MTN '08 Net Up 44%; Continues To Target Growth

Mergers, Acquisitions and Financial Results

MTN Group Ltd, Africa's largest cellphone network operator, said last Thursday it expects to easily pass the 100 million customer mark this year as it continues to invest aggressively and expand in a continent where mobile phone use still remains the lowest in the world.

The Johannesburg-based company posted a 44% jump in net profit last year as it grew its subscriber base to 90.7 million from 61.4 million, and Chief Executive Phuthuma Nhleko said MTN conservatively targets an additional 22.6 million customers by the end of 2009.

MTN's stock was buoyed by its results, and by 1253 GMT was trading 2.4% higher at 93.70 rand in a lower market overall. Net profit for 2008 increased to 15.3 billion rand ($1.5 billion), or 806.1 cents a share, from ZAR10.6 billion, or 559.2 cents a share, the year before, MTN said. Revenue for the year climbed to ZAR102.5 billion from ZAR73.2 billion in 2007.

African economies, initially isolated from the banking crisis that started in the U.S., now feel the sting of the global economic slump as demand for metals and other exports has dries up. South Africa, the economic engine of the continent, could be in recession for most of this year, Moody's Investors Service said Thursday.

Despite this, MTN said it is cautiously optimistic about the year ahead. "Mobile telecoms is almost an essential service in countries that have low fixed-line or poor fixed-line penetration," Nhleko said. "The resilience almost approximates a utility."

The company has more than doubled its subscriber base over the last two years through acquisitions and by launching operations in countries offering high growth prospects, but which some analysts cautioned were also high risk. Highlighting this, MTN's greatest growth in 2008 came from Iran and Nigeria.

Nhleko said the company continued to look for new markets and expected the continued drive for economies of scale, coupled with new entrants in many markets, would spur industry consolidation. "We're still of the view opportunities will present themselves and there will be consolidation," he said.

MTN has been looking for a foothold in southeast Asia and last year failed to agree mergers with two of India's largest mobile operators, Reliance Communications Ltd. (532712.BY) and Bharti Airtel Ltd. (532454.BY).

Nhleko said MTN, like its rivals, remained keen for Angola and Ethiopia to release operating licenses. The company currently operates in 21 countries in Africa and the Middle East. "This is a business that will always be driven by economies of scale," he said.

Finance Director Rob Nisbet said the company has approved an investment of ZAR37.7 billion in existing operations this year, albeit with some of this expected to roll over into 2010. That compares with ZAR28.3 billion in capital expenditure in 2008, much of which went toward expanding and improving infrastructure to handle increasing subscriber numbers.

Dow Jones Newswire