MTN withdraws cautionary in late-night move
ANALYSTS and investors expecting major news from MTN today — amid rampant speculation that it may be an acquisition target — better get used to the cellular operator remaining independent after it withdrew a cautionary notice late last night.
But the cancellation of what were widely tipped to be acquisition talks cannot take the shine off MTN’s interim results, which showed healthy growth in all its major operations.
MTN now claims to be king of the continent not only by revenue and profits but also by subscriber numbers, with its customer numbers soaring 32% over the six-month period to 20,6-million. While subscriber numbers cited by the cellular operators are sometimes questioned by market watchers, the latest figures show MTN has overtaken Vodacom, which claims 19,1-million customers.
MTN’s revenue was up 25% to R17,2bn for the past six months alone. Net profit jumped 31% to R4,4bn as it reaped a hefty profit margin of 41,7% on its earnings before interest, tax, depreciation and amortisation.
Headline earnings a share followed suit with a 30,8% climb to 222,5c. Long-term borrowings stand at R3,7bn, with cash on hand of R5,2bn.
MTN has made several recent moves to ensure its spectacular growth continues. This week, it confirmed that it had paid €300m for a 49% stake in Iran’s second cellular operator.
It is also bedding down a new 44% stake in Mascom in Botswana, bought for R837m, along with the acquisitions of small networks in Côte d’Ivoire and Zambia. Those three moves added just under 1,5-million subscribers, although MTN will need to follow through with more investment capital to improve the network coverage in those countries.
The company now earns 43% of its revenue and 55% of its operating profit in other countries. Those foreign activities have pushed up its profit margins too, with MTN Nigeria producing a spectacular 52,2% margin. In SA, it maintained a profit margin of 32,7%, and enjoyed strong subscriber growth to hit 8,9-million users. But their average monthly spending dipped 9% to R168 as lessaffluent customers signed up.
MTN is also spending money quickly, with Nigeria soaking up R2,2bn or 58% of the overall capital expenditure in the period. A total of R7,5bn is expected to be invested over the nine months to December 31. Depreciation and amortisation charges rose 17,1% to R1,7bn, mainly from the capital investment in Nigeria, and all the profits generated there are reinvested into the business.
Data services contributed 6,3% of the revenue, up from 5,5% last year, with the company admitting that the adoption of new services has been slow.
Across several of its operations the trend remained the same — user numbers up, but the average customer spending down as lower income users sign up.
To diversify its investment portfolio, the group will “continue to explore value-enhancing expansion opportunities in Africa and the Middle East”, the directors said. Business opportunities “complementary to the core mobile telephony business” will also be pursued.
That may see MTN get involved in fixed-line operations where they go hand in hand with a cellular licences, as well as initiatives such as cellphone banking.
The board says that if the current market conditions continue, the group will show good subscriber growth and maintain a strong market position in all its operations. |
