2011 Q1 subscriber update

MTN released subscriber numbers on Friday afternoon. Disappointing ARPU (Average revenue per user) number overshadowed a revision upward in their outlook for their subscriber additions this year. I guess not unexpected, call times are cheaper as competition intensifies. We have seen that trend in some African countries, with fierce competition. I am always flabbergasted at how people expect their mobile connections to be top notch all the time. And if not, well then, the networks are rubbish. Useless. Well, let me just say this, twenty years ago the alternative was to find beaten up tickie box phones and hope it worked or was not broken. Inside of those twenty years mobile handset usage has grown from 12.4 million to roughly four and a half billion people.

The first 3G connection was rolled out a decade ago. You can use your handset to navigate, listen to music, collect your email, bank, skype AND the battery life is much better than ever. So a dropped call or connection or two (or even ten) is acceptable in my world. After all, the handsets nowadays seem to consume ones attention. Here are some interesting handset milestones, taken from Mobile phone:

First mobile call made: 1946 from a motor vehicle from equipment that weighed 36kgs.
First handset: a 2kg brick from Motorola in 1973
First commercial network: NTT launched in Japan in 1979, US in 1983
First Sim card: 1991
First SMS: Sent from computer to handset in the UK in 1992, handset to handset in 1993.
First mobile download: 1998, a simple ringtone (remember those!!) in Finland
First commercial mobile payment system: launched in the Philippines in 1998
First 3G network launched: in Japan by NTT in 2001
First commercial 4G network with complete coverage: launched in South Korea in March this year by KT.

But (for a change) I digress. Here goes the subscriber details headlines: "MTN Group recorded 147,265,000 subscribers at 31 March 2011. This is a 4% increase for the quarter from 141,598,000 subscribers recorded at 31 December 2010. The Group continued to perform well despite aggressive competition and heightened political unrest in certain countries in the Middle East and West Africa."

A lot of the time people forget that this is this quarter when measured against last quarter. And not this time last year. Whereas ARPU's are measured on a YTD basis, not too sure why, but there you go. South African ARPU's fell 10 percent to a blended (both post and pre paid basis) 137 ZAR. In the other territories it is measured in US Dollars. Nigerian ARPU's fell 6 percent from 11 to 10 Dollars (not too specific here, as in 10.97 to 10.38 is what I would be looking for) whilst the other important territory, Iran stayed steady at 8 Dollars per user. Ghanaian ARPU's fell 5 percent in Dollar terms but increased 1 percent in local terms. The biggest fall offs were in the hotly contested East African markets, ARPU's fell 22 percent in Dollar terms in Uganda and 24 percent in Rwanda.

OK, I chatted about that revision of guidance earlier, the group suggests that they should add 18.435 million new subscribers to their networks this year, that was versus the prior guidance of 16.925 million subscribers given earlier. If I was doing the guesstimating I might have been inclined to say 18.5 from 17. But sounding more precise means you must be on the case. The three most important areas for MTN are still Pre-paid South Africans (15.7 mn subscribers), Nigerians (40.2 mn) and Iranians (31.3 mn). Ghana is the next close subscriber base with just over 9 million subscribers.

Overall not a bad quarter, the ongoing political violence in one of their major regions, Middle East and North Africa is well noted. Plus there is mention made of mobile money and the tie up with American Towers. Also, they refer to a growing data market and perhaps most exciting, here goes:

"MTN continues to benefit from its various cable investments. In April this year the high-capacity West Africa Cable System (WACS) linking Southern Africa and Europe landed at Yzerfontein, South Africa. The 14,000km long fibre optic submarine cable system has already landed in Nigeria, Cote d'Ivoire and Cameroon and is expected to land in Ghana in early May 2011. MTN is the landing party in the last four countries mentioned. Service on this cable system is anticipated to commence in late 2011."

I cannot wait for super quick bandwidth. The share sold off quite a bit Friday, but then came back strongly with the rest of the market, but still ended around a percent down. As you can see, it is tough to make predictions in this world, which is moving at a rapid pace. But the long and the short is that folks are more reliant on their handsets for almost everything. WiMax, "the cloud" and TV viewing are all the new things you can do on your handset. The biggest worry of course is margin compression, increased competition and increased regulation. Still, we remain buyers of the stock, they are still cheap relative to their global peers and have transitioned to higher yield territory, which does indicate some maturity at a level.