Telecommunications giant MTN has taken a year-end hit as it emerged from “one of its most difficult” years, marred by operational challenges, regulatory pressure and a hefty pending penalty in Nigeria, and exacerbated by weak macroeconomic conditions and increased market competition.
Presenting its financial results for the year ended December 31, 2015, executive chairperson Phuthuma Nhleko on Thursday said the JSE-listed group posted lower-than-expected earnings for the year under review, with headline earnings per share (HEPS) plunging 51.4% to 746c.
The rapid decline was largely owing to the Nigerian regulatory fine provision, which negatively impacted HEPS by 402c, and hyperinflation, which shaved 54c from HEPS.
MTN also experienced headline losses of 34c from investments in Africa Internet Holdings and Middle East Internet Holding and 39c from the sale of its tower companies.
On a like-for-like basis, HEPS declined 14.3%.
Reported earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased 19.2% to R59.1-billion, with the R8.3-billion profit from the sale of towers and a R231-million adjustment for hyperinflation in Iran, Syria and Sudan offset by the R9.3-billion regulatory fine.
Excluding these impacts, Ebitda declined 8.6% to R59.9-billion during the 12 months to December.
The group recorded a 3.9 percentage point decline in its Ebitda margin to 40.9%, impacted by lower Ebitda margins in Nigeria and in MTN’s large and small opco clusters.
Group revenue remained flat at R146.3-billion, while the group’s operating costs increased by 7.2% during the year under review.
MTN Nigeria’s competitiveness in the market was compromised by the suspension of regulatory services in October and a $5.1-billion fine, later reduced to $3.9-billion, from the Nigerian Communication Commission for the late disconnection of about 5.1-million subscribers whose registration documents were considered incomplete.
MTN, withdrawing the matter from the Federal High Court, last week made a good faith payment of $250-million to the federal government, as discussions continued to reach an amicable resolution.
“In the near term, we anticipate the resolution of the ongoing suspension of regulatory services which continues to restrict new tariff plans and promotions, the suspension of regulatory services and the subscriber registration requirements, which led to the [overall] disconnection of 6.7-million subscribers,” Nhleko commented.
While the operation reported a 2.3% increase in subscribers to 61.3-million during the year under review, its market share fell from 49% to 44.7%.
The Nigerian unit’s total revenue decreased 2.1% and Ebitda margin declined 5.6 percentage points to 53%.
Capital expenditure (capex) in Nigeria declined 40.4% to R5-billion during the 12 months to December, owing to the tower transaction and the increased use of build-to-suit towers.
Despite this, 597 new second-generation (2G) sites and 1 856 co-located third-generation (3G) sites were added to MTN Nigeria’s infrastructure portfolio during the year.
In South Africa, the operations continued a successful turnaround, with the subscriber base increasing by 9.3%, surpassing 30-million customers, and revenue increasing 2.9% owing to a 37.2% growth in data revenue.
South Africa’s capex amounted to R10.9-billion in the 2015 financial year – a 92.9% rise on the prior year. Some 966 2G, 1 593 co-located 3G and 3 148 co-located long-term evolution (LTE) sites were added during the year under review.
Meanwhile, in the long-embattled Iranian market, MTN had made some headway after sanctions had been lifted.
MTN was now working towards remitting some R15.8-billion from MTN Irancell during the first half of this year.
Irancell had delivered a strong performance despite the impact of a slow economy and sanctions, with subscribers increasing 5% to 46.1-million in a “highly penetrated market”, with revenue increasing 11.6% and data revenue increased by 90.2%
MTN Irancell’s Ebitda margin decreased by 1.3 percentage points to 41.5% as a result of an increase in regulatory fees and transmission costs associated with 3G and LTE network roll-out.
MTN injected R8.5-billion in capex during the year to modernise its network and continue its expansion of the 3G and LTE networks, with an additional 432 2G sites, 2 443 co-located 3G sites and 1 266 co-located LTE sites rolled out during the period to December.
Overall, capex for the year increased 15.7% to R29.2-billion, with the group having rolled out 3 116 2G sites, 7 891 co-located 3G sites and 5 241 co-located LTE sites.
The group also rolled out 1 469 km of long-distance fibre and connected a total of 1 164 sites to fibre across its operations.
MTN declared a full-year dividend of R13.10.