Mergers, Acquisitions and Financial Results

Mobile phone operator MTN is looking at acquiring Vivendi’s 60 per cent stake in KenCell Communications as one of the options of expanding its footprint in East Africa. "We are assessing that," said Chief Executive Officer Phuthuma Nhleko during the announcement of financial results for the year ended March 2003.

"We’d like to consolidate in the regions we are in. It makes sense to develop hubs around the continent," he said confirming reports that the other option for the company that pulled out of the running for a third cellular operator’s licence in Kenya, would be to expand further north, around its operations in Nigeria and Cameroon.

The group’s profit leapt 305 per cent to $293 million as debt dropped 36 per cent. Mr Nhleko said MTN’s foreign operations were becoming more important as competition in South Africa drove down margins.

No dividend was declared, with the directors saying they believed it was in the best interest of stakeholders to reinvest earnings in operations or use them to reduce borrowings.

Analysts said MTN was focusing on its foreign operations, to counterbalance its inability to dominate in South Africa.

"We are constantly exploring other opportunities. While we were trying to get out of the woods in Nigeria, we had to focus on that. Now we are getting to the edge of the forest and we are comfortable looking at other opportunities," Mr Nhleko said.

MTN’s biggest triumph has been in Nigeria, where network expansion has yielded a 59 per cent market share and $146 million in after-tax profit for the year to March 2003.

Officials said MTN’s services have reached only 36 per cent of the population in Nigeria, leaving huge potential for growth.

The subscriber base grew threefold from 327,000 in March 2002 to reach 1,037,000 by March 2003. However, the network still needs major investments to increase its geographic spread and ease congestion.

At the same time, increased competition in South Africa had made it necessary to raise its subsidies on handsets and to offer more connectivity incentives, pumping up the cost of signing up new users.

MTN Cameroon has chalked up 431,000 subscribers, representing 54 per cent of the market while MTN Uganda had also grown to 363,000 subscribers by last March.

Liquid Africa