SA’s telecom operators were all in the red on the JSE on Tuesday, with MTN leading the losses, dropping R14.85bn of its market value after it reported a fall in first-quarter revenue of almost a fifth.
The group is dealing with an unfavourable cocktail of macroeconomic and geopolitical headwinds that had a negative effect on its financial performance for the period.
MTN’s service revenue fell 18.8% in the first quarter as the macro environment remained challenging and amid local currency devaluations in some of its key markets.
The group also revised down its expected capex (ex-leases) deployment for 2024 to R28bn-R33bn due to a reduction in expected spend by MTN Nigeria.
“We remain focused on our strategy execution to deliver on our medium-term guidance,” the company said.
Reported group service revenue fell to R42.9bn from R52.8bn a year ago.
Voice revenue decreased 32.2% and data revenue by 14.7%. However, fintech revenue increased 11.4%.
Following the news MTN’s share price fell the most in 14 months, down 8.5% to R84.82, giving Africa’s largest mobile operator a market cap of R159.8bn.
Sector peers Vodacom and Telkom were down 3.22% to R89.02 and 0.64% to R24.86, respectively.
Like MTN, Vodacom is dealing with its own cocktail of headwinds. On Monday it reported a 10.8% drop in headline earnings for the year to end-March, citing a combination of start-up losses in Ethiopia and higher finance and energy costs as some of the factors that weighed on the bottom line.
Telkom is expected to report on its full-year performance on June 18.
MTN’s group earnings before interest, tax, depreciation and amortisation (ebitda) before one-off items were down 28.7% at R17.3bn, but up 3.9% in constant currency, the company said.
“In Nigeria, we saw strong underlying commercial momentum in the business, despite the financial impacts of the sharp devaluation of the naira and continued elevated inflation during the period,” said CEO Ralph Mupita.
“Geopolitical tension remained elevated and a factor impacting our performance. This included the ongoing civil war in Sudan, which severely affected network availability and revenue generation in our business in that market. We were also affected by cable cuts that resulted in downtime for significant subsea cables connecting the African continent, particularly in West Africa,” he said.
The ebitda margin fell 2.5 percentage points to 38.1%, affected by upward pressure on costs due to inflation and forex depreciation, mainly in Nigeria, and network resilience costs and electricity tariff escalations in MTN SA.
To aid the situation in Nigeria, the group has instituted a five-point plan to improve performance. This includes internal measures like cutting costs; making the most of existing network infrastructure thus reducing capital expenditure; reducing exposure to foreign denominated debt and renegotiating tower leases.
Externally, MTN and other operators are lobbying the country’s telecom regulator for higher tariffs to help push up revenue and in turn, investment.
Through the execution of the group’s expense efficiency programme, it realised savings of R430m during the quarter.
Subscribers increased by 3-million to 287.6-million. Base growth was hampered by subscriber registration regulations in Ghana and Nigeria, and a drop in subscribers in Sudan.
Active data subscribers were up 7.8% to 149.2-million, supporting increased traffic and data revenue growth.
MoMo active users increased 6.2% to 65.5-million as advanced services remained on their strong growth trajectory. Rwanda, Uganda and Nigeria were the main contributors to the 40.1% increase in active merchants to 2.2-million in the first quarter.
Transaction volume and value increased 18.3% and 11.2%, respectively.
Despite the headwinds, MTN said it maintained “a healthy liquidity position”, with fire power of R39.1bn at the end of the reporting period.
Update: May 14 2024
This story has been updated with new information.
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