Weaker rand helps MTN to book forex gains of R1.1bn

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BR MTN 74287 Bloomberg An MTN store in Maponya Mall, Soweto. Africa's biggest cellular operator generated 31 percent of its sales in South Africa in the first half, but analysts expect it to lose local market share. Photo: Bloomberg

Johannesburg - MTN Group’s earnings a share for last year jumped by between 25 percent and 30 percent, boosted by a foreign exchange gain of about R1.1 billion, Africa’s biggest cellular operator said yesterday.

The increase was mainly a result of a currency gain in MTN Mauritius, MTN said.

MTN booked a foreign exchange loss of about R2.7bn the previous year.

“It was a positive trading statement, ahead of estimates of a 20 percent increase,” Kate Turner-Smith, an analyst at BPI Capital Africa, said. “MTN benefited from a weaker rand.”

MTN generated about 31 percent of sales in South Africa during the first half of last year, with the rest coming from operations in other markets, including Nigeria. The rand was the worst-performing major currency against the dollar in 2013, weakening 19 percent in the period, Bloomberg data showed.

The foreign currency gain for 2013 “translates to about 60c a share, which would take our headline earnings a share estimate to R14.03, the lower limit of the trading statement range”, Turner-Smith said.

In a statement last year, MTN said earnings a share, excluding one-time items, had risen 1.9 percent to R10.89 for the year to December 2012.

The group’s shares fell as much as 2.7 percent by early afternoon before recovering some losses to close 1.4 percent down at R197.88, valuing the company at R370.5bn. The stock has declined 9 percent this year, compared with a 12 percent fall at Vodacom, South Africa’s market leader.

Jean Pierre Verster, an analyst at 36One Asset Management, said foreign exchange movements and detail about the R1.1bn impact of these movements on full-year profit would be of interest when MTN published its financial results in two weeks time.

The group operates in 22 markets with more than 200 million subscribers.

The naira had weakened against the dollar during the period under review but the Nigerian currency strengthened against the rand.

The performance of MTN’s individual operations and, in particular, the results from South Africa and Nigeria, where it had historically derived the most earnings, would be keenly watched.

In its financial results earlier this week, Blue Label Telecoms, a distributor of SIM starter packs and prepaid airtime vouchers, showed that Vodacom had maintained market share and Cell C had gained share.

“Listening to what those two are saying it would seem that MTN lost market share,” Verster said, adding that the impact on the profitability and any changes to the capital expenditure commitment for MTN South Africa would be closely monitored.

The Nigerian Communications Commission had barred MTN Nigeria from adding new customers because of the strain on the networks. The capital expenditure and profitability of the unit was also under scrutiny.

MTN signed a five-year contract this week for service provider Ericsson to manage its networks in Nigeria.

Verster added that potential changes to MTN’s dividend payout would be of interest. While investors were hoping for a major increase, MTN’s board might not have approved a significant increase in the payout in line with the increased earnings because the latter was attributable to foreign exchange, which was not a sustainable source of earnings. - Business Report


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