MTN swings to loss, despite gaining subscribers

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The Nigerian regulatory fine had a 500c negative impact on HEPS, says MTN.
The Nigerian regulatory fine had a 500c negative impact on HEPS, says MTN.

MTN has reported a full-year headline loss per share of 77c, compared to headline earnings per share (HEPS) of 746c a year ago. This despite growing group subscribers by over 3% to 240.4 million.

The group says the financial year ended 31 December 2016 was the most challenging year in the company's 22-year history, "precipitated by a number of material regulatory, macro-economic and political challenges experienced across our regions". Despite the difficulties, MTN says the business has begun to show encouraging first signs of a turnaround.

MTN says the headline loss per share was significantly impacted by the group's Nigerian regulatory fine, which had a 500c negative impact on HEPS. Other contributing factors included foreign exchange losses of 329c, MTN Zakhele Futhi's impact of 88c, and hyperinflation of 37c.

In June 2016, MTN agreed to a settlement amount of 330 billion naira ($1.671 billion at the time) to be paid to the Nigerian government in six instalments over three years. This after it failed to meet a deadline to disconnect 5.1 million unregistered SIM cards on its Nigerian network in 2015.

Full-year losses from MTN's 51% equity interest in Nigeria Tower InterCo BV, of 122c, were mainly as a result of unrealised foreign exchange losses on US dollar-denominated loans. These will be non-recurring from 1 February 2017 after MTN exchanged its 51% interest in Nigeria Tower for an increased stake in IHS Holdings.

Losses from MTN's investments in its Digital Group, mainly including Africa Internet Holdings, Middle East Internet Holdings and Iran Internet Group, amounted to 39c, while another non-recurring 73c loss came from professional fees related to the settlement of the Nigerian fine.

If the Nigerian fine had been excluded from the full-year results of both 2016 and 2015, HEPS would have come in at around 423c.

Group revenue was negatively impacted by the depreciation of the rand against the US dollar, as well as lower-than-expected top-line growth in Nigeria and South Africa. Revenue increased marginally by 0.4% to R146.9 billion, while data revenue grew by 16.7% to R39.5 billion. Voice traffic dropped by 1.7%, while data traffic shot up by 143% overall. The telecoms giant increased its capital expenditure by 19.6%, to R34.9 billion for the year.

Earnings before interest, tax, depreciation and amortisation (EBITDA) decreased by 13% to almost R52 billion, while the company's EBITDA margin dropped by 5.5 percentage points to 35.4%. Despite this, the group declared a final dividend of 450c per share.

Despite challenging conditions in Nigeria, MTN's operation there continued to improve its competitive position throughout the year. While revenue declined 6.3% in the first quarter of 2016 when compared to the same quarter in 2015, revenue growth improved steadily throughout the year and fourth quarter revenue increased by 4% year-on-year.

MTN Irancell and MTN Ghana reported a strong performance driven by data revenue growth. MTN Irancell benefited from the country's youthful demographics and higher smartphone penetration, while MTN Ghana's data revenue growth was attributable to low-cost smartphones sold following the successful launch of its 4G network.

Group data revenue increased 19.7% year-on-year, contributing 27% of total group revenue. This was supported by the group's strategic decision to accelerate network investment across its markets, particularly SA, Nigeria and Iran.

MTN also managed to repatriate R6.3 billion (EUR425 million) from MTN Irancell up to 31 December 2016, which was the entire amount due under a loan advanced for a licence fee in 2005.

"Subsequent to year-end, the operational dividends of the last five years presently due to MTN were paid by MTN Irancell totalling EUR468 million. This brings the total repatriation to EUR893 million."

MTN Uganda, MTN Cameroon and MTN Ivory Coast showed improved momentum towards the fourth quarter of 2016 following a competitive environment and subscriber registration challenges in the first half of the year.

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