MTN, Africa's mobile giant, brings profit cheer to its shareholders
JOHANNESBURG - Mobile telecoms provider MTN informed shareholders on Friday that its profits would more than double in the second half of the year.
MTN, Africa’s mobile giant, said it was boosted by increased demand for data and connectivity and its profits would more than double during the half-year ended June ahead of market expectations and despite the Covid-19 pandemic economic fallout.
MTN’s share price closed 10.72percent higher at R66.40 on the JSE after it said it expected its earnings per share to increase at least 140percent.
However, an expert questioned sustainability of the growth rate given the economic fallout from the Covid-19 pandemic.
This means earnings per share would be more than R5.92 for the six months ended compared with R2.47 a year earlier.
The company also said headline earnings per share would likely be at least R1.95, or 100percent, higher compared with the six-month period ended June 30 2019.
MTN said that its earnings per share included the benefit from gains amounting to R3.41 on the disposal of the ATC Uganda and ATC Ghana tower joint ventures.
In 2019 telecoms group announced its asset realisation programme to simplify its portfolio and cut debt.
Headline earnings per share were lifted by non-operational items mainly related to foreign exchange gains.
MTN's rival Vodacom on Thursday said that underlying service revenue growth in its international operations was subdued and declined by 5.3percent during the quarter ended June after stripping out the rand devaluation.
Vodacom said the lower service revenue from its international operations was as a result of lower economic trading activity, free M-Pesa services and customer registration requirements in these businesses.
Peter Takaendesa, head of equities at Mergence Investment Managers, said MTN might be concerned about the sustainability of the growth rate given tougher trading conditions in most African markets going into the second half of the year.
Takaendesa also said it was clear that for Vodacom the rest of Africa business was getting tougher as its service revenue from those regions declined after stripping out the translational boost from a weaker rand over the period.
Takaendesa added that telecoms companies were likely to be less affected compared to other more sensitive industries by the Covid-19 pandemic as they would likely accelerate the adoption of some digital services provided by the companies such as mobile data and mobile money.
“However, the economic impact of Covid-19 on many African countries with limited space for fiscal policy to stimulate their economies is likely to be a near-mid term headwind to consumer spend in general,” said Takaendesa.
In June, MTN topped 100 million group data subscribers after growing its user base since the beginning of the year.
The group’s mobile money business also grew strongly and was likely to approach 40 million users in the near future, said Takaendesa.
“The increased mobile data and digital services adoption due to Covid-19 will clearly accelerate the achievement of more customer and digital revenue milestones.
"However, the significant investments the group has made into its data networks and data-enabled devices have been the real structural enablers,” said Takaendesa.
MTN was likely to leverage those investments coupled with proceeds from the targeted R25bn asset disposals over the next two years to selectively launch 5G services in countries where it made economic sense, pay dividends and maintain reasonable gearing on its balance sheet.