MTN's strongest contributor has experienced a dramatic turnaround in the company's performance for the six months ended 30 June.
Speaking at the results presentation this morning, CEO Phuthuma Nhleko said the South African operation has faced its toughest six months ever. “These challenges have been precipitated by a number of issues,” he added.
The local operation has produced some disappointing numbers for the half year, with MTN losing 52 000 prepaid subscribers over the period under review. “We have seen high churn in prepaid in SA.”
Nhleko noted that South Africans are starting to take up dual SIMs from MTN and competitor networks, to take advantage of specials that are offered on other networks. “We have also seen declining ARPUs at postpaid base. During the recession people are spending less.”
The company only gained a total of 62 000 new subscribers in the local market, leaving its market share at 34%.
Passing phase?
Nhleko said the global economic crisis is only partly to blame for the troubles in its South African operations. “We have also had operational challenges we had to deal with. Mainly issues of [not] being strong in the market as competition came in and some technical challenges.”
The company is in the process of outsourcing its internal IT systems, including its billing system, which Nhleko explained has had an impact on the local operation. It has also been upgrading its networks and installing a fibre network, which he admits has caused network quality troubles.
“The network upgrade, with service interruptions and troubles in the distribution channel with competitive products and high subsidisation, has caused the contribution of SA network additions to be low.”
During the same period last year, the SA and East African market showed year-on-year revenue growth of 18%, compared to this year's 10.2%.
Analysts at the presentation said the South African operation seems to be on an accelerated decline.
Despite the figures, Nhleko pointed out: “We believe it's a phase, and we are working hard to reverse this.”
Group is good
While the South African operation has shown disappointing growth, and group margins remain under pressure, the company is still on a solid growth path.
The group's revenue has increased by 24.2%, to R57.3 billion, and it managed to secure a total subscriber base of 103.2 million. The biggest contributor to the company's growth was the West and Central African markets, which contributed 47% of its total revenue, it said.
MTN's EBITDA is up 24.8%, to R24.5 billion, and headline earnings per share have been boosted by 22.5%, to 415.5c. Adjusted headline earnings were down 10.9%, to 363.8c.
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