MTN’s business in Uganda is upbeat about its prospects in 2025, even as a new directive cut terminate rates almost in half, putting service revenue under pressure.
“We received an industry wide review directive from the Uganda Communications Commission regarding a reduction in local mobile termination rates in September 2024. The rates were reduced by 44% to 26 Ugandan shillings, with the last review conducted in 2018,” MTN Uganda CEO Sylvia Mulinge said as the company reported full-year earnings to end-December.
In essence, termination rates refer to the costs of making calls to subscribers on other operators’ networks. These rates determine the fee one mobile network operator charges another to complete a call on its network.
Mulinge said the changes “stemmed from the changes in traffic patterns, network technologies, changing macro conditions and market competition”. Unfortunately, “these changes have had a negative impact on our voice revenues during the last quarter of 2024”.
MTN is likely to feel the effect of the directive for quarters to come with a fuller picture to come as it reports interim earnings later in the year.
Despite the setback, Mulinge appears confident of her business’ ability to push through, with MTN Uganda maintaining its medium-term guidance of delivering service revenue growth in the “upper teens” — 15%-19% — “with stable earnings before interest, tax, depreciation and amortisation (ebitda) margins expected above 50%”.
“Over the course of the coming year, we will focus on continuing to execute commercial strategies to position our voice business favourably, notwithstanding changes in our interconnect termination rates,”Mulinge said.
MTN and other mobile operators on the continent are facing pressure from regulators in a number of countries seeking to cut communication costs. Operators have previously made a lot of money charging for calls between networks.
In its home market, the Independent Communications Authority of SA (Icasa) gazetted new call termination regulations that aim to cut voice communication costs in December.
In Rwanda, the regulator cut mobile termination rates to zero in August 2023, hurting earnings of Africa’s largest mobile operator. This directive was for a year. The regulator has been in talks with mobile operators to find an appropriate rate at which such charges can be levied. MTN is hopeful that the talks will yield positive results.
In the 12 months to end-December MTN Uganda reported an increase in subscribers of 13.2% to 22-million. Data customer were up 22.4% while fintech users grew 13.9%.
Profit after tax for the period rose 30.1% to 641.5-billion Ugandan shillings (R3.2bn), while service revenue increased 19.5% to 3.17-trillion Ugandan shillings.
Ebitda grew by 20.7% to 1.7-trillion Ugandan shillings with a margin of 52.2%.
MTN Uganda started trading on the country’s stock exchange in December 2021 after an initial public offering that raised R2.4bn, the largest seen in the East African country at the time. The company is the biggest by value on the Uganda Securities Exchange.
The listing reduced MTN group’s stake in the Uganda unit from 96% to about 83%, with a further transaction, in the period, taking this down to 76%.
MTN Uganda increased its final dividend by 32.8% to 190.3-billion Ugandan shillings, or 8.5-Ugandan shillings per share.
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