Africa's largest mobile operator reports it experienced "good growth" in data and MTN Mobile Money usage, but voice revenue remained under pressure in key markets during the six months ended 30 June.
Reporting its interim numbers this morning, the company stated its Nigerian operation "delivered a robust performance, in line with market expectations", but said its South African business remained under pressure and steps were taken to improve its performance.
While group revenue for the six months increased by 10.7%, to R72.7 billion, supported by the continued weakness of the South African rand, MTN says revenue from its local operation declined by 7%, to R19.1 billion. "This was mainly the result of lower outgoing voice revenue, which declined by 8.6% to R8.4 billion. Incoming voice revenue declined by 30.4% as the impact of the mobile termination rates (MTR) reduction took effect during the second quarter," the company says in a statement.
Local data revenue, including MTN Business, increased by 13.7%, to R4.4 billion and contributed 23.4% to total revenue. "This was a satisfactory result, despite a decrease of 38.1% in the average price per megabyte given the aggressive price competition. Increased 3G coverage and competitive data bundles were the main contributors to this growth. The number of data users increased by 2.7%, to 14.7 million and the operation had 5.3 million active smartphones on its network," MTN says.
The mobile operator's market share declined by 2.7 percentage points, to 31.9%, as competition intensified in the prepaid segment. During the first quarter of 2014, the South African operation's subscriber base contracted by 825 000 subscribers and during the second quarter it grew by 394 000, to reach 25.3 million subscribers at period-end.
MTN explains that the improvement in subscriber growth was mainly due to focused and targeted promotions to the prepaid segment, which included the introduction of the widely successful "79c per minute" price plan.
Locally, the company says it "made good progress" in controlling costs, with operating expenses declining 6.8%, underpinned by savings in distribution and marketing costs.
During the reporting period, MTN says local capex of R2 billion was focused mainly on improving 3G capacity. "During the period, we added 220 new 2G sites and 400 co-located 3G sites. Our 3G population coverage increased to 83.9% at the period-end."
Reducing churn
Group subscribers increased by 3.5%, to 215 million. During the period under review, the operator says it "focused on reducing churn, offering competitive segmented offerings, as well as improving network quality and capacity as key differentiators in our value proposition".
Group earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19.6%, to R33.6 billion, excluding the profit from the sale of towers, says MTN. Basic headline earnings per share increased by 9%, to 729c, and attributable earnings per share rose by 4.4%, to 731c.
Cash inflows generated by operations increased by 17.3%, to R30 billion. The increase in cash generated and the reduction in net interest paid resulted in a 28.4% increase in cash flows from operations to R6 234 million.
"MTN made good progress on delivering on our strategy in the period. The group continues to improve operational and cost-effectiveness, as well as explore opportunities to expand our product offering outside of traditional voice into the digital space," says MTN president and CEO Sifiso Dabengwa.
"Furthermore, the group continues to benefit from our ongoing investment in the network, which enhances MTN's offering and positions us for further growth."
Commenting on MTN's results, Frost & Sullivan ICT industry analyst Joanita Roos says: "The competitive segmented offerings, in combination with MTN's improving network quality and capacity, are the key factors supporting its growth over the period."
According to Roos, MTN will continue its solid investments in both infrastructure and infrastructure-sharing initiatives to ultimately ensure network quality and capacity, which are key factors leading to continued growth and sustained market position.
Overall, she adds, MTN posted a solid performance, mostly driven by its international operations. MTN is expected to continue to explore opportunities and expand its product offering beyond the traditional voice, including MTN Mobile Money, broader financial service offerings, innovative ICT solutions and a move into the digital space, Roos concludes.
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