Good news for MTN

MTN is on the rebound after getting things under control in its Nigeria operation, with dividends and earnings expected to grow in the near future.

This is according to Sentio Capital’s Imtiaz Suliman speaking on BusinessDay TV.

“If you look at MTN, it is all about them unlocking some value in the Nigerian operation,” says Suliman.

This follows the MTN Group reporting a 20.8% decline in service revenue and R7.39 billion loss in its half-year results.

This was attributed to macroeconomic factors, including the further devaluation of the Nigerian naira and operational challenges in Sudan due to the ongoing conflict.

Another issue was foreign currency translations that affected reporting currency results.

However, Suliman pointed out that MTN’s renegotiated tower leases with IHS Towers and American Tower Corporation (ATC) will help to decrease its dependency on a dollar cost component.

As opposed to being linked to a discounted consumer price index, the leases are now majority naira-linked.

“This will bring some of the cost to local currency, which will benefit its margin,” Suliman said.

The renegotiated costs do not include technology-based pricing and include an energy cost component indexed to the cost of providing diesel.

IHS will provide MTN with 1,400 sites and ATC with 2,100.

One thousand of these sites will be rolled out over the next few years.

Although it is experiencing trouble in Nigeria, Suliman mentions MTN’s growth back home, given South Africa’s increased energy stability since load-shedding ended.

In its results for the first half of the year, South African operations grew service revenue by 3.3%, and the company’s EBITDA (earnings before interest, taxes, depreciation, and amortisation) in South Africa was up 4.3%.

MTN saw total subscriber growth of 0.8% to 288 million customers, with active data subscribers growing by 9.2% to 150.2 million.

“Despite the weak reported numbers, a key takeaway from the results was the strong operational (constant currency) performance,” said Victor Mupunga, head of research at Old Mutual Wealth Private Clients.

“Notwithstanding the current tough macro environment, the respectable operational performance gives us confidence that the group remains well-positioned to deliver solid returns once the macro headwinds abate.”

In addition to developments in its Nigerian infrastructure contracts, MTN South Africa said it constructed 145 new base stations this year and upgraded another 400 across the country.

This allowed the network to increase its 5G coverage by 44%, a nine-percentage-point increase since the beginning of the year and a 25-percentage-point increase since August 2023.

MyBroadband’s Speed Test results show the operator’s customers are currently achieving average download speeds of around 180 Mbps and average uploads of 40 Mbps on its 5G network, while latency is in the low 20ms range.

MTN said that it deployed LTE at 1,060 sites nationwide this year.

“We are continuously monitoring and optimising our network to meet customer needs for quality and service availability,” MTN SA network executive Rami Farah previously said.

“This level of resilience means that we can maintain our high standards of reliability and quality regardless of any challenges that otherwise may have caused downtime.”

Farah pointed out that this resilience has been proven in areas with unexpected load reduction and provinces that experienced extreme weather conditions, such as KwaZulu-Natal, Western Cape, and the Eastern Cape.

MTN also boasts a network uptime of 98%, which required the network to invest tens of billions of rands in backup power at its towers and other key network sites.

With energy security still uncertain, the mobile network is developing a 5 MW solar plant with a 2 MW battery energy storage system.

MTN is also developing four 5G-centred commercial proposals for mining, manufacturing, education, and logistics sectors. These will be concluded by the beginning of next year.

Another concern that threatens a network’s uptime is safeguarding base stations against theft and vandalism.

This has been a persistent threat to mobile networks in South Africa, and MTN reports that it has experienced 2,000 incidents of theft and vandalism across its sites in the past quarter.

However, Farah notes that the network is “working with law enforcement and implementing additional security measures, to combat these challenges.”