MTN 2Q numbers

MTN first half results were released this morning. The subscriber base is now 231 million across 22 countries. That subscriber base is bigger than any country in Africa, and as a standalone would be the fifth most populous country in the world. In fact, MTN offers services to 3.1 percent of the population of the globe. That is no mean feat for a company that is less than two and a half decades old. Quick check at the key numbers, group revenue decreased 4.9 percent to 69.2 million Rand (0.7 percent lower on a constant currency basis), EBITDA was down 10.1 percent (down 4.2 percent on a constant currency basis) to 30.2 billion Rand. For the half.

MTN EBITDA for the first half of the year is 89 percent of the Telkom market capitalisation. MTN invested 10.8 billion Rand in their infrastructure, an 18 percent increase from this time last year. HEPS was 10.3 percent lower than the prior corresponding reporting period, 654 cents per share. The dividend was actually hiked to 480 cents, the interim dividend that is (408 cents after paying a 15 percent tax rate). That is more than they paid in 2012 for the whole year, back when there were no interim dividends.

The average minutes spoken across the networks increased 11.2 percent, average billed price per minutes fell 25 percent, in Dollar terms. As we suspected, minutes spoken are still increasing across the board, the real growth driver remains data.

30.1 percent of all revenues in South Africa are from data. Margins expanded here too. The company spent locally, 4.678 billion Rand on their infrastructure. What amazes me is that whilst us urbanites demand LTE where ever they go, MTN is still rolling out 2G towers in South Africa, my reality and your reality is not the reality of other people. My wife renewed her contract in this time and even though it was in the middle of the strike, an awesome person at the store here in Melrose Arch helped me, I had NO PROBLEM. My signal never fell over as a result of the strike, as a consumer I was totally unaffected.

In Nigeria, where the group has nearly 63 million subscribers (one fourth of the base), data is now 20.5 percent of all revenues. Margins decreased, mostly as a result of the selling of the tower infrastructure and a weakening of the Naira. The Nigerian currency translation is always going to be a problem. As Michael pointed out yesterday, the Rand has actually weakened to the Naira recently. The Naira is pegged to the US Dollar, the Rand has weakened to the Dollar. So from a currency roundabouts and swings point of view, these normalise over time. You and I cannot control the currency, the oil price, nor the Nigerian government being reliant on the two. Over time the country will move further away from a commodities based economy to services, 160 million people need access to better telecommunications. The fact that the company is only rolling out 2G and 3G infrastructure means that there is no fast internet connections there. That tells you what you need to know.

Their third really big market, Iran saw data revenue increase by 44 percent, in total data represents 26 percent of all revenue. MTN Irancell is rolling out fibre, PLEASE can I have some here. The next set of businesses is the Large Opco Cluster, as they call it. This includes Ghana, Cameroon, Ivory Coast, Uganda, Syria and Sudan. The last two, as you can imagine, operating in difficult conditions. The rest of the territories, Zambia, Benin, Guinea Bissau, Congo-Brazzaville, South Sudan, Liberia, Yemen and so on, fall under small opco, collectively contributing 33.5 million subscribers.


Why continue to hold MTN? Why buy them at these levels, are they not "ex-growth"? As we pointed out at the year end stage, 84 percent of AT&T's revenues come from data. MTN has ARPU's far lower than the developed world. The countries and territories that the company trades in are high growth, tricky at best from a regulatory point of view, never mind politically speaking. There are very few investments that give you unparalleled focused access to this continent we call home, as well as the middle east. Fixed lines are non existent in the territories that MTN operates in, if Telkom is the best competitor across the lot, you saw the relative size and scale. Data will continue to drive the company, whilst they trend to being more "utility like", the margins are fabulous, the dividend flow should continue to be strong. Hold and accumulate on weakness, there is plenty of room for expansion of services across what is still a very low base.