Demand keeps MTN profits rolling in
CONTINUING demand for telecoms services across Africa and the Middle East would give MTN another successful year despite the deepening global recession, CEO Phuthuma Nhleko said yesterday as the cellular operator posted a net profit of R17,1bn.
All its key figures enjoyed a strong surge in the year to December, and that should continue as its networks in Iran and Nigeria each expect to win 6-million more customers this year. The recession was making financial institutions averse to risk and borrowing money was tough, Nhleko said, but MTN could continue to expand as it had a strong balance sheet and generated a lot of cash.
The cash it generates is shown by its revenue of R102bn, up 40% from R73bn, while adjusted headline earnings per share of 904c were up 33% from 682c. Subscriber numbers also soared from 61,4-million to top 90,7-million. MTN will soon be able to claim more than 1-billion users, given its conservative goal of signing up 22,6-million more by Christmas.
While the amount of cash rolling in continues to rise, so does the amount rolling out again. More than R37,6bn has been earmarked for network expansion as it battles to handle the endless demand for airtime. Last year a huge R28,2bn in capital expenses went into its network, which was seen as a likely peak. But Nhleko said the roll-out had to be expanded rather than scaled back to handle increasing call volumes, an expected rise in data traffic and to defend its market share in countries where the level of competition was rising. The phenomenal growth in subscribers last year would not have been possible if it had not invested so heavily in network capacity, he said.
Of last year’s spending, R9bn was pumped into Nigeria where MTN was banned from advertising its services until it bulked up the quality of its network. That improved capacity now lets it serve 23-million Nigerians.
Its Iranian operation serves 16 million, and the relentless growth as it reaches more cities will soon see Iran serve more customers than its network in SA, which has 17,1-million users. The relatively young network has yet to pull its weight on the profit front, however, and Iran contributed a gross profit of just R1,4bn.
MTN’s growth plans saw it declare a dividend of 181c, letting it retain most of its cash to fund its entry into other countries. Angola and Ethiopia were cited as potential targets. Asia was another possibility, but despite large populations in Pakistan and Bangladesh there was a high level of competition from existing players. “Unless there’s an opportunity for a cluster of countries that gives us critical mass it wouldn’t make sense,” Nhleko said.
MTN is also moving into different but related technologies to offer more services to corporate customers. It has just completed the R1,4bn acquisition of networking company Verizon SA, giving it 23% of SA’s data traffic market. Verizon’s country manager, Angela Gahagan, has been appointed to head MTN Services, the division that is absorbing Verizon.
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