Tough trading sees weaker MTN subscriber growth

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Johannesburg - The effects of a tough trading environment in the markets where MTN operates on the continent and in the Middle East have resulted in weaker subscriber growth compared with a year ago, its results for the first three months to March showed yesterday.

Although the performance was boosted by strong growth in data, competitive offerings and improved network quality and coverage, subscriber numbers at Africa’s largest cellular network operator grew by only 1.1 percent to 210 million during the quarter compared with a 3.2 percent quarter-on-quarter increase in the quarter to March 2013.

The company said growth during the period under review was curtailed by a ban on the sale of new sim cards in Nigeria, its largest market, last month, and the disconnection of subscribers who do not generate revenue in South Africa. Fewer customers were also signed up in Iran, MTN’s third-biggest market, where the base grew by 1 percent to 41.7 million.

Analysts said the poor performance was also a reflection of price competition particularly from smaller operators who were fighting for market share.

In most of the 22 countries in Africa and the Middle East where MTN operates it is either the biggest or second-largest operator.

“In a market with symmetric termination rates, one expects the market shares to see-saw marginally but remain literally flat on a through-the-cycle basis. We believe that MTN is in an environment where it is experiencing some market share losses relative to competitors,” said Farai Mapfinya, a portfolio manager at Mvunonala Asset Managers.

Sifiso Dabengwa, MTN’s group chief executive, confirmed this, saying: “Our operating environment remains tough with persistent price competition and regulatory challenges in key markets.”

He said data, which grew 43.3 percent, and mobile money would remain a key focus to offset declines in traditional voice revenue. Mobile money subscribers increased by 12 percent during the quarter. Mobile money is a payment service operated using a cellphone.

Price competition has resulted in lower tariffs, which has led to decreased average revenue per user (Arpu) at MTN. In Nigeria, Arpu slid by 3.2 percent while subscriber numbers lifted by 0.8 percent to 57.2 million during the quarter.

The company said stronger growth was made after the regulator removed a one-month ban on signing-up new SIM cards, which was imposed on MTN and two other competitors to penalise them for poor network service.

Data revenue jumped by 21 percent in local currency following an increase in the number of 3G technology-enabled devices on MTN’s network in Nigeria.

In South Africa, MTN subscriber numbers fell by 3.2 percent to 24.9 million during the quarter after the company cut 973 064 subscribers who showed activity but did not generate revenue within a 90-day period. Of this number, 19.6 million are prepaid customers.

Contract numbers jumped 3.7 percent on growth in telemetry SIM cards, a segmented marketing campaign and converged offers. Data revenue rose by 13.3 percent to contribute 22.8 percent to the unit’s revenue. Blended Arpu fell by 11.3 percent to R100.47 a month.

MTN said the prepaid market was challenging. Recently it launched a voice promotion of 79c a minute for calls made to other subscribers on and off the network.

Jean Pierre Verster, an analyst at 36One Asset Management, said: “MTN SA has clearly lost market share recently. The impact on the financials will depend on how Vodacom and Cell C react. If competitors cut tariffs to similar levels, it will lead to lower profitability for all the mobile players.”

The outlook for MTN’s financial performance remained positive, he said. “The weak Nigerian numbers should recover during the rest of the year as the SIM ban has been lifted, and MTN Group has indeed reiterated that its full-year targets remain intact.

“The weak quarter one update will just lead to some small earnings downgrades from analysts.”

Shares fell 3.2 percent to close at R208.20 yesterday.


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