Nigeria fine among several challenges impacting on MTN Group results.
Based on its financial results for the year ended 31 December 2016, MTN Group has described the period under review as “the most challenging year in the company’s 22-year history”.
According to results presented at the company’s offices in Johannesburg on 2 March, EBITDA decreased by 13,2% to R51 981 million, EBITDA margin decreased by 5,5 percentage points to 35,4%, while Group subscribers increased by 3,3% to 240, 4 million.
MTN recorded a 0,4% (R146 894 million) increase in revenue (impacted by the depreciation of the rand against the US dollar as well as lower-than-expected top-line growth in Nigeria and South Africa), along with a 16,7% increase in data revenue to R39 546 million, while voice traffic decreased by 1,7% and data traffic increased by 143%.
In a statement, the operator explained that MTN South Africa delivered a sub-optimal result in the first six months of 2016, with network, systems and customer service challenges.
“The operation significantly increased its net promoter score (NPS) particularly in the fourth quarter where it increased its NPS by 8 percentage points (pp) to 81% when compared to the same period in 2015. MTN South Africa’s earnings before interest, tax, depreciation, amortisation, impairment of goodwill, net monetary gains and share of results of joint ventures and associates after tax (EBITDA) in the second half of the year increased by 31,0% (excluding the MTN Zakhele Futhi share-based payment expense) compared to the first six months of the year,” said MTN.
Nigeria impact
The operator said regulatory challenges, subscriber disconnections and withdrawal of regulatory services in the first half of the year impacted its Nigeria operations. The Group recorded several once-off costs including the Nigerian regulatory fine of R10 499 million, professional fees related to the settlement of the fine of R1 324 million as well as the R530 million Project Winback (relating to the reconnection of subscribers in Nigeria.)
The company added that while its Nigeria operation recorded a 6,3% drop in revenue during the first quarter of 2016 (compared to the same period in 2015), an improvement in network quality and “attractive value propositions” there was an improvement in revenue growth and in Q4 of 2016 secured a 4,0% increase (year-on-year).
“This trend continued in early 2017, with revenue in January 2017 up by approximately 16% YoY as the business continued to regain lost market share. We expect YoY growth to be maintained for the month of February 2017. NPS more than doubled in the fourth quarter of 2016 when compared to the same period in 2015. However, the depreciation of the naira against the US dollar negatively impacted EBITDA margin and drove US dollar-linked costs higher,” the company stated.
Towards the end of February 2017, MTN Group Executive Chairman Phuthuma Nhleko expressed concern over recent protests at the company’s offices in the West African country and used his discussion with the Nigerian Communications Commission (NCC) in Abuja to appeal for additional spectrum.
MTN Uganda, MTN Cameroon and MTN Ivory Coast showed improved momentum towards the fourth quarter of 2016 following a competitive environment and subscriber registration challenges in the first half of the year, it added.
Measures to transform
The operator underlined its transformation initiative IGNITE, initially focused on its two biggest operations – MTN South Africa and MTN Nigeria.
Through its IGNITE initiative, the company aims to accelerate revenue growth, translate a greater percentage of revenue into EBITDA and profit, improve processes, accelerate the diversification of revenue streams and focus on customer experience, among other objectives.
At the same time, the operator emphasised the contribution made by its lifestyle and mobile financial service offerings, with MTN Mobile Money accounting for 20,2% of total digital revenue.
“The number of MTN Mobile Money registered customers grew by 18,4% to 41 million, supported by a strong performance from MTN Ghana and MTN Benin. The number of 30-day active customers increased by 55,3% to 15,4 million across 15 countries. MTN Mobile Money revenue increased by 50,7% to R2 829 million off the 2015 base. Five operations (compared to two in 2015) had over a million active customers each. This is a critical tipping point for the product. We continued to focus on advanced financial services such as remittances (28 corridors have been established), micro-lending and savings offerings,” the company added.
During January 2017, MTN exchanged its 51% share of Nigeria Tower InterCo B.V. (the parent of Nigerian telecoms tower operator INT Towers Limited) for an increased stake in IHS Holdings Limited (IHS). MTN’s stake in IHS increased to approximately 29% from approximately 15%
“This transaction enables MTN to simplify its tower ownership structure and diversify its exposure to tower infrastructure across the IHS Group. Through this transaction (and with effect from 1 February 2017), MTN will no longer equity account for INT. In addition, this exchange allows MTN to benefit economically from its previously owned passive infrastructure and continued network investment,” the operator stated.
Rob Shuter is scheduled to take over from Nhleko on 13 March 2017.