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MTN ramps up Nigerian capex despite R25bn fine

MTN ramps up Nigerian capex despite R25bn fine.

MTN plans to double its capital expenditure (capex) in Nigeria this year, despite its West African unit preparing to pay $1.671 billion (R25.4 billion) to the Federal Government of Nigeria over the next three years, to settle a hefty fine.

The South African-headquartered telecoms operator plans to spend R11.1 billion to upgrade its network in Nigeria in 2016, more than double the just under R5 billion it spent on capex in 2015. This according to a presentation to Nigerian investors, published on MTN's Web site this week.

Africa's biggest mobile operator says the roll-out of 3G and LTE services in Nigeria remain a priority. The presentation also explained MTN's plans to increase 3G population coverage from about 67% to around 90% going forward.

The funding push comes after MTN Nigeria's capex declined by 40% in 2015 to a below budget R4.99 billion. The telco says improving the quality and data speeds of its network in key Nigerian areas also remains a priority.

This comes just a few days after the telecoms giant announced it would pay less than a third of a hefty penalty it faced from the Nigerian Communication Commission. The original $5.2 billion (R79 billion) fine was imposed when MTN Nigeria failed to meet a deadline to disconnect 5.1 million unregistered SIM cards in the West African nation last year.

The fine was later reduced to R3.9 billion (R59 billion), but after months of negotiations, Nigerian authorities and the MTN leadership last week settled on an amount of $1.671 billion to be paid in six instalments over the next three years.

MTN Nigeria says it expects improved competitiveness and operational performance in the coming year, and anticipates increased revenue "supported by reconnecting subscribers and new services approved beginning May 2016".

The SIM registration compliance process in Nigeria saw MTN drop 6.7 million subscribers in the financial year ended 31 December 2015. The telco then had to drop an additional 4.5 million subscribers in Nigeria in the first quarter of 2016 as part of the ongoing compliance process.

MTN remains Nigeria's largest mobile phone operator, with 57 million subscribers in the country, which brings in over a third of the group's revenue.

Investment drive

Last month, MTN SA CEO, Mteto Nyati, announced the SA business would also be upping its capital investment in the local network to R12 billion in 2016.

The new investment target was a 50% increase on the R8 billion outlined for SA's capex at MTN's full-year financial results presentation in March. The target for this year is also over R1 billion more than the telco's capex spend in SA of R10.95 billion in 2015.

"We have decided this is the time for us to continue to make investments. At a time when other people are cutting down, we are going to be making more investments," Nyati said.

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