MTN AGM update, close to 200 million subscribers

Yesterday we received a business update for the 4 months to 30 April 2013 from MTN. I am still constantly amazed by the subscriber growth of this business. Not because I think the numbers are not there but because off a constantly higher base the growth remains consistent. MTN are expecting to service 200 million people by the middle of the year. That is astounding.


The exact number for this period came in at 197.4 million, a 4% growth for the period. To put things into perspective, in the last report ended 31 March 2013, MTN had 195.4 million subscribers. That means they have added 2 million subscribers in a Month! By the end of 2004 the business had just short of 9 million subscribers. The power of compound growth, 4% does not seem like much but when you put things into perspective you look at it differently. And that was only ten years ago.


On the back of this subscriber growth revenues grew 5.6% year on year thanks to a good performance from MTN Nigeria. Of course the weaker rand has been beneficial for a business who report in Rands but get most of their income outside of the country. Rand reported revenues are up 15% year on year.


There have been a few issues in Nigeria with regards to the quality of their network. This is cleared up in the update.


"The main focus for the Nigerian operation is to improve network quality and capacity to enhance competitiveness and cater for higher usage. We have made good progress on our capital expenditure rollout programme and continue our constructive dialogue with the regulator, the Nigerian Communications Commission, regarding its recent determination that MTN Nigeria is a dominant operator in that country."


I guess with more control and power comes more responsibility. They also talk about South African operations which remain fairly muted as earnings marginally declined. If it weren't for good data and SMS growth this would be even worse. Fortunately this business has huge geographic diversification.


"The Group's operations in Iran, Ghana, Sudan and Uganda showed healthy growth in both revenue and subscriber for the period. Group data and SMS revenue continued to expand strongly in most markets, increasing its contribution to total group revenue to approximately 18%."


That last sentence is key. 18% is huge when you consider that data was barely mentioned a few years ago. And we expect this to only get bigger.


In a separate announcement the company announced that former CEO and the man who brought MTN to such great heights, Phuthuma Nhleko will be taking over as chairman from Cyril Ramaphosa. I take one positive and one negative from this turn of events. The positive is that over the years I am sure that Phuthuma has built quite a large share holding in MTN. This means that his interests are aligned with shareholders. The negative however is the temptation to take a more executive roll. It may be quite distracting for Sifiso Dabwengwa to have his former boss as chairman. Overall it is probably net neutral.