MTN looks to data growth in Africa

FY results generally in line with expectations but ‘pretty strong’ given tough market conditions – portfolio manager.

Data is a major growth area for the MTN Group, with low smartphone penetration, low data consumption per subscriber and the lack of fixed data services all contributing to a ‘very large data opportunity’ in Africa.

This is according to Aslam Dalvi, Investment Analyst at Kagiso Asset Management.

“MTN remains well positioned to capitalise on this opportunity,” he adds. 

On Wednesday, the MTN Group announced its financial results for the year ending December 2014, and it was evident that Nigeria continues to be a headache for Africa’s largest telecommunications group. Persisting regulatory obstacles as well as oil price volatility contributed to an overall performance that fell ‘below expectations’. MTN Nigeria’s revenue grew by 12.1%, helped out in part by rand weakness. 

“MTN is a strong performer in the emerging markets and is clearly dominant in that space,” comments Sudheer Singh, portfolio manager at Sasfin Securities. “Although Nigeria and other African regions are a worry, the group is one of the best at navigating its way through headwinds in the area.”

Bruce Main at Ivy Asset Management adds that despite the group’s troubles in Nigeria and other volatile regions, it is still “hugely cash generative and not massively expensive”.

“It has the most diverse geography around Africa, and despite the associated risks, we still like the business in the long term,” he says.

MTN says its focus in Nigeria will be on active subscriber management, competitive offerings and improving data usage. Looking ahead, the group cautioned investors that “some level of uncertainty remains with regards to the implications of the oil price and currency fluctuations”.

“The outlook for the business remains challenging with the company facing several near-term headwinds,” says Dalvi. “Results for 2015 will likely be impacted by a weaker naira, macro challenges across several of [MTN’s] African operations as a result of the recent collapse in the oil price, and continued competitive pressure in key markets.”

Group subscribers increased by 7.5% to 223.4 million, while MTN Nigeria grew its subscriber base by 5.5% to 59.9 million. 

FY results: more of the same

MTN Group’s financial results for the year ending December 2014 had no major surprises in store for the market.

Group revenue grew by 6.4% in the year to R146 billion, while South African revenue declined by 3.9% to R38.9 billion. MTN SA attributed most of this loss to a hefty decline in interconnect revenue due to lower mobile termination rates (MTRs).

“The operating performance of the business was broadly in line with expectations,” says Dalvi. “SA performance was lower, although this was driven by several once-off charges that impacted the numbers. Excluding these charges, the underlying SA performance has improved over the year.”

Singh agrees that the results were generally in line with expectations and were “pretty strong” given tough market conditions. 

“MTN’s operating margin was the standout result, along with strong data revenue,” he says. “Overall, it was more of the same from them, and we see the group continually push out steady results like this.”

Group data revenue increased by 33.2% in the year (contributing 18.7% to total revenue at year-end), “supported by an expanded 3G network, strong growth in data usage and an increase in the number of smartphones and 3G-enabled devices in our markets,” MTN stated.

MTN declared a final gross dividend of 800c per share, bringing the total dividend to 1.245c per share.


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