MTN’s South African operation has again borne the brunt of the price war in the mobile industry, with its revenue in the six months to June slumping by 7% and its profit margin, measured before interest, tax, depreciation and amortisation, sliding by 1,5 percentage points to 33,3%
The poor numbers were exacerbated by steep cuts earlier this year to call termination rates, the fees the operators charge each other to carry calls between their networks. This interconnect revenue fell by 30,4% year-on-year for the six-month period.
The only bright spot in MTN’s numbers was a 13,7% improvement in data revenue, though this fell far short of the growth in data revenue reported by rival Vodacom.
“MTN South Africa showed resilience in the face of significant market and operational challenges,” the company said in notes accompanying its 2014 interim results, published in Thursday.
“Market share declined by 2,7 percentage points to 31,9% as competition intensified in the prepaid segment,” it said.
During the first quarter of 2014, the operation’s subscriber base contracted by 825 000, though it clawed back about half of these losses in the second quarter when it added 394 000 customers to reach 25,3m subscribers by end-June.
“The improvement in subscriber growth was largely a result of focused and targeted promotions to the prepaid segment, which included the introduction of the widely successful 79c/minute price plan. Other competitively priced voice and data bundle promotions included MTN Sky, Wow, Happy Hour and Friends and Family. Customers responded positively to these initiatives and for the second quarter of 2014, prepaid traffic on the network grew by 33,5%,” the company said.
However, the better performance in the second quarter was not enough to prevent a 4,3% decline in the prepaid subscriber base, bringing the total prepaid segment to 19,8m. The post-paid segment increased by 4,6% to 3,5m.
MTN said it expects a return to normalised growth in revenue and subscribers in South Africa over the next six months.
Outgoing voice revenue declined by 8,6% to R8,5bn. Incoming voice revenue declined by 30,4% as the impact of the mobile termination rates reduction took effect during the second quarter, it said.
Data was a bright spot, despite a decrease of 38,1% in the average price per megabyte. Increased 3G coverage and competitive data bundles were the main contributors to this growth, MTN said.
The number of data users increased by 2,7% to 14,7m and the operation had 5,3m active smartphones on its network.
MTN managed costs lower, with operating expenses declining by 6,8%. This was not enough to stop the decline in profit margins, exacerbated by a R172m impairment related to passive network infrastructure.
Capital expenditure for the period was R2bn. — © 2014 NewsCentral Media
