MTN is a leading emerging markets mobile operator, connecting 233 million people in 22 countries across Africa and the Middle East.
The Group’s results are presented on a regional basis in line with the Group’s new operational structure. This is comprised of South and East Africa (SEA), West and Central Africa (WECA) and Middle East and North Africa (MENA).
The SEA region includes: South Africa, Uganda, Zambia, Rwanda, South Sudan, Botswana (joint venture – equity accounted) and Swaziland (joint venture- equity accounted). The WECA region includes: Nigeria, Ghana, Cameroon, Ivory Coast, Benin, Congo Brazzaville, Liberia, Guinea Conakry and Guinea Bissau. The MENA region includes: Iran (joint venture – equity accounted), Syria, Sudan, Yemen, Afghanistan and Cyprus.
Although Iran, Botswana and Swaziland form part of their respective regions geographically and operationally, they are excluded from their respective regional results due to being equity accounted for by the Group.
Financial results snapshot for the six months ended 30 June 2016
Group subscribers remained flat at 232,6 million from 31 December 2015
Revenue increased by 14,0% (1,5%*) to R78 878 million
Data revenue increased by 32,2% (19,7%*) to R19 849 million
Voice traffic and data traffic increased by 7,9% and 135,3% respectively
EBITDA decreased by 3,3% (25,9%*) to R29 273 million
EBITDA margin decreased 6,6 percentage points to 37,1%
Headline loss per share of 271 cents**
Interim dividend of 250 cents per share
Capex increased by 26,9% (15,4%*) to R13 772 million
Nigeria regulatory fine re-measurement impact of R10,5 billion
Overview
MTN continued to operate in a challenging environment for the six months ended 30 June 2016. The financial performance for the period reflects the confluence of a number of material issues, which created the “perfect storm”. The Group has made strides towards resolving these challenges although many of these factors fall outside of its control.
The Group’s reported results were significantly impacted by the Nigerian regulatory fine. On 10 June MTN Nigeria resolved this matter with the Federal Government of Nigeria (FGN) and agreed to pay the FGN a total cash amount of 330 billion Nigerian naira (US$1,671 billion, using the exchange rate prevailing at the time) over three years in a full and final settlement. This was agreed in addition to complying with certain other regulatory conditions imposed as part of the settlement reached. The 50 billion naira (US$250 million) paid in good faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the settlement, leaving a balance of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time) outstanding. In June 2016 the first scheduled payment of 30 billion naira (US$124 million) was made. The remaining cash payable at 30 June 2016 amounted to 250 billion naira (US$882 million).
The Group has accrued the present value of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time), which in total had a negative impact of R10 499 million on reported earnings before interest, tax, depreciation and amortisation and impairment of goodwill (EBITDA) and a R8 632 million negative impact on the Group’s reported headline losses, or 474 cents on reported headline losses per share. The reported impact on the Group’s statement of cash flow for the period amounted to R5 870 million, which equates to the 80 billion naira paid during the period.
During the period, R1 324 million costs were incurred on a range of professional services relating to the negotiations that led to a reduction of R34 billion in the Nigerian regulatory fine to 330 billion naira (US$1,671 billion, using the exchange rate prevailing at the time). The board has exercised its judgement and approved the quantum of the professional fees incurred taking into account global benchmarks and the value delivered culminating in the final settlement of the Nigerian fine.
Apart from the Nigerian regulatory fine, the depreciation of local currencies against the US dollar had a substantial impact on the Group’s results. This resulted in foreign exchange losses amounting to R3 606 million during the period. MTN South Sudan reported an impairment on property, plant and equipment (PPE) of R259 million** (using a Rand/ Sudanese pound exchange rate of 0.376). When the impairment write-off is presented on an organic basis the impairment amounts to R2 632 million* (using a rand/Sudanese pound exchange rate of 3.837). This organic impairment write-off had a significant negative impact on organic EBITDA.
The Group’s underlying performance was impacted by weak macro-economic conditions affecting consumer spending, the withdrawal of regulatory services in MTN Nigeria from July 2015 until May 2016 and disconnections of subscribers related to subscriber registration requirements, mainly in Nigeria. MTN Nigeria disconnected the last batch of 4,5 million subscribers in February 2016. MTN Uganda and MTN Cameroon were also impacted by subscriber registration requirements. This resulted in significant free minutes provided for subscriber re-registration campaigns, contributing to a 12,2%* decline in the effective voice tariff. The Group’s performance was further impacted by aggressive price competition and under-performance of MTN South Africa.
MTN Irancell (joint venture – equity accounted), MTN Ghana and MTN Cyprus delivered strong operational and financial performances for the period.
