Subscriber disconnections and withholding of regulatory services in Nigeria is hurting MTN, Africa and Middle East biggest mobile phone operator, which reported on Thursday a 51.4% drop in 2015 full-year headline earnings per share (HEPS) to 746 cents despite a 4.1% rise in total subscribers to 233 million. HEPS is South Africa’s main profit gauge. By Gugu Lourie
The move deeper into the red by the mobile phone giant was partly driven by the underperformance of its Nigerian operation – the biggest asset in the company that has more than 61.3 million customers. Nigeria is by far and away MTN’s biggest and most enticing market but regulatory issues and stiff competition is impacting the telco’s profitability.
The company attributed the dropped in earnings to a R9.3 billion Nigerian regulatory fine provision, which impacted HEPS by 402 cents a share. However, stripping out the provision for the fine, MTN’s earnings would have dropped by 24.3%, which is still a huge number, indicating that most of the telco’s operations are not performing to their maximum levels.
MTN added that its earnings were also hit by hyperinflation of 54 cents versus a postive impact of 69 cents a share in 2014 financial year. Its investment in Africa/Middle East Internet Holdings also reported losses that impacted the company’s profitability.
In an attempt to calm investors, MTN said on a like-for-like basis HEPS has dropped by 14.3% when stripping out the Nigerian fine provision, hyperinfgaltion and the impact of losses on Africa/Middle East Internet Holdings.
The shares of MTN, which is valued at more than R246 billion, have plunged 28% in the past 90 days, as investors sold the stock after the Nigerian business, the company’s biggest mobile phone asset, was hit with a $5.2 billion fine, which was later reduced to $3.2 billion.
The group – which has operations in 22 countries including Iran, Afghanistan, Syria, Ghana, Cameroon, Uganda, etc – reported a flat revenue at R146 billion, helped by an increase in data revenue. The revenue remain flat due to a decline in voice revenue in Nigeria and reduction in handset revenue in South Africa.
Despite facing a huge fine in Nigeria and the company underperforming in 2015, MTN said it declared a 830 cents a share dividend for a second half of 2015, bring the total dividend for 2015 financial year to 1 310 cents a share.
Phuthuma Nhleko, the acting executive chairman of MTN Group, said in a statement to the JSE that the company anticipates declaring a minimum dividend of 700 cents a share in full year 2016, taking into consideration the uncertainty regarding the Nigerian fine.
“We have adopted a cautious approach to the dividend outlook for 2016, taking into account the interests of shareholders and lenders and the importance of maintaining an investment grade credit. The minimum dividends remain subject to the outcome of the regulatory fine imposed by the Nigerian Communications Commission and is at the discredit of the board. Should the operating condition improve, we will look to declare higher dividend than advised.”
MTN Nigeria, South Africa & Iran
MTN Nigeria, which is the company’s biggest asset, reported a 2.1% decline in revenues for the 2015 financial year.
While subscriber numbers rose 2.3% to 61.3 million after the company was forced by the Nigerian communications watchdog to disconnect 5.2 million customers. Its market share dropped to 44.7% versus 49% in 2014.
In Iran, MTN saw its customers rise by 5% to 46.1 million and total revenue increased by 11.6%.
The company said this was supported by the continued adoption of 3G and LTE services by the youth segment. This was supported by the continued adoption of 3G and LTE services by the youth segment.
While, the South African operations continue to face stiff competition from rivals, it delivered a 9.3% rise in customers to 30.6 million.
MTN is fighting to keep market share from competitors such as French-based Orage group that has been buying assets in Africa, British-based Vodafone, Millicom and Vodacom and overt-the-top players, which are fighting for a bigger slice of the telecommunications market.
Asserting that Africa’s biggest mobile phone operator will continue to invest despite these numbers, Nhleko said the telco will focus on improving network quality and capacity in key markets.
He added that the company will improve quality and throughput in homes and fixed locations through the deployment of FTTH in South Africa, Nigeria, Ghana and Iran in 2016.
Despite the bad news around the disconnection of subscribers and a ridiculous fine in Nigeria, MTN has continued to invest in its Nigerian and other assets.
Earlier in January, MTN announced it has acquired Visafone, Nigeria’s wireless network provider, to use it to deploy broadband internet in Africa’s largest economy. The deal seems to issue a clear message that MTN is committed to the lucrative Nigerian market despite a possible R59 billion fine imposed by the Nigerian Communications Commission on the South African-based mobile phone operator for failure to register customers.
The Nigerian Communications Commission also approved the renewal,and extension of the tenure of MTN’s operating spectrum in the 900MHz and 1800MHz frequency bands. The operator paid $94,2 million (R1.3 billion) as a spectrum fee for the 5-year extension period.
The telco also spent R3.5 billion to renew its licences in Côte d’Ivoire and Ghana.
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A very detailed account of MTN performance and its good they continue to pay a good dividend and still promising to pay in 2016. I love MTN as a stock still.
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