MTN’s share price slid to its lowest level in more than a year on Thursday even as the group reported higher subscribers numbers, increased revenue, and mobile payments shot up in the March quarter.
The drag on the group’s stock is largely seen as being due to factors out of management’s control, such as power outages in SA, cash shortages in West Africa and a general economic downturn on the continent.
In terms of the group’s overall performance, the number of MTN subscribers advanced 5.2% year on year to 290.6-million in the first quarter of the new financial year, along with 11.9% more active data subscribers and data traffic rising about 20%.
Group service revenue rose 15.6% to R52.8bn and group earnings 8.6% to R24.3bn, but the annual revenue per user fell 4.9% in SA to R88.65.
Active mobile money subscribers were up 5.2% to 61.7-million, while fintech volume of transactions rose 38.8% to 4.1-billion, with the value of those transactions rocketing 64.6% to $65.7bn.
MTN, like rival Vodacom, has taken a big bet on mobile payments as a new area of growth, which appears to be paying off.
Despite the positive earnings, the market took a dim view of the group’s prospects in the face of headwinds across its operations. The share was down 4% on Thursday at R110.37.
The group, now Africa’s largest mobile operator, faced headwinds in many of its operating countries as living costs ramp up, all working to reduce the spending power of consumers. Like the rand, a number of African currencies have also weakened against the US dollar, affecting reported earnings and ability to invest in infrastructure for the JSE listed company.
“Local currencies generally weakened against the dollar, and foreign exchange availability was limited in several of our key markets, affecting the pace of capital expenditure and our ability to upstream dividends and management fees,” said group CEO Ralph Mupita.
The group said that average inflation in countries where it operates stood at 18.5% in the quarter, compared with 11.5% at the same time in 2022.
Power cuts in MTN’s home country also continue to hamper prospects.
“Over and above reduced economic activity in SA, MTN SA network availability remained under pressure due to ongoing power outages across the country,” said Mupita, explaining that there were about 90 days of load-shedding in the first quarter of 2023 compared to 14 days in the previous March quarter.
“The key issues at this stage are things that the management has limited control of,” Peter Takaendesa, head of equities at Mergence Investment Managers told Business Day.
“In SA, the key issue is load-shedding impact on both revenue and costs. Rest of Africa is mostly an issue of very high inflation levels that they can’t pass through to subscribers immediately, as well as ongoing liquidity challenges that have forced them to take scrip dividends instead of upstreaming cash.”
He said it doesn’t help that the SA business is weaker while the rest of Africa is undergoing a tough macroeconomic environment.
“In a nutshell, MTN management is still executing very well on what they can control but the operating environment in key markets has major headwinds that are largely beyond their control over the short term.”
Nigeria is the company’s biggest country by service revenue, accounting for 41.3%, followed by SA (19.2%).
Looking ahead, MTN expects load-shedding to further hamper its SA businesses and hopes postpaid tariff increases, which became effective in April, will improve top-line growth as it works to improve its network after power cuts were a key contributor to SA’s core earnings being 6.5% lower.
Part of its plan includes extra battery capacity to allow at least six hours of battery life and a mix of generators.
Earlier in the year, MTN said it set aside R1.5bn to deal with the effects of power outages in 2023.
With Nico Gous
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