MTN South African has announced that it will spend R4bn more than previously budgeted for on its network in 2016, boosting its capex plan for the financial year to 31 December by 50% to R12bn, from the R8bn it had set aside previously.
The nearly R12bn capex plan comes on top of already high spending by MTN South Africa of R10,9bn in the 2015 financial year.
The revised capex figure means MTN will far outspend bigger rival Vodacom South Africa for the second year running.
MTN South Africa acting chief technology officer Krishna Chetty said MTN Group revised the capex number higher after intense lobbying.
“The R8bn was merely guidance as a function of a sticky situation we find ourselves in in Nigeria. The group board was being conservative initially,” he said.
“Subsequent to that, my colleagues and I have made made presentations to the group board and our own board telling them why we cannot stop investing in this country. They really bought into our belief system, to the extent of giving us back the intial amount that was taken away.”
In the financial year to 31 March 2016, Vodacom South Africa spent R8,7bn on its network, a 1,2% increase over the R8,6bn invested in the 2015 financial year. Going forward, Vodacom has lowered forecast group capex intensity to 12% to 14% of group revenue, from between 14% and 17% before (prior to a revenue restatement).
Assuming MTN South Africa’s revenues stay flat at R40bn in 2016, the company’s capex intensity, at the projected R12bn, is 30% of revenue. Even with a healthy 10% growth in revenue, capex intensity will still be double Vodacom’s, at 27%.
“All companies [in South Africa] are going through challenges; people are scaling down,” said MTN South Africa CEO Mteto Nyati at a media briefing on Thursday.
“We have decided that this is the time to make investments… We are increasing the capex of last year. This year, we are putting R12bn in the ground to make sure we have the right infrastructure that we can leverage for the [expected] growth.”
Last year, MTN South Africa embarked on an aggressive network roll-out, increasing spend by 92,9% in the 2014 figure and adding 966 2G sites, 1 593 largely co-located 3G sites and 3 148 4G/LTE sites to its network.
Nyati also used Thursday’s media briefing to express the company’s concern about government’s forthcoming white paper on ICT policy and specifically what it will say about spectrum allocation.
Government has indicated that it is not in favour of auctioning off the spectrum and wants to create a wholesale open-access network to encourage new competition in the market.
Vodacom and MTN have both said they are in favour of an auction as the most efficient way of making spectrum available to operators. — © 2016 NewsCentral Media