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MTN Nigeria Records N32.7bn Profit
From Phillip de Wet in Johannesburg, 11.18.2004
The half year financial results of MTN Group released yesterday in Johannesburg, South Africa for March – September 2004 period, showed that MTN Nigeria made a profit after tax of N32.765 billion (R1.486 billion). The telecom firm is said to now have some three million subscribers as it continues to make more money in Nigeria than in its far more established South African flagship operation. At its financial results presentation for journalists and analysts in Johannesburg yesterday, MTN Group Chief Executive Officer, Mr. Phuthuma Nhleko, disclosed that the Nigerian result rose by about 28 percent compared to the same period last year. In contrast, the South African market netted the company R1.42 billion (N31.309 billion), an improvement of 51 percent. The Nigerian operations remained more lucrative despite a lower profit margin as Nigerians were said to still spend on average $48 per month on MTN, compared to $29 in South Africa and $23 in Cameroon. However, MTN’s profit margin in Nigeria as measured on earnings before interest, tax, depreciation and amortisation (EBITDA) stayed at 51 percent. That figure was 52 percent for Uganda and 54 percent in Swaziland. The fast-growing MTN network in Nigeria also saw it overtake South Africa in another important respect. MTN now values its assets in Nigeria at just over R11 billion, or N242 billion, representing nearly a third of its total assets. Its South African assets were valued at R10.127 billion. Much of the new Nigerian assets are base stations, of which the company rolled out 344 in the six months between March and October. The new base stations, it said, now covers 30 percent of Nigeria geographically and 56 percent of the population. Far more base stations are to be rolled out before the company ends its financial year in March. Nhleko said MTN now had the ability to build around 100 new base stations per month and has R6.5 billion (N143.6 billion) earmarked to be spent in Nigeria before March 2005. It believes it will be able to spend roughly R4 billion of that, with the rest to be carried over into the next financial year. He said part of the spending will be on a fibre optic backbone to connect its base stations and the fibre optic cabling, which can carry an immense amount of data or telephone calls, and is aimed at relieving congestion in the MTN network. MTN said it is still considering listing up to 25 percent of its Nigerian operation on the Nigerian Stock Echange (NSE) but is no closer to finalising the deal. Nhleko also disclosed that the company remained committed to bringing more Nigerians on board as shareholders. “We are actively evaluating how we should bring in those broad based shareholders but however we do it will be in such a way that we don’t lose control [of MTN Nigeria],” he said. The group shocked the market earlier this year by announcing a possible initial public offering in Nigeria but has provided no detail since. A listing of 25 percent of MTN Nigeria would make it one of the biggest shares traded on the Lagos exchange. The around 3 million Nigerian subscribers the company boasts makes up 24 percent of the MTN group customers across its operations including those in Cameroon, Uganda, Rwanda and Swaziland. The company said it was on track to have 3.5 million customers in Nigeria by March 2005 thanks to massive response after it reduced its connection fees. On the overall performance of the group, “our growth over this period has been pleasing and poises us well to be a leader in telecommunications in developing markets", says Nhleko. Adjusted headline earnings per share increased by 34 per cent to 165.8 cents. The Group's interim adjusted headline earnings per share exclude the beneficial financial impact of the deferred tax asset recognized by MTN Nigeria. Non-South African operations accounted for 40 per cent of Group revenue, 52 per cent of its EBIDTA and 48 per cent of its adjusted headline earnings per share during the period under review. Specifically, MTN South Africa improved its EBITDA margin from 30 per cent to 32.8 per cent, driven partly by tighter control of distribution costs and operating expenses for the 12 month period. Estimated market share remains 38 per cent, with the number of prepaid subscribers having increased by 516 000 to 5.6 million, constituting 81 per cent of the subscriber mix. The postpaid base increased by 8 per cent to 1.3 million subscribers. Blended Average Revenue per user per month (ARPU) of R187 was achieved for the six-month period. Both postpaid and prepaid subscriber ARPU decreased to R587 (2004: R597) and R97 (2004: R104) respectively. "The decrease in prepaid ARPU is the result of strong subscriber growth in lower end segments of the mobile market in South Africa," Nhleko said. He revealed that full 3G commercial services will be available during the first half of 2005 pending favourable confirmation of licence terms and conditions. “MTN Nigeria continued with its accelerated network rollout, commissioning 344 base stations and eight switches during the six months. Total capital expenditure for the period amounted to R3.1 billion. “Subsequent to the period end, MTN Nigeria secured an additional $200 million finance facility from local and international financial institutions to accelerate network roll out. “MTN Cameroon has maintained market leadership in a highly competitive market. Subscribers increased to 689 000, representing a 19 per cent increase from 31 March 2004. ARPU declined slightly to $23 for the period ended 30 September 2004. “MTN Uganda increased its total GSM subscriber base by 23 per cent since 31 March 2004 to 609 000, fueled by continuing strong demand for services. Following strong subscriber growth, MTN Uganda's ARPU decreased to $20 from $22 for the year to 31 March 2004. “MTN Rwanda experienced slower subscriber growth, but still managed to increase its active subscriber base to 170 000. ARPU of US$20 was recorded, compared to US$22 to 31 March 2004. “MTN Swaziland achieved strong subscriber growth of 36%, which resulted in the ARPU decreasing from R223 to R212”, Nhleko announced. As in the past, he disclosed that the Group will continue to explore value-enhancing international expansion opportunities in line with the company's strategic and financial criteria to enhance shareholder returns. He added that the currently adopted conservative dividend policy of 6-7 times cover of adjusted headline earnings, paid annually, will be reviewed at the end of the year taking expansion opportunities into consideration. "Assuming that current market conditions prevail, we are confident that, while the competitive environment is intensifying, South African operations will continue to generate strong free cash flows for the Group. MTN Nigeria is expected to show increasing subscriber growth," he added.
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