Mergers, Acquisitions and Financial Results

In order to deepen its business and increase subscriber base, MTN is seeking expansion opportunities in the Middle East and other parts of Africa where it currently has no presence. MTN Group CEO Phuthuma Nhleko speaking at the group's presentation of its six months results in South Africa said that in order to add more value to the business, diversification outside Africa had become imperative.

He explained that diversification opportunities were available for the company in the Middle East, stressing, "Of course the Middle East seems an obvious logical extension".

There are GSM licenses to be bided for in Saudi Arabia and the United Arab Emirates, among others next year, while Egypt is also planning to issue a third GSM licence. The CEO would however not confirm whether the company would submit bids for the licenses expected to be issued in these Middle East countries.

Said Nhleko: "As in the past, the group will continue to explore value-enhancing international expansion opportunities in line with the company's strategic and financial criteria to enhance shareholder returns. The currently adopted conservative dividend policy of 6-7 times cover of adjusted headline earnings, paid annually, will be reviewed at the end of the year taking expansion opportunities into consideration."

Apart from South Africa and Nigeria, which represents the nerve of MTN operations, the company has other smaller operations in Cameroon, Uganda, Rwanda and Swaziland.

Despite the quest for more opportunities outside of its current operations, Nhleko says that the company has confidence in its operations in Nigeria and South Africa.

"Assuming that current market conditions prevail, we are confident that, while the competitive environment is intensifying, South African operations will continue to generate strong free cash flows for the Group. MTN Nigeria is expected to show increasing subscriber growth," averred Nhleko.

In the results released last week, MTN reported revenue earnings of R13.49 billion, about N296.72 billion, up 22% from the R11.72 million achieved in the same period the previous year.

The results for the six months also showed massive subscriber growth in the period under review. MTN's subscriber numbers rose by 40% to 11 million. MTN Nigeria increased its active subscriber base by 32% since March to 2.59 million. In SA, the group recorded 6.9 million capable subscribers. In March, it had 6.27 million subscribers in South Africa.

While in Nigeria, where revenue grew 38% to R4.6 billion (about N99.484 billion), in SA revenue rose from R7.16 billion to R8.24 billion (about N178.205 billion).

In other markets, MTN Cameroon maintained market leadership in a highly competitive market. Subscribers increased to 689 000, representing a 19% increase from 31 March 2004. ARPU (average revenue per user) declined slightly to US$23 for the period ended 30 September 2004.

MTN Uganda increased its total GSM subscriber base by 23% since 31 March 2004 to 609 000, fueled by continuing strong demand for services. Following strong subscriber growth, MTN Uganda's ARPU decreased to US$20 from US$22 for the year to 31 March 2004.

MTN Rwanda experienced slower subscriber growth, but still managed to increase its active subscriber base to 170 000. ARPU of US$20 was recorded, compared to US$22 to 31 March 2004.

MTN Swaziland achieved strong subscriber growth of 36%, which resulted in the ARPU decreasing from R223 to R212.