South African mobile phone operator MTN is expected to report a 40% hike in first-half headline earnings next week, buoyed by better-than-expected growth in its year-old Nigerian operations.
”They will trim losses in Africa and probably maintain margins in South Africa,” John Slettevold of UBS Warburg said of MTN’s results for the six months to end-September.
”I think things in Nigeria are going to be a lot better than people expect. The key is to focus on margins in South Africa and look for guidance on Nigeria,” said another analyst.
”We expect revenue growth to be boosted by a very strong performance in Nigeria,” Morgan Stanley said in a note.
Two weeks ago MTN said first half earnings would be ”materially higher” than the same half last year.
A Reuters poll of eight analysts gives an average forecast for headline earnings per share — which strip out one-off items — of 45,5 cents from 32,6 cents last time.
MTN, which owns South Africa’s second largest cellphone network, reports its results at around 1500 GMT on Tuesday.
Facing a maturing market at home, MTN has ventured into Africa, the world’s fastest growing telecoms market, where it also has operations in Cameroon, Rwanda, Swaziland and Uganda.
Investors will also be looking for details of what plans the group has to take more cash out of South Africa and into Nigeria, after the government last month more than doubled the limit on local firms’ investments in other African countries.
It increased the limit on African investment to two billion rand from R750-million, clearing the way for MTN to reduce its unhedged debts of around $240-million.
Investors will also be looking out for an update on its plans to launch a $450-million syndicated loan to help fund the rollout of its services in Africa’s most populous country.
They will also scrutinise capital spending. Morgan Stanley said it expects that capex underspending in the first half may alleviate debt burden concerns, especially in Nigeria.
Salomon Smith Barney analyst Rhys Summerton expects MTN revenues to rise 44 percent to R7,4-billion in the first half, thanks to its Nigerian operations.
”That would filter through to an EBITDA improvement of 27%, and an EBITDA margin of just under 30%.”
Others see revenues hurdling eight billion rand.
On the local front, investors will be looking for the effect on subscriber numbers of aggressive year-old competitor Cell C.
”The focus in South Africa is on cost cutting as there is a transfer of value from MTN to Cell C,” said another analyst. ”Capex at 10% of sales is not sustainable.”
At its annual results presentation in June, MTN said it expected to maintain a capex/sales ratio of below 10% in South Africa.
UBS Warburg’s Slettevold said he would be looking for what kind of subscriber base MTN reckons it can support with the network it has already installed. – Reuters