Power cuts knock R695m off MTN’s earnings

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 13 Mar 2023
MTN Group president and CEO Ralph Mupita.
MTN Group president and CEO Ralph Mupita.

Mobile operator MTN Group is reeling from the adverse effects of load-shedding.

This emerged when the company today announced its financial results for the year ended 31 December.

According to the telco, load-shedding impacted earnings before interest, tax, depreciation and amortisation (EBITDA) by R695 million.

The company incurred additional expenditure to meet the requirements of power, security and repairs, due to load-shedding and the vandalism of sites.

In September, MTN announced plans to power its Johannesburg headquarters with solar energy.

Over the years, South African mobile operators have been lamenting the challenges brought by the power crisis.

However, MTN Group today reported strong 2022 financial performance. This included an expansion in return on equity to 23.4% and a 10% increase in the dividend to 330c per share, in a challenging macro-economic environment of elevated inflation across its 19 markets.

According to the operator, in the year to 31 December 2022, total subscribers rose 6% to 289 million, with data subscribers growing by more than 12% to 137 million and Mobile Money users up by 21% to 69 million.

Demonstrating good operational execution and ongoing strategic delivery, in constant currency terms the group reported a 15.3% increase in service revenue to R194 billion and maintained a stable margin on EBITDA of 44%, says the telco.

It adds that EBITDA increased by 14.3% to R90 billion. MTN notes EBITDA was supported by the firm’s expense efficiency programme, which yielded R2.7 billion in savings, mostly in Nigeria and South Africa.

“The structurally higher demand for data and fintech services was sustained, with data traffic and fintech transaction volumes increasing by around a third each,” says MTN Group president and CEO Ralph Mupita.

“To support this, we invested more than R38 billion in our network, IT and platform infrastructure – an increase of 17% − while at the same time, reducing consumers’ average cost to communicate by nearly 23%.”

In a statement, the telco says the network investment expanded access to broadband services to almost 88% of the population (from 83% in 2021) as it focused on rural rollout, extending digital inclusion across Africa.

“Our contribution to society also included income taxes of approximately R14 billion paid to nation states in the year,” says MTN.

“Alongside the increase in capital investment, our proactive commercial, expense efficiency, supply chain, network and financial resilience interventions helped alleviate the impact on results of a tough operating environment.

“This included – across markets – high inflation and interest rates, weak local currencies, pressure on disposable income and in SA, the significant impact of severe load-shedding.”

The performance of MTN SA was solid, with growth in service revenue of 3.6% to almost R41 billion and an EBITDA margin of 39.2%, says the firm.

On MTN SA, Mupita says: “We are encouraged by the performance of the business and the focus on network resilience. Amid unprecedented load-shedding and the intensified need for backup power in the second half of 2022, MTN SA invested significantly to secure network resilience.

“With the state of disaster regulations gazetted, SA now has a unique opportunity to accelerate efforts to secure the resilience of critical national infrastructure, such as telecommunications.

“Government and business must jointly seize this moment and act decisively to deal with the quadruple crises of energy, logistics, crime and corruption, and youth unemployment. Inaction risks SA being a failed nation state.”

Across the markets, MTN says it continues to execute on its strategic priorities. “To build the largest and most valuable platforms, we expanded our fintech ecosystem and made progress in separating our fintech business from our GSM business, receiving offers for strategic minority investments in the MTN Group fintech structure.

“We anticipate completing the process to review offers and engage investors in May 2023.

“To drive connectivity operations, we increased voice, data and fintech revenue, rolled out more than 5 000km of fibre and invested in subsea cables.”

To create shared value, MTN notes it reduced its scope one and two emissions in pursuit of net zero by 2040.

“Diversity and inclusion remained central to our efforts – we achieved 40% women representation, moving closer to our 2030 target of gender parity.

“We also accelerated portfolio transformation, recording proceeds from asset realisations of R12 billion, and signing a share purchase agreement with a subsidiary of M1 Group to acquire all our shares in MTN Afghanistan for a gross consideration of $35 million.

“Looking ahead, we remain focused on executing on our Ambition 2025 strategy and maintain our guidance for performance over the next three to five years, despite elevated macro-economic risks in SA and Nigeria.

“Across our markets, in 2023, MTN plans to invest more than R37 billion in networks and platforms. Of this, we will spend R9 billion on the South African network.”