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No more room for price erosion – MTN Group

August 14, 2013 • Mobile and Telecoms, Top Stories

MTN Group CEO Sifiso Dabengwa. (Image source: File)

MTN Group CEO Sifiso Dabengwa. (Image source: File)

Executive management at the MTN Group have attributed flat results, in terms of overall operating profit, to the core issue of significant price erosion.  At the same time, the company’s leadership is of the view that there is there is little room in the market for any further price decreases or for competitors who base their main strategy on pricing.

Speaking at a presentation of the Group’s interim results for the six-month period ending June 2013, Group CEO Sifiso Dabengwa confirmed that the company’s five-pillar strategy is still firmly in place and it has “made good progress in execution in applying five pillars in the strategy”, particularly in terms of dealing with tariff pressure, improving on data services and combining ICT services for the corporate and SME market segments.

In a review of the company’s performance, Dabengwa emphasised the increase in subscribers to 201.5 million, an increase in data revenue to 36.9% to R9, 054 million

“The operating environment during the first half of 2013 has been quite challenging. We have seen, from a revenue point of view, on a constant currency basis, the growth has been about two percent. Revenue has been impacted by strong competition in our key markets that has led to much lower tariffs. We have also experienced reduction in mobile terminating rates that has impacted our inter-connect revenues. However, we have continued to drive data growth, quite successfully, continued to focus on cost control – which is going to be an important part of our activities going into the second half. Capex rollout has gone reasonably well, and we’ve managed to continue with our teleco establishments in Cameroon and in Ivory Coast,” said Dabengwa.

He described results from the company’s South African operations, specifically in terms of subscriber growth, as “rather disappointing”, and referred to the company’s slow response to aggressive price competition that was experienced, which led to lower-than-expected revenues. Inter-connect revenues have declined by just over 23%.

“However, we have seen good data growth, driven by good distribution and competitive value propositions. We have continued to increase the number of 3G devices and smartphones, and from a traffic point of view, we have seen an increase of about 63% year-on-year,” Dabengwa added.

He reiterated that clarity on LTE spectrum remains an issue in South Africa, but that the Group was hopeful that there would be clarity by year-end, in order to continue to rollout LTE services across its operation.

Leadership at the company commended the performance of key operations in Nigeria, Ghana, Ivory Coast and Sudan.

Although issues like disconnections as a result of the termination of the subscriber registration process and the general regulatory environment represent challenges, Dabengwa says positive trends from last year have continued.

Highlights of the results include:

*         Group subscribers increased 6,5% to 201,5 million

*         Revenue increased 9,8% to R65 248 million

*         Data revenue increased 36,9% to R9 054 million

*         EBITDA increased 6,4%** to R27 743 million

*         EBITDA margin stable at 42,5%**

*         Capex increased 32,7% to R 12 792 million

*         HEPS increased 22,0% to 654 cents

*         Interim dividend increased 15,3% to 370 cents per share

*         Constant currency information disclosed in these results is the responsibility of the Group’s directors. The constant currency information has been presented to illustrate the impact of changes in currency rates on the Group’s results and hence may not fairly present the Group’s results of operations. In determining the change in constant currency terms, the current financial reporting period’s results have been adjusted to the prior period’s average exchange rates determined as the average of the monthly exchange rates.

The measurement has been performed for each of the group’s currencies, materially that of the USD, Nigerian Naira and Iranian Rial. The constant currency information has been not been reviewed and reported on by the Group’s external auditors.

**excluding tower profits

Chris Tredger – Online Editor

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