MTN shakes off Nigerian ghost

Africa’s largest telecommunications group MTN appears to have put the headwinds of the previous year largely behind it, on Wednesday (3 August) posting a return to half-year profit for the six months ended 30 June.

2016 saw the group dogged by regulatory challenges as well as an agreement to pay a $1.7bn cash fine to the Nigerian government for failing to disconnect 5m unregistered SIM cards.

While the group has largely worked this debt out of the system, the unwinding of the Nigerian regulatory fine interest outstanding in the current period reduced headline earnings per share (HEPS) by 24 cents.

Notwithstanding the financial hangover from Nigerian charge, CEO Rob Shuter told shareholders in Johannesburg that a 31.9% boost in group data revenue to R13.95bn and an increase in digital revenue of 24.7% to R6.46bn lifted the group’s overall revenue to group revenue by 6.7% to R64.3bn.

HEPS for the period demonstrated a solid recovery from the loss of 271c a share posted in the prior year’s comparable period.

In South Africa, revenue was supported by data revenue growth of 18.5% and a strong uptick in the prepaid sector, but Shuter acknowledged a need for further work in attracting contract or postpaid customers.

Nigeria contributed strongly towards overall earnings with an impressive 70.4% improvement in data revenue, while Iran – another critical MTN market – saw a similarly impressive data revenue rise of 67.7% for the first half of the year.

Despite a 3.1% decline in earnings before interest, taxes, depreciation and amortisation to R21.17bn in the first six months of the year, MTN declared an interim dividend of 250c a share – in line with the financial year 2017 guidance of 700c per share communicated in March 2017.
 
“Our growth in data revenue benchmarks well against what’s happening in the rest of the industry, he commented,” noted Shuter. 

“We are seeing pleasing progress in our key growth drivers of data and digital services against headwinds of challenging macroeconomic conditions and foreign exchange currency pressures.”

Elaborating on significant items impacting results, chief financial officer Ralph Mupita explained that, as the stronger rand and a significant year-on-year depreciation of the Nigerian naira against the US dollar had a negative translation impact on rand-reported results for the period, MTN opted to release its results on a constant-currency basis.
 
A R2.6bn goodwill impairment and a R2.8bn asset impairment further dented profits.

Shedding subscribers

Worryingly, subscriber numbers in the period decreased by 3.6% to 231.8m, impacted by a decline in subscriber numbers in MTN Nigeria and MTN Ghana.
 
“This was largely a result of the group’s initiative to modernise subscriber definitions to reflect the business’s changing mix of revenue streams.

The implementation of the modernised definitions continues and is expected to be completed by the end of the year,” Shuter explained. On the upside, however, the group added 2.7m active MTN Mobile Money customers in the first half of the year.

MTN plans to continue it investment in the roll-out of network and information technology across its markets in 2017 and continues to eye Africa and the Middle East as its key growth regions over the medium to long term.
 
“As the prospects for telecommunications are closely aligned to this growth trajectory, we see a number of opportunities and believe that MTN is well placed to benefit given our unique position in the markets in which we operate.”
 
“We will be going back to the basics of voice and data connectivity and plan to leverage our established infrastructure,” said Shuter.

Demographic expansion in Africa would underpin growth across MTN’s markets in the next three years, with the company predicting to draw R575bn from consumers, R210bn from enterprises and R30bn from its wholesale division by 2020.

The group currently has 232m subscribers in emerging markets and 72m active data users.