "MTN is still enjoying sound growth in that market.
"It's an expensive market where returns do not come without significant expenditure. MTN spends a lot of money in Nigeria and makes a lot of money in return."
She said the pending launch of MTN Business Nigeria will give the company entry into a lucrative niche.
"We have not really had much activity in this space from the incumbent players in Nigeria, while MTN Business will offer dedicated offerings for enterprises with backhaul, application hosting and services being offered."
This will not be without competition, however, as Chireka said that Vodacom Group [JSE:VOD] is likely to launch similar services in Nigeria, as is Telkom via its Multi-Links subsidiary.
On Monday MTN shares closed 1.29% higher at R118.
- Fin24.com