HILARY GUSH, Johannesburg | Tuesday
SOUTH Africa’s M-Cell, which owns mobile phone operator MTN, says the $285m it paid for its Nigerian GSM licence was at the high end of its expectations and would hit earnings this year.
”It would have an impact on our earnings,” M-Cell chair Irene Charnley told a news conference, without giving figures.
But she said that once the Nigerian venture was profitable – in two to three years – it would help maintain M-Cell’s overall earnings as the South African market matured.
”As the South African market is saturating, we will look to increase (Africa’s contribution) to maintain earnings.”
Charnley said M-Cell would report earnings from South Africa and figures for operations in Nigeria and Cameroon separately.
M-Cell shares fell on the licence win, with analysts concerned it had paid too much.
”The market perception is that the price is a little bit too high, and they will only reap the benefit much later,” said one senior stockbroker. ”In the short-term the share will take a knock, but I think in the longer term M-Cell is better off with Nigeria, than without.”
Although M-Cell would have to invest heavily in the next few years in Nigeria, and earnings would take a hit, in the long-term value would be created for shareholders, she said.
MTN and its local partners, who last week won one of three GSM mobile licences auctioned by Nigeria, plan to spend $1.4bn in the next 10 years in Africa’s most populous country.
MTN, which says Nigeria’s population of 124 million makes it the continent’s most promising market, forecasts a 10 million rise in telecoms subscribers there in the next 10 years.
Saying the licence price ”was getting to the top end of our valuations”, MTN Finance Director Rob Nisbet predicted MTN Nigeria would turn profitable in the financial year to end-March 2004. ”But we always aim to improve on that.”
He said operations outside its home market would contribute up to 30% to M-Cell’s bottom line in the next five years. Nisbet said the licence fee and working capital for the first two years would be funded with bank debt secured offshore. The loan for the licence would likely be replaced with equity. – Reuters