MTN Flies Into A ‘Perfect Storm’, Posts Heavy First Half Loss

Written by Staff

Aug 06, 2016

By Alexandra Wexler – From The Wall Street Journal

South Africa’s MTN Group Ltd., Africa’s largest telecommunications company, attributed a heavy loss in the first half of the year to a “perfect storm” that included a massive regulatory fine in Nigeria and unfavorable currency movements in many of its markets.

Generally weak macroeconomics, hyperinflation in Syria and Sudan, impairments in South Sudan as well as losses from investments in internet and tower companies contributed to the company’s first ever half-year loss.

The Johannesburg-based telecom giant reported a loss of 5.49 billion South African rand ($400 million) during the six months ended June 30, compared with a profit of 11.9 billion rand during the corresponding period a year earlier. The basic headline loss per share, the company’s preferred measurement which strips out certain exceptional and one-off items, was 2.71 rand, compared with earnings of 6.54 rand per share a year earlier, in line with previously announced guidance.

While little known in the U.S., MTN is a telecommunications juggernaut in Africa and has expanded across the Middle East and other regions, including in high-risk markets such as Syria and Iran.

Revenue was up 14% at 79.1 billion rand during the first half of 2016, just below expectations for revenue of 79.88 billion rand, as total subscribers remained flat at 232.6 million across MTN’s 22 markets. Nevertheless, revenue from the fast-growing data segment was up 32% to 19.85 billion rand.

The company declared a first-half dividend of 2.50 rand, down 48% from the corresponding period in 2015.

In October, the Nigerian Communications Commission fined MTN’s Nigerian unit $5.2 billion, or roughly a quarter of the country’s federal budget, alleging that MTN missed a deadline to deactivate more than 5 million unregistered SIM cards under regulations meant to combat terrorism. In June, the company said it had agreed to pay a fine of 330 billion naira ($1.67 billion) over three years.

Continued subscriber registration requirements in Nigeria, Uganda and Cameroon also hit the company’s bottom line in the first half of the year, with the last batch of 4.5 million Nigerian subscribers disconnected in February.