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Weak currencies, strikes hurt MTN revenues

Johannesburg - Currency fluctuations, industrial action and declining termination rates have hit Africa’s biggest mobile network MTN for the six months ended June 30 2015.

MTN operates in over 20 markets across Africa and the Middle East and on Wednesday the company released its interim results which point to group revenues having fallen 4.9% to R69.2bn.

The company’s earnings before interest, taxation, depreciation and amortisation (Ebitda) fell 10.1% to R30.2m. This means the company experienced a 2.6 percentage point fall in its Ebitda margin to 43.7%.

Meanwhile, MTN’s headline earnings per share (HEPS) also dropped 10.3% to 654 cents.

"We've continued to see declining termination rates which have impacted on our revenues," MTN Group president and chief executive officer Sifiso Dabengwa told attendees at a results briefing on Wednesday.

"It's been quite clear to us that relatively weak currencies...have impacted our markets negatively.

"Industrial action in South Africa did impact our results,” he added.

However, other more positive results from the company indicate that its overall group subscriber base increased 3.4% to 231 million and its data revenue jumped 21.3% to R15.4bn. MTN’s interim dividend has also climbed 7.9% to 480 cents.

South Africa and Nigeria

The company also highlighted how challenges in its two biggest markets - South Africa and Nigeria - have particularly impacted on the business.

MTN explained that its South African unit’s performance was hurt by “handset supply chain challenges and industrial strike action during the period”.

A strike launched by the Communication Workers Union (CWU) earlier this year - which called for higher pay for staff - lasted over a month and was followed by the MTN SA CEO Ahmad Farroukh resigning.

MTN’s revenue fell 1.4% during the period in South Africa from R19.1bn at the end of June 2014 to R18.8bn at the end of June 2015.

In Nigeria, MTN said that a “weak macroeconomic environment, aggressive competition and operational execution challenges” hurt its business in that country.

MTN reported that its revenue in Nigeria fell from R27bn at the end of June 2014 to R24.6bn at the end of June 2015.

“Despite this, the operation grew its subscriber base by 4.9%, increasing total subscribers to 6.8 million and maintained market share for the  period,” said MTN.

Meanwhile, the company further said that its group revenue was impacted by currency fluctuations.

“Movements in the majority of the group's operational currencies against the rand negatively impacted performance,” said MTN.

“The rand strengthened by 8.7% against the Nigerian naira, 23.1% against the Ghanaian cedi, 10.6% against the Central African Franc, 5.8% against the Ugandan shilling, 36.9% against the Syrian pound and weakened 5.7% against the Sudanese pound,” MTN added.

Other challenges for MTN include problems in its Syrian and Yemeni markets.

MTN said that its Syrian business recorded a 1.6% drop in its subscriber base to 5.8 million. A brutal civil war has engulfed Syria since 2012, destabilising that country’s economy.

Yemen, which has come under military attacks from its neighbour Saudi Arabia, is also proving to be a challenging market for MTN.

“Yemen continues to operate under challenging conditions with the majority of  the management team now based in Jordan,” said MTN.

Despite these challenges, there have been bright spots in MTN’s Iranian operation.

The US is set to lift sanctions against Iran and subsequently the outlook in that country is looking more positive, according to MTN.

Irancell’s subscriber base increased by 0.5% while its revenue grew 13.9%.

Looking forward, MTN sees a challenging environment for its overall operation.

"This has been a challenging year; we expect positive revenue growth in the next six months," Dabengwa said in the briefing on Wednesday.

"Growing data revenue is an important part of our focus going forward," he added.

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