MTN South Africa takes hit from 1GB data promotion

MTN has released its financial results for the year ended 31 December 2019.

The company’s South African operations saw the following headline changes, said MTN:

  • Service revenue increased by 0.4%
  • Data revenue increased by 5.2%
  • Fintech revenue increased by 11.2%
  • Digital revenue decreased by 31.4%

The company said that as a result, EBITDA increased by 8.4% to R17 billion.

Capex investments were R11.29 billion on IFRS reported basis, it added.

Service revenue

“MTN South Africa recorded a stronger performance in the fourth quarter, supporting marginal growth in service revenue for the year despite a difficult operating environment, “said MTN.

“Service revenue growth was supported by growth in national roaming revenue, but this was offset by a 4.1% reduction in consumer prepaid service revenue.”

“The prepaid business came under pressure due to ICASA’s end user subscriber service charter regulations, impacting out-of-bundle data revenue.”

It added that MTN South Africa would have recorded service revenue growth of 1.2% if all Cell C roaming revenue had been recognised.

Prepaid business and 1GB promotion

MTN SA’s consumer prepaid business showed an “improvement in momentum” in the second half of the year, with the decline in service revenue reducing to -2.6% compared to -5.5% in the first half to June 2019.

“In order to drive distribution cost efficiencies, MTN South Africa discontinued the lossgenerating prepaid 1GB acquisition promotion and similar incentives,” it said.

“This resulted in savings of over R80 million, but contributed to the churn of 2.3 million SIM cards, taking the subscriber base to 28.9 million.”

MTN SA’s results for the previous year – ended 31 December 2018 – showed it had 31.2 million subscribers at the time.

The consumer postpaid business, however, delivered service revenue growth of 3.1%, said MTN.

This slowed due to “deteriorating economic conditions and muted additions due to stricter vetting rules aimed at reducing credit risk”.

Roaming agreement and expenses

MTN said that its operating expenses were driven by increased network costs on the back of its network expansion and external factors.

These factors included load-shedding, battery theft, and site vandalisation.

“MTN South Africa’s continued investment in the network led to its endorsement by MyBroadband as Best Network and Best ISP (Supersonic) of the year,” said MTN.

During the period the company also signed a signed a new long-form roaming and services agreement with Cell C, subject to certain conditions.

“This is aligned to MTN’s strategy to further develop the group’s wholesale business and will allow both MTN and Cell C to harness greater efficiencies in providing telecommunications services, while supporting a more sustainable and competitive industry.”

Cell C remained current with the agreed payment arrangement during 2019, said MTN.

Now read: MTN CEO Rob Shuter to step down

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MTN South Africa takes hit from 1GB data promotion