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MTN optimistic about Nigeria fine settlement

Paula Gilbert
By Paula Gilbert, ITWeb telecoms editor.
Johannesburg, 25 May 2016
Executive chairman Phuthuma Nhleko says a new MTN group CEO will be announced by the end of June "at the latest".
Executive chairman Phuthuma Nhleko says a new MTN group CEO will be announced by the end of June "at the latest".

MTN continues to engage with Nigerian authorities over the $3.9 billion (R61 billion) fine it is facing in the country and is "awaiting feedback".

"We remain optimistic on reaching a conclusion on this matter in the short-term," MTN said in a SENS statement this morning ? released ahead of the group's annual general meeting which will be held later today.

This despite Bloomberg reporting last week that talks between Nigerian authorities and MTN had been suspended while the country's House of Representatives completes an investigation into the size of the penalty and how it was delivered.

The original $5.2 billion (R81 billion) fine was issued last October after MTN failed to meet a deadline to disconnect 5.1 million unregistered SIM cards on its Nigerian network. The penalty was later dropped by 25% to $3.9 billion, but the telco remains in drawn out negotiations with authorities to further reduce it.

The company made a provision of almost R9.3 billion for the fine in its financial results for the year ended 31 December 2015. This included a "good faith payment" of $250 million (R3.9 billion) already made towards settling the penalty.

"We will continuously monitor developments with regards to the Nigerian fine and review the adequacy of the provision at the end of the reporting period," MTN said today.

In the SENS statement, MTN executive chairman Phuthuma Nhleko also said the search for a new MTN group CEO "is well under way" and the company hopes to make an announcement by the end of next month "at the latest".

Nhleko has been holding down the fort since November 2015, when Sifiso Dabengwa resigned from his role as group CEO.

Group growth

At the end of last month, the group's subscriber base grew slightly to 230.3 million subscribers across its 22 operations.

This included a 7% decline in subscribers in Nigeria and an 11% decline in Uganda, mainly as a result of the non-compliant subscriber deregistration process in these countries which was only completed in the first quarter of 2016.

"The group took an exceptionally conservative stance related to the disconnection of subscribers that were deemed non-compliant, to mitigate future regulatory challenges."

During the first four months of 2016, MTN SA reported a 7% increase in year-on-year subscribers, while MTN Ghana grew its subscriber base by 20%.

Group revenue increased by 15% compared to the same four-month period in 2015, supported by a 21% decline in the average rand exchange rate against the naira and a 23% decline in the average rand exchange rate against the US dollar.

Nigeria struggles

During the first four months of 2016, MTN Nigeria's organic revenue was down 6% year-on-year. The company says this was mainly due to uncompetitive pricing arising from the suspension of regulatory services and regulatory restrictions that obliged operators to seek permission from customers to charge out-of-bundle rates upon the depletion of data bundles.

MTN Nigeria's data revenue also declined 12% ? mainly due to the withdrawing of regulatory services. Despite this, Nigeria's data traffic increased by 27% year-on-year, supported by the continued improvements made to the data network.

"While not without challenges, we expect MTN Nigeria's performance to improve given the focus on reconnecting subscribers and the re-instatement of regulatory services enabling the operation to provide more competitive tariffs and promotions," Nhleko says.

SA grows

MTN SA continued to show positive momentum and increased revenue 4% in the first four months of the year. This was supported by a 17% increase in handset revenue and 23% growth in data revenue driven by a 59% year-on-year increase in data traffic. Digital revenue was up 55%.

"Outgoing revenue was impacted by a 48-hour network outage in some key areas in February 2016, as well as a decrease in consumer spend over the period."

MTN says it expects the South African operation to report improved revenue growth through the rest of the year "supported by 3G and LTE network rollout, improvements in network quality and competitive offerings".

Data revenue in SA is also expected to benefit from aggressive handset sales.

Prospects for Iran

Following the partial removal of sanctions in Iran, the group expects to see an opportunity to expand services and more appetite for growth in this market.

"While it has taken longer than initially expected, MTN continues to engage the various related parties in an effort to repatriate approximately $1 billion [R15.6 billion] equivalent from MTN Irancell (where it holds a 49% share)."

This as MTN Irancell recorded a 7% increase in organic revenue for the period.

"We expect the group's performance to be impacted by the weak macro environment in key markets as well as by tough competition. We, nevertheless, remain confident about the longer term prospects of the countries in which we operate."

The group believes it is still well positioned "to become the leading digital global player across our markets in the next few years". This as it continues to see strong growth in data as well as its investments in online and e-commerce players, and related activities in the digital space.

The group expects full year capital expenditure (capex) for the group to be approximately R34 billion, as MTN SA has increased its capex target to R12 billion for the year.

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