MTN has released its interim results for the six months ended 30 June 2020, reflecting a total revenue decline in South Africa despite strong performance across other sectors.
MTN South Africa reported a 5.7% decline in revenue over the period, bucking the trend of significant revenue growth across its other markets.
Group service revenue increased by 9,4% to R80.2 billion, which was led by the growth of 12,4% in MTN Nigeria and 19,4% in MTN Ghana.
The company attributed its loss in service revenue for South Africa to the loss of its roaming agreement with Telkom and Cell C’s lack of payment for its roaming deal.
“MTN SA recorded a 2.5% decline in service revenue, as a result of the lost national roaming revenues arising from the discontinuation of our roaming agreement with Telkom and effects of the continued accounting for Cell C revenue on a cash basis,” MTN said.
“The continued turnaround in MTN SA’s consumer and enterprise businesses has, however, supported a pleasing improvement insequential service revenue growth trend in the second quarter.”
The effects of both of these factors were reflected in MTN South Africa’s wholesale revenue, which declined by 41.4% over the period.
“We recognised R788 million in revenue from Cell C in the six months to 30 June 2020, and R673 million of Cell C revenues remained unrecognised at June 2020,” the company said.
“MTN SA commenced phase two of the roaming agreement with Cell C, effective 1 May 2020.”
“The arrangement envisages a three-year transition towards a full national roaming arrangement under which MTN will carry all of Cell C’s network traffic,” it added.
Big growth in data revenue
MTN South Africa saw significant growth in data revenue over the period, as well as strong commercial performance across most sectors of the local business.
Other key changes included the following:
- Service revenue decreased by 2,5%
- Data revenue increased by 16,7%
- Fintech revenue decreased by 1,2%
- Digital revenue decreased by 10,3%
- EBITDA increased by 3,3% to R8,4 billion
- EBITDA margin increased by 3,4pp to 39,9%
MTN said its good South African performance was achieved as its prepaid business began to recover from the impact of regulatory changes which cracked down on out-of-bundle data billing.
The company also noted a significant increase in subscribers over the period.
“Total subscribers increased by 137,000 to 29,0 million,” MTN said. “The prepaid base has started to stabilise as the impact of the discontinuation of the 1GB promotion abated.”
“At June 2020, prepaid subscriber numbers were down 349,000 to 22,5 million, while postpaid subscribers were up 486,000 to 6,6 million.”
“Included in the postpaid base, are 323,000 gross additions for short term university and college student deals,” MTN noted.
Effects of COVID-19
MTN said that COVID-19 has had a significant effect on its operations, although this has been somewhat alleviated by the allocation of additional spectrum in South Africa.
“The constraints of COVID-19 have delayed the pace of rolling out sites, however, our emphasis on the capacity and resilience of connectivity has ensured that our networks continue to remain stable and perform well,” MTN said.
“The relief spectrum released by authorities in some of our markets, including South Africa, has also enabled us to alleviate some of the pressure in some areas of our networks arising from the surge in data traffic.”
“Although there have been moderate disruptions, these have been largely mitigated by the measures we have put in place including having built up a healthy inventory of equipment and critical spares,” MTN said.
The company noted that the availability of high-end devices in South Africa has been a challenge across the industry, but the ability for customers to upgrade handsets was restricted by COVID-19.
“We continue to monitor and manage the impact of the pandemic on our network and supply chain closely to mitigate against significant interruptions to our business,” MTN said.
As of June 2020, MTN said the headroom on its South African network stood at 27%.