MTN disruptions will taper off, says Phuthuma Nhleko

MTN group is showing signs of a recovery following one of the most difficult years in its 22-year history.

The company reported its first full-year loss as a result of a number of one-off factors, chief of which was the multibillion-rand Nigerian fine.

For the 2017 financial year, it has budgeted R35bn for capital expenditure as it moves to claw back its market share and retain existing customers in many of its key markets.
Of that, R11.5bn will be invested in SA, where the group is aggressively upgrading its network to surpass that of its big rival, Vodacom. The group is also targeting 8.2-million new subscribers by the end of 2017.

Executive chairman Phuthuma Nhleko has said recent disruptions in some of MTN’s markets will taper off. "We have no doubt we are still well positioned [in many markets]. The fact [is], those countries are very much still in the primary stage of demand," he said.
MTN had implemented a transformation initiative, Ignite, to accelerate revenue growth through, among other things, focusing on digital services.

 

 

"Digital services have increasingly become a crucial aspect of growth of revenue as we face lower tariffs and declining voice revenue," said Nhleko.
Moreover, the sector is changing. Nhleko said some operations would in the next year or two become predominantly data companies, which required internal changes.
MTN’s two biggest markets, SA and Nigeria, are expected to show mid to upper single-digit growth. Mergence Investment Managers portfolio manager Peter Takaendesa said the worst was over for MTN. It was now up to the new management team to execute "what looks like a credible turnaround programme and diversify the group’s revenue sources longer term", Takaendesa said.
MTN had tackled the key issues that affected its operations in several markets.
"The market is likely to be comfortable if weaker results are simply a function of cyclical economic pressures and not caused by company-specific execution problems," he said.

Chief investment officer at Falcon Crest Asset Managers Farai Mapfinya said the turnaround programme appeared to be a "hybrid of the back-to-basics MTN of the past", but with the realisation that they had to close the innovation gap between MTN and Vodacom that had been widening over the past few years.

MTN also lagged materially relative to competitors in Nigeria and "we see this as an effort to reclaim that leading edge", Mapfinya said.
MTN said its network quality in SA was better than Vodacom’s in a number of key cities.
MTN’s share price jumped 8% to close at R126.75, driven in part by a dividend of R4.50, slightly less than the previous period and partly because of the repatriation of a total of €893m from Iran. The money is made up of loan repayments and
dividends.
MTN plans to sell about 35% of its operation in Ghana to local investors before the end of 2017. The company, which operates in 22 countries across Africa and the Middle East, has 240.4-million subscribers.