Africa's largest cellular operator, MTN, this morning indicated it is looking for expansion opportunities in emerging markets, echoing analysts' previous comments that it could be involved in a large deal within the next two years.
The group this morning presented its annual results for the year ended 31 December 2009, saying there is a real possibility it will look farther east than its current operations for possible growth paths.
However, CEO Phuthuma Nhleko said any opportunity would have to be of a significant size and add critical mass to the company. He said MTN will look at every opportunity that comes its way; however, it is unlikely to look at Eastern Europe as an expansion target, but he added: “I am not saying never.”
Nhleko added that, in South America, if there were opportunities, these would have to be “opportunities of size”.
MTN had a bank balance of R24 billion, at the end of 2009, which allows it significant leeway when looking for a merger or acquisition, despite having to pay back debts to the tune of R15.8 billion this year.
RICA woes
The company presented its financial results to analysts and investors this morning at its campus, on the West Rand.
Group subscribers have grown 28%, to 116 million, while revenue is up 9.2%, to R119 billion.
Nhleko said growth of prepaid subscriptions was disappointing, although it has since started picking up. He explained the company was slow off the mark in implementing RICA and it took time to get the systems right.
Previously, MTN had indicated a flat net addition of subscribers for the year, but it had underestimated the effects of the legislation.
Some 5.5 million prepaid subscribers, of the company's 13 million prepaid subscriber base in SA, have been registered in terms of the Act.
Across the borders
Nigeria, the company's largest operation, added seven million subscribers in the last year, and MTN spent R10 billion in upgrading the network capacity and quality. It has also completed phase two of a 3G rollout in the country, with phase three now under way.
Nhleko said: “There has been a huge benefit from the capital investment.”
Ghana, the most competitive environment in which MTN has a presence, saw the addition of 1.5 million subscribers during the year, and the company spent R2.6 billion on its network in the country.
Iran has grown into a larger market than SA, in about three years. Despite the scepticism the company's move into the country was met with, Nhleko is “delighted” with the performance. MTN added seven million subscribers during the year and spent R3 billion on an aggressive network rollout.
In Syria, the company added just under 700 000 subscribers, but has slowed capital expenditure, because of concerns about its build, operate and transfer (BOT) agreement, which it expects to have resolved by year-end. Under BOT, the company will have to build and operate a network to a point where it is ready to hand over to the Syrian government.
Nhleko said MTN has seen subscription growth in all of its key countries, apart from SA. In the year ahead, however, it aims to add 20 million subscribers to its base, with the bulk of these coming from Nigeria and Iran.
SA is expected to add 800 000 to the company's subscriber base. MTN is looking for new growth opportunities and, while the mobile operator will initially focus on growing what it already has in Africa and the Middle East, Nhleko said it will then look further east for growth.
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