MTN’s share price plunged more than a tenth on Monday, driven by the negative effects of load-shedding and resulting in lower than expected earnings at its SA business, with expectations of higher costs in the future.
“In SA, the extent of ongoing power outages [load-shedding] worsened into the second half and increased the negative impacts on network availability and pressure on the business,” CEO Ralph Mupita said on Monday in the company’s annual results for the year to end-December.
“Our investment in this regard, which included dealing with vandalism and additional security on sites, put additional pressure on operating costs,” he added.
The R695m cost of blackouts to MTN amounts to 3.4% of local core earnings of the company, which is valued at R237.1bn on the JSE.
Mobile operators have struggled as extended power cuts have sometimes depleted the batteries of their cellphone towers, leading to signal being dropped for customers.
The group believes the state of disaster regulations recently announced by President Cyril Ramaphosa and designed to deal with the energy crisis, give SA a “unique” opportunity to help with important national infrastructure, including telecommunications.
The number of subscribers to the mobile operator, which operates in 19 markets, increased 6.1% year on year to 289.1-million.
In terms of sales, group service revenue rose 14.4% year on year to R196.5bn, group data revenue rose 30.4% to R73.7bn and fintech revenue was up 8.6% to R17.3bn.
The group noted that fintech now makes up 9% of total revenue. CFO Tsholofelo Molefe said this could have been higher but the introduction of levies and taxes in a number of markets has begun to hurt this revenue stream.
That said, the group remains bullish about its prospects, announcing that it has received a number of offers to buy a piece of its financial services unit. MTN is looking for strategic partners that can help it to further scale its fintech business, which now services 69-million customers.
Profit after tax rose 42.8% to R24.26bn, and total comprehensive income for the year was up 45.9% to R12.3bn.
MTN declared a final dividend of R3.30 per share, up 10%.
Despite generally good news on its overall earnings, the share fell sharply on the load-shedding outlook, closing 10.66% lower at R126.24, its biggest drop since the early days of the Covid-19 pandemic.
MyWealth Investments CEO Annatjie van Rooyen said MTN reported results in line with previous guidance but just below the middle of the range, with earnings per share of R10.71 recorded against an expectation of R10.31-R11.06.
Despite economic challenges and geopolitical volatility, MTN maintains its medium-term guidance in key markets, including SA. “However, given the higher-than-expected power and network security costs as well as a reassessment of the management fee agreement with the group, we are revising the targeted range for MTN SA’s core earnings margin,” it said.
“The SA business remains exposed to rolling blackouts,” Van Rooyen said, adding that it is now targeting a lower medium-term profit margin for the SA business from 39%-42% to 37%-39%.
Some of the economic challenges include high inflation, interest rate hikes and the fallout from the war in Ukraine on global markets. MTN reported an average blended inflation rate in SA markets of 15.1%, 3.6 percentage points higher than a year ago.
“Coupled with higher interest rates, consumers felt pressure on disposable incomes while enterprises optimised expenditure and capital investment during the period,” the mobile operator said.
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