MTN South Africa’s network availability plunged in June to just 89%, from a target of 99%, caused largely by Eskom’s escalating frequency of load shedding.

MTN Group disclosed this number alongside its interim financial results for the six months to 30 June 2022, published on Thursday, and warned mitigation measures now being deployed will lead to rising costs.

Despite the challenges, MTN South Africa still reported good service revenue growth, underpinned by demand for data services, and stable earnings before interest tax, depreciation and amortisation (Ebitda) of R9.8-billion.

“The increasing severity of load shedding resulted in a negative impact on network availability and growth, especially in the second quarter,” MTN said. It added that it doesn’t expect the situation to improve any time soon.

“Global and local macroeconomic pressures are expected to remain, including sustained load shedding, increasing inflation, deteriorating exchange rates and rising interest rates. The related negative impacts on consumer spending power and patterns are therefore also anticipated to persist into the second half of 2022, which will impact on the MTN South Africa business,” it said.

“Load shedding also appears likely to occur more frequently, and with greater intensity, than anticipated, which will have implications for MTN South Africa’s outlook of both service revenue and costs. To mitigate the impact of load shedding, MTN South Africa has rolled out a comprehensive network resilience plan, including additional batteries, generators and enhanced security features.”

Group CEO Ralph Mupita said: “Battery and generators solutions will be deployed to restore network availability to the world-class standards our customers have been used to. This resilience plan will be executed within the capital expenditure envelope of the business.

“If we experience the same level of load shedding in the second half as we did in the first half in South Africa, service revenue will come in slightly under guidance, with margins at the lower end of the range communicated to investors,” Mupita said.

Subscriber growth

Despite the tough economic conditions and the extensive rolling power cuts in the first half, MTN South Africa still managed, through a customer acquisition drive and a focus on churn management, to increase subscribers by 8.9% to 35.3 million. This was supported by an increase of 3.7% in contract subscribers to 7.8 million, while the prepaid base declined marginally by 0.4% to 27.5 million.

“The overall growth in the base was particularly encouraging given the significant ramp-up in load shedding, which impacts systems and typically constrains new customer acquisitions,” MTN said.

Operating conditions in South Africa were further compounded by the floods in KwaZulu-Natal in April, which also contributed to a decline in network availability.

Key highlights of MTN South Africa’s first-half performance include:

Service revenue increasing by 4.1%;
Data revenue increasing by 14.6%;
Fintech revenue decreasing by 0.9%;
Wholesale revenue decreasing by 0.2%;
Adjusted free cash flow, excluding payments for spectrum and proceeds from tower sales, declining by 2.4%, impacted by increased working capital;
Profit after tax increasing by 18.6%, boosted by lower finance costs; and
Ebitda increasing by 0.2%, with Ebitda margin declining by 0.6 percentage points to 40.8%.

Active data subscribers climbed by 15.3% to 18.1 million, driving a 41.5% year-on-year increase in traffic. The average price of data fell by 18.9%.

“An active prepaid data subscriber now consumes an average of 2.6GB of data per month, up 24% year on year, and an active post-paid data subscriber uses nearly 12.5GB/month, an increase of 26%,” MTN said.

The consumer prepaid business recorded service revenue growth of 1.2% in the first half of 2022. This was supported by strong data consumption, partly offset by the pressure in voice revenue brought about by a decline in voice usage during periods of load shedding. “This was an encouraging result, reflecting the resilience of the MTN South Africa business where the prepaid segment is more acutely affected by the increased macroeconomic pressures, especially in the lower-income consumer segment,” MTN said.

The enterprise business reported service revenue growth of 20.7%, driven by growth in bulk SMS as well as the core mobile and ICT businesses.

In fintech, the number of registered mobile money (MoMo) users climbed to 4.7 million, up 32% year on year. Monthly active users reached a million, for year-on-year growth of 174.5% as at 30 June. Transaction volumes rose, driven by airtime, electricity, gaming, e-commerce and e-government services. — (c) 2022 NewsCentral Media