MTN shrugs off downturn

Johannesburg, 12 Mar 2009

Strong subscriber growth, currency movement and increased investment in infrastructure drove solid earnings for the MTN Group during the year ended 31 December 2008.

The group reported a 40% increase in revenue, to R102.5 billion (R73.1 billion in 2007), driven by subscriber growth. MTN recorded 90.7 million subscribers at 31 December 2008, compared with 61.4 million at the end of December 2007. The 48% increase was driven largely by MTN Irancell and MTN Nigeria, which added 10 million and 6.6 million subscribers, respectively.

The group's revenue was also enhanced by the relative appreciation of operating currencies to the rand. The depreciation of the rand against the US dollar resulted in the effective appreciation of many African and Middle Eastern currencies against South African currency, for a major portion of the year. This, says the mobile operator, positively affected its net trading results by approximately 15%.

Basic headline earnings per share increased by 43%, to 836.5c, for the period under review, while adjusted headline earnings per share increased by 33%, to 904.4c. EBITDA was up 36%, to R43.2 billion, from December 2007.

The company said this morning its pre-tax profit surged 44.6%, to R28.4 billion, while profit after tax grew to R17.1 billion, up 43.8% from 2007.

Cash generated from operations increased to R44.8 billion, from R34.3 billion, as a result of the company's strong operational performance, as well as the impact of a weaker rand.

Trying times

MTN says the period under review saw a strong focus on operational performance, as well as continued improvements in the roll-out of infrastructure. This enabled the company to sustain or improve its market position in increasingly competitive environments.

The group incurred expenditure of R28.3 billion on capital expenditure in 2008, an 84% increase over 2007.

MTN continued to focus on evolving its networks and actively seeking infrastructure, transmission and site sharing opportunities across its operations. The operator adds it also invested approximately R250 million in 2008 to gain access to significant submarine cable capacity through the SAT-3, WACS, Eassy and EIG initiatives.

“The successful capital expenditure roll-out programme utilised R26.9 billion of cash during the year. Nevertheless, net cash flow for the year was R7.4 billion before foreign exchange translation gains of R2.7 billion and movements in restricted cash balances.”

Back home

Locally, MTN SA performed well in what it describes as “challenging” conditions. Overall subscribers increased by 16%, to 17.2 million, while market share remained relatively consistent at 36% in 2008.

Postpaid subscribers grew by 10%, to 2.8 million, despite a slowdown in economic growth, stronger inflation, interest rate hikes and high fuel prices.

“Growth within the postpaid segment was mainly driven by the launch of the MTN Anytime value proposition in September 2008, which attracted more than 259 000 subscribers,” the company says.

Prepaid subscriber numbers grew by 17%, to 14.4 million, driven by the success of MTN Zone, which became the most successful MTN pay-as-you-go price plan ever launched, attracting 6.6 million subscribers in the 11 months after its launch in February 2008.

Average revenue per user (ARPU) in the prepaid market segment increased by 5%, to R97 a month, positively influenced by the success of MTN Zone and continued demand for lower-denomination vouchers, which stimulated usage.

Infrastructure investment

Postpaid ARPU increased by 2%, but the blended ARPU was negatively impacted by the mix between postpaid and prepaid subscribers.

Capital expenditure on infrastructure and distribution was a major focus of the year, with nearly R4.9 billion invested in the period, up from R2.8 billion the previous year.

“The key objectives, as regards the network, were to improve capacity, quality and coverage; modernise the network and make it more efficient; stimulate and support the development and launch of new products,” says the company.

MTN has advised shareholders that a cash dividend of 181c per ordinary share, in respect of the period 31 December 2008, has been declared.