MTN Group has moved to quantify the impact of load shedding on its South African operation’s earnings, saying on Monday that Eskom’s woes cost it R695-million in Ebitda in the 2022 financial year.

The group said this is 3.4% of MTN South Africa’s Ebitda, or earnings before interest, tax, depreciation and amortisation, in the 12 months ended 31 December 2022.

It also lowered its Ebitda guidance for the 2023 financial year to a margin of between 37% and 39%, from guidance of 39% to 42% previously.

The power cuts are placing “enormous strain” on the MTN South Africa network, “impacting availability as well as some business functions, including those supporting recharge and upgrade activity”, the group said.

Load shedding reduced service revenue growth by 1.6 percentage points.

“The extent of ongoing load shedding worsened into [the second half of 2022] and increased the negative impacts on network availability and pressure on the business,” the group said. “We continued to implement our comprehensive network resilience plan to mitigate these impacts.

“Our investment in this regard, which included dealing with vandalism and additional security on sites, put additional pressure on operating costs,” it added, saying that the South African business is working on a network resilience plan that should be fully in place by this May.

‘Sustained and elevated’

Group CEO Ralph Mupita said MTN expects “sustained and elevated levels of load shedding” in the near term.

MTN had upgraded more than 3 000 high sites by the end of February to make them more resilient to load shedding. “Furthermore, considering the increased frequency and intensity of stage-6 load shedding, as well as the potential threat of stage 8, MTN South Africa is working with its partners on further optimising sites to ensure consistent performance of the resilience upgrades. This optimisation process is expected to be concluded by December 2023.”

Despite all of this, MTN South Africa reported full-year service revenue that rose by 3.6%. That came on the back of a 13.1% improvement in data revenue. Data now makes up 45.6% of service revenue, up from 41.8% a year ago. Enterprise (business) revenue climbed by 17.5%, while wholesale revenue was up by 5.3%. Ebitda margin rose by 0.3 percentage points to 39.2% but would have been down 0.4 percentage points to 38.5% if a once-off gain recognised on the sale of towers by the South African business is excluded.

Subscribers increased by 4.4% to 36.5 million, a net addition of 1.5 million. This was assisted by good growth (12.5%) in post-paid subscribers “through competitive integrated voice and data-centric plans”. The number of prepaid customers increased by 2.3% to 28.3 million.

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The macroeconomic environment in South Africa remained difficult, with inflation rising to 6.8% from 5.9% in 2021, “exacerbated by the rand which depreciated by 10.5% against the US dollar, [which] put pressure on consumer spending and costs in the business”.