Business review pays off for MTN

Business review pays off for MTN

E-commerce and tower company investments are not viewed as long-term strategic assets, will be monetised over time, according to operator.

Mobile network operator MTN increased its subscriber base by 16 million to 233 million, and its active data users increased by 10 million to 79 million and its active mobile money subscriber base is at 27 million, according to its financial results for the year ended December 2018.

The company has experienced several challenges to the market including the postponement of MTN's US$2-billion tax-related court case with Nigeria's attorney general, Turkcell's ongoing US$4.2-billion lawsuit, engagement with the Independent Communications Authority of SA's (ICASA's) Complaints and Compliance Committee (CCC) over a charge related to MTN's Social Bundle Amendment – WhatsApp monthly 1GB , and MTN Uganda CEO Wim Vanhelleputte having been deported from the country.

The company said it overcame several regulatory headwinds in 2018, the most material of which was the Central Bank Central Bank of Nigeria dispute on historical dividend repatriations.

"This was resolved and MTN announced in December 2018 that they had agreed to implement a notional reversal of the 2008 private placement and consequently made a resolution payment of $53 million. The group is committed to further enhancing its risk management and stakeholder management processes," the company stated.

Increased service revenue

MTN said it had met its medium-term targets and accelerated service revenue growth, and recorded a 10,7% constant currency increase in service revenue to R125,4 billion.

According to MTN its Group Ebitda rose more than 15% and reported headline earnings per share (HEPS) increased to 337 cents from 182 cents in 2017. Adjusting for once-off items HEPS would have been 565 cents per share. The total full year dividend of 500 cents is well covered and a final dividend of 325 cents has been declared.

The company said it conducted an extensive review of its portfolio "to reduce risk, improve returns and simplify MTN" and this review covered subsidiary companies, associates and its investments in e-commerce investments and tower companies.

"The group has R40 billion tied up in the value of the e-commerce and tower company investments and has announced that they are not viewed as long-term strategic assets of the group and will be monetised over time."

"The group has committed to the portfolio review realising more than R15 billion over the next 3 years excluding any proceeds from its R23 billion position in IHS."

MTN also announced that it would be disposing of its associate in Botswana, Mascom, for US$300-million where its lack of control position and MTN branding meant that the group is not able to execute on its BRIGHT strategy.

The group stabilised its gearing, bringing the holding company leverage down to 2,3 times at December 2018 from 2,9 times at June 2018 and within the target range of 2,0 to 2,5 times. The group's overall gearing moderated to 1,3x.

Group CFO Ralph Mupita added, "We have made good progress to improve the holding company leverage bringing it within the medium-term guidance range we set out. Proceeds we receive from the asset realisation program will support efforts to further reduce debt and de-lever the holding company balance sheet. We believe the holding company leverage is appropriate, and we can well manage the debt and deliver on our 500 cents progressive dividend policy in the future."

Rob Shuter, MTN's group president and CEO said: "We see significant opportunity to grow subscribers and voice revenue as we also execute on the large mobile data opportunity. We are also extending our BRIGHT strategy to build MTN into a digital operator with a major focus on the FinTech, digital, enterprise and wholesale business areas."

"Key focus areas for 2019 are the launch of our own music streaming and instant messaging applications and extending MTN mobile money from 14 to 18 countries through launches in South Africa, Nigeria, Afghanistan and Sudan," Shuter continued.

Considering the improved performance in 2018 and its growth plans, the group revised its guidance to investors upwards, targeting double-digit growth in service revenue, improved profit margins and capex efficiency and a new target to drive return on equity from 11% to over 20% in the next three to five years.