South Africa: No Stopping MTN As Revenue, Subscriber Numbers Rocket

Mergers, Acquisitions and Financial Results

MTN's US$5.5bn acquisition of the rival operator Investcom has given its figures a massive fillip, allowing Africa's most successful cellular network to report a staggering 90% rise in subscriber numbers and a 69% surge in revenue. The unstoppable growth has boosted its after-tax profit to R6.3bn for just half a year, with headline earnings a share up 17% to 324c.

Nonstop action in four regions -- east, west and southern Africa and the Middle East -- means MTN now has 48,2-million subscribers, who rang up a revenue of R34bn for the six months to June. That growth proved the decision to buy Investcom was "very sound", said CEO Phuthuma Nhleko, yet even if the acquisition was stripped out of its figures MTN's core operations grew their revenue 35%.

Nhleko has previously set a mid-term target of a 45% profit margin before tax, depreciation and amortisation, and has nearly achieved that with a margin of 44,4%. Nevertheless, he almost apologised for a mere 17% rise in headline earnings a share, which was "rather depressed" by the end of a tax holiday in Nigeria and by finance costs of R1,4bn, linked largely to acquiring Investcom.

The bulk of its profits come from SA and Nigeria, but as those markets mature it is keen to pump up its operations elsewhere. In SA the average monthly spending by each of its 13,4-million users dived from R164 in December to R149 as poorer users sign up and as the market remains highly competitive. A different risk faces Nigeria, where the end of its tax holiday will now hit profits with a tax rate of about 45%.

(source: Business Day)