South African mobile operator MTN on Wednesday reported a 27,5% increase in adjusted headline earnings per share to 278,5 cents for the six months ended June from 218,4 cents for the six months ended September 2005.
MTN also advised that its subscribers were up 9,4% to 25,4-million for the six months to June.
Revenue was up 18% to R20,2-billion, mainly due to the strong performance of MTN South Africa, with revenue of the Southern African region at R11,6-billion and Nigeria contributing R6,4-billion. Operations acquired during 2005 contributed R1,2-billion.
Profit for the period was 23% higher at R5,4-billion.
The group changed its financial year-end to December 31 at the end of the previous financial year in line with its operational cycle and international peer group, and is reporting interim results at June 30 for the first time. The last reviewed six-month period was September 30 2005, which has been used for income-statement comparatives.
Earnings before interest, tax, depreciation and amortisation (Ebitda) increased to R8,7-billion and adjusted profit after tax rose to R5-billion from R4,1-billion.
The group said that operations acquired during 2005 accounted for 1,986-million subscribers, comprising 8% of the group’s subscriber base. These operations contributed 5,8% of revenue and 4,5% of Ebitda for the review period.
The group has changed its segmental reporting to reflect three major operating regions: Southern Africa; West and Central Africa; and Middle East, North and East Africa.
Southern Africa contributed 58% of revenue and 48% of Ebitda, while the West and Central Africa region contributed 40% and 50% of revenue and Ebitda respectively. The Middle East, North and East African region has not contributed significantly as Iran, which is expected to be the major contributing operation in this region, has not yet launched commercial services.
Results for the review period do not include results of the Investcom deal, which was concluded during July this year.
The group’s total assets increased by 24,4% to R55,8-billion compared with R44,8-billion at the end of December 2005. Borrowings increased to R9,2-billion from R8,6-billion.
MTN South Africa recorded 10,437-million subscribers at the end of June 2006 — a 2% increase from December 2005, with growth expected to increase in the second half.
The post-paid component of the subscriber base was the main contributor to the increase, recording 216 000 net additions in the first six months. The prepaid base remained constant despite declines in the first quarter due to increased churn at the low end of the customer base. Net additions were positive in the second quarter of 2006 with 238 000 net new customers, with post-paid and prepaid contributing equally to this position.
As expected, blended average revenue per user (Arpu) for the six-month period declined by 6% to R159, driven principally by declines in the post-paid segment. Postpaid Arpu decreased by 8,7% to R494, while prepaid Arpu decreased marginally to R90 from R93.
Included in total post-paid subscribers are 388 000 My Choice Top-up subscribers who generate significantly lower Arpu than the average post-paid subscriber.
During the period, MTN South Africa launched a commercial HSDPA service. Its 3G site build continued with 304 additional base stations being rolled out in the first half of the year as part of expanding network coverage and capacity. This infrastructure provides customers in high-density areas with high-speed access to MTN South Africa’s data offerings as well as video-based services.
It is encouraging to note that the number of 3G subscribers has increased by 76 000 to 133 000, MTN noted.
Data services contributed 7,8% of total revenue, excluding handset revenue. While SMS continues to contribute 85% of data revenue, uptake of new data services is encouraging and continues on a positive upward trend.
Africa
MTN Nigeria increased its subscriber base to 9,636-million, 15% growth since the end of December 2005. Subscriber acquisitions are expected to accelerate in the second half of the year. Blended Arpu remains strong and declined only marginally to $18.
MTN Cameroon increased its market share from 54% at the end of December 2005 to 56% at the end of June 2006. Mobile subscribers increased by 22% to 1,528-million subscribers. MTN Uganda captured an estimated 80% of net connections during the period, increasing its mobile market share to 64,5%.
There was a 26% increase in its mobile subscriber base to 1,236-million. MTN Côte d’Ivoire recorded 1,108-million subscribers at June 30 2006, a 3% increase from December 2005. Market share is currently estimated at 44%. In May 2006, MTN increased its shareholding in MTN Côte d’Ivoire from 51% to 68,34% through the purchase of a 17,34% stake from Atlantique Telecom.
Mascom Wireless Botswana recorded 531 000 subscribers at June 30 2006 with an estimated market share of 62% and Arpu of $16.
MTN Rwanda still enjoys 100% mobile market share with 311 000 subscribers and recorded Arpu of $16. A second operator has been licensed but has not yet commenced operation.
MTN Swaziland increased its subscriber base by 11% to 236 000, while Arpu has decreased to R141, 5% lower than the R149 at the end of December 2005. MTN Swaziland is the only mobile operator in the country.
MTN Congo Brazzaville recorded 229 000 subscribers at June 30 2006, a 9% increase from December 2005 with Arpu at $20, and MTN Zambia recorded a 23% increase in subscribers to 119 000 from December 2005 with Arpu remaining stable at $20. In terms of the licence, 10% of the equity in this business will be placed with Zambian nationals.
MTN IranCell operation is ready for network system testing in three cities — Tehran, Mashaad and Tabriz — with 5 000 test SIM cards. The first “on net” call was connected on August 24 this year. Commercial launch is expected towards the latter part of September with the company targeting a minimum of one million subscribers and full coverage in six cities by the end of December 2006.
Investcom
MTN Group made a cash and shares offer on May 23 this year to acquire the entire issued share capital of Investcom LLC for a total consideration of $5,5-billion. MTN shareholders approved the transaction on June 28 and it became wholly unconditional on July 4. Investcom will be consolidated from this date onwards.
The Investcom LLC transaction settlement of cash and shares took place on July 17 and 24. In terms of the offer made, $3,7-billion was settled in cash and 183-million MTN Group shares were issued to the previous Investcom LLC shareholders.
Bridging finance obtained at the time of the Investcom LLC offer was refinanced in early July through an issue of corporate paper in the South African bond market and a United States dollar- and South African rand-denominated bank facility underwritten by Calyon, Citibank, Commerz, Deutsche, Sumitomo and Standard Chartered banks. A total of R6,3-billion was raised in the bond market — R5-billion with a four-year term and R1,3-billion with an eight-year term.
The shareholding in MTN Uganda was increased during July 2006 from 52,01% to 97,34% for approximately $220-million, converting the joint venture operation into a fully consolidated subsidiary of the group.
Looking ahead, MTN said on the assumption that current market conditions endure, the board expects the group to continue to show good subscriber growth and maintain a strong market position in existing operations.
Capital expansion programmes in Nigeria, South Africa and Iran, as well as the operations in Investcom, are expected to provide further impetus to subscriber and revenue growth.
Following the conclusion of the Investcom deal, the group has increased its footprint substantially and further diversified its revenue and earnings streams. Financing the transaction has resulted in the group raising additional debt and issuing shares, and the related financing costs and dilution effect will inhibit the rate of growth in the group’s earnings per share in the short term, it noted.
The key priorities in the short term are the integration of Investcom and realisation of synergies as a result of the transaction. In the medium term, priorities are the realisation of longer-term synergies as well as the repayment of debt used to fund the acquisition, it concluded. — I-Net Bridge