MTN AGM comments, passes through 150 million subscribers

Some background quickly, a client of ours who is involved in the telecommunications industry, as an analyst (I hope I got that right or he is going to kick my butt) has been having a to and fro with me on the prospects of the mobile companies. His contention is that they are nothing more than utilities who see something different in the mirror. They feel pretty like Maria in West Side Story. Who is not a Jet.

Here is the first line, sounds quite encouraging: "The majority of the markets in which MTN operates have continued to show strong subscriber growth despite increased competition. The Group increased its subscriber base by 7.4 million subscribers or 5% to 149 million customers for the four months to 30 April 2011 and has subsequently passed 150 million mobile subscribers across its 21 operations."

But, "Group revenue improved only marginally mainly as a result of the continued strengthening of the rand against the USD and increased competition. Due to political unrest, operational performance has been impacted negatively in Cote d' Ivoire and to a lesser extent in Yemen and Syria." I guess the best part is that the currency seems to have found a level, and has been less volatile this year when measured against '08, '09 and '10.

Margins. Perhaps the most important part when talking about these businesses: "Margins in the majority of MTN's key markets remained robust. This was primarily due to the benefit of ongoing cost control and efficiency initiatives despite the negative impact of inflationary pressures and higher fuel costs. However, margins are under significant pressure in markets experiencing high levels of price competition." That is in their least mature market in Nigeria.

In the most mature part of their business, in South Africa, where MTN says that data continues to gain momentum, "EBITDA margin continued to show a healthy trend upward mainly due to lower selling and distribution costs and to a lesser extent the containment of network operating costs." Right. So unlike Telkom (who have a far greater data contribution), MTN's margins are increasing in this "mature" market.

As ever, we watch this theme, the argument that they might become simple struggling utilities does hold weight. This argument is given a whole lot of substance with the Indian example. But I suspect that India and Africa are different beasts.