MTN interim results confirm impact on SA, Nigeria operations

Mergers, Acquisitions and Financial Results

A difficult regulatory environment and weak macro-economic conditions have impacted on MTN Group's performance in parts of its business, the mobile operator confirmed in a presentation of its interim financial results for the six months ended 30 June in Johannesburg today. A snapshot of its results highlighted an increase in Group subscribers by 3,4% to 231,0 million, a decrease in revenue by 4,9% to R69 210 million, an increase in data revenue by 21,3% to R15 412 million, and a decrease in earnings before interest, taxes, depreciation and amortisation (EBITDA) of 10,1% to R30 274 million. The mobile operator also experienced a decrease in basic headline earnings per share by 10,3% to 654 cents, and a decrease of 10,7% in attributable earnings per share to 653 cents. The drop in EBITDA margin, by 2,6 percentage points to 43,7%, was attributed to lower revenue and weaker local currencies impacting costs.

"The sale and lease back of towers, which were largely earnings neutral due to lower depreciation costs, were a drag on the EBITDA margin. However, good progress in transforming our operating model, maintaining cost growth below inflation and optimising resources, partly offset the decline in margin," the company said in a statement. It continued saying, "Notwithstanding the challenging environment, MTN remains well positioned in a rapidly evolving market, growing its subscriber base by 3,4% to 231,0 million. Despite a 62,5% decline in US dollar data tariffs year-on-year (YoY), the Group continued to benefit from increased demand for data services, increasing data revenue by 21,3%. This was attributable to an 87,0% YoY increase in data traffic as well as encouraging growth in digital and mobile financial services

"Lower voice tariffs (average price per a minute (APPM) declined 25,3% in US dollar terms), drove a 11,2% increase in billable minutes. The lower tariffs together with lower termination rates and pressure on consumer spending negatively impacted voice revenue growth resulting in a 4,9% decline in total revenue for the period."

Capex was reported to be R10 852 million, which is stated as being 18,0% higher than the previous period.

The mobile operator, which claims to connect over 230 million people across 22 countries in Africa, also acknowledged issues with handset supply chain challenges and industrial strike action hampered its South African operation. MTN South Africa's reported revenue declined 1,4%, while data revenue increased 26,6%. Revenue excluding handset and other revenue increased by 4,6% and EBITDA margin increased by 2,3 percentage points to 35,6%. Looking ahead the Group stated its intention to build on staff engagement and customer service within MTN South Africa, as well as accelerate capex plans to support medium term growth prospects “especially in data.
In July this year, at the time of strike action, the recently appointed MTN South Africa CEO Mteto Nyati told ITWeb Africa that the company had not ruled out job losses at the operator saying it was a measure to continue to be profitable and competitive. "That is something that we will always do. Today, tomorrow and forever we will always be looking at the cost structures of our business," he said.

The Group also expects a challenging remainder of the year for its Nigeria operation, citing tough operating conditions. "There will be a strong focus on active subscriber management and providing more competitive voice and data offerings to high value customers. We expect the large and small opco clusters to maintain the growth trajectory of the past six months," said MTN.

MTN Nigeria's revenue declined by 1,1%, while data revenue increased 21,3% and EBITDA margin decreased to 57,3%.
Source: News24Wire 5th August 2015