Nigeria, Iran growth helps offset SA troubles for MTN - TechCentral

Nigeria, Iran growth helps offset SA troubles for MTN

MTN head office

Listed cellphone operator MTN is “struggling” with its operations in SA, consultancy Frost & Sullivan said on Thursday.

Earlier, MTN reported a fall in group profit due as it released its results for the year ended 31 December 2009. It said adjusted headline earnings per share were down 16,6% to R7,54 in spite of a 28% increase in subscribers to 116m.

According to Frost & Sullivan’s ICT industry analyst Spiwe Chireka, regulatory risks had been a key factor impacting the company’s performance.

“Interconnection fee cuts and subscriber registration have dampened both revenue and subscriber growth,” she said.

However, she did expect a recovery from the cellphone operator in the next 12 months. “Frost & Sullivan’s global analysis indicates that mobile operators’ short-term revenues tend to suffer following interconnection cuts, but they can make a full recovery through strategies such as increased subscription charges, lower subsidies and reduced incentives for distribution, she said.

In addition, the Fifa World Cup was likely to boost revenues for MTN through airtime sales, roaming fees and match content delivery.

Chireka said MTN’s performance in Nigeria was encouraging, with 30% subscriber growth for the period.

Revenue in local currency increased by 33%, but due to the strength of the SA currency, this translated into growth of just 5,6% in rand terms, she said.

Chireka said earnings before interest, tax, depreciation and amortization (Ebitda) for the West and Central African region as a whole increased by 6,7%, while Ebitda in the Middle East and North Africa region showed the biggest improvement, growing by 24,2%.

“In its favour, MTN has also formed relationships with some of the leading businesses in SA to become the telecoms partner of choice in their African expansions,” Chireka said. “This has been possible due to the group’s geographical presence advantage.”

She said MTN also had the money to lap up any non-cellular operators where it needed to, to ensure that it could deliver additional services.

Chireka said data services, in particular business data services, also made a noteworthy contribution to overall performance. “MTN decided to directly take on Telkom Business, Neotel and Vodacom in the business services space.

“Though a latecomer in this arena, the group has the deep pockets to make the necessary investments to ensure that it keeps up with the competition.”

According to Frost & Sullivan this would be the next big growth area on the continent. “Together with the current challenges that are affecting the mobile market in Africa, the opportunities in business data services may lead to a change in approach from MTN.”

Chireka said the group might well focus its short term efforts on non-mobile services. “Mobile voice is nearing critical mass, and while it makes sense to try and raise the average revenue per user (Arpu), the results of such activities can take time … so rather than focusing only on mobile and trying to increase spending in that area, it may be time for MTN to move away from its comfort zone and move into the world of ICT as a whole.”

Chireka pointed out that MTN had the geographical spread to successfully service multinational corporations within and coming to Africa. “The group would however need to build brand equity separate from its mobile communications operations,” she added.  — Sapa

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