MTN has hit a perfect storm of bad news in the first half of its 2016 financial year, with the telecommunications group warning that it will report a basic headline loss per share of between R2,55 and R2,85 on Friday when it publishes its interim results for the six months ended 30 June 2016.
It expects a basic loss per share of between R2,85 and R3,15, it told shareholders on Thursday in an earnings update. It’s a huge swing into the red given that in the same period a year ago, MTN reported headline earnings per share of R6,54.
MTN has blamed a wide range of factors for the poor results, especially the regulatory fine that has been imposed on it in Nigeria, where it failed to disconnect more than 5m unregistered Sim cards as required under that country’s Sim card registration law.
In total, the net effect of the fine on the interim results came to a negative R4,74/share.
But it wasn’t only the fine that has clobbered MTN’s numbers.
With the depreciation of the rand and operating currencies against the dollar, earnings were further negatively impacted by foreign exchange losses of R1,35/share, MTN said.
Also, losses from tower companies of R1,36/share (largely impacted by foreign denominated loans) have impacted the numbers for the interim period.
MTN has also blamed “increased short-term losses” from its digital businesses, Africa Internet Holdings and Middle East Internet Holdings, when compared to the previous reporting period.
Other negative factors included hyperinflation adjustments in respect of MTN Irancell; higher professional services charges; and operational underperformance of MTN Nigeria.
“MTN Nigeria’s performance was impacted by the disconnection of 4,5m subscribers in February 2016, the final batch of subscribers to be disconnected in compliance with the Nigerian Communications Commission’s subscriber registration requirements,” the group said.
The withdrawal of regulatory services, which were reinstated on 15 March 2016, also negatively impacted MTN Nigeria’s performance.
MTN South Africa also reported a “relatively weaker operational performance”. The group warned the South African unit will suffer a decline in profit margins when measured using earnings before interest, tax, depreciation and amortisation due to a marked increase in handsets sold.
The basic loss per share has also been impacted by an impairment on property, plant and equipment in South Sudan and goodwill impairments in Guinea Conakry and from MTN’s acquisition of a controlling 50% stake in Internet service provider Afrihost (which it has subsequently sold).
MTN closed on Tuesday — the last trading day in Johannesburg before Wednesday’s election day holiday — at R132,53, down by 4,1% on the session. In the past 12 months, the counter has shed 36,5% of its value. Year to date, MTN’s share price has risen by 2%. — © 2016 NewsCentral Media