MTN reports 11% profit growth, but it sees a fall in SA amid load shedding


Africa's largest mobile operator MTN said on Thursday while robust demand for data helped lift its revenue by double digits in its first quarter to end-March, profit margins came under strain as it battled with load shedding in SA and high inflation across its markets.

MTN, which generates more than 60% of its revenue in Nigeria and SA alone, reported revenue growth of more than 15% to R52.8 billion for its three months to end-March, with data usage jumping by more than a quarter. Core profit grew 11% to over R24 billion but fell almost 7% in SA.

The group's core profit margin fell 2.7 percentage points year on year to 43.7%. Margins fell 3.8% in its second-biggest market SA, where it is investing to help offset the effects of load shedding, though higher management fees also had an effect. MTN said its busy upgrading and equipping its cellphone towers with batteries and piloting solar at a limited number of sites, as well as spending more on security. 

In late morning trade on Thursday MTN's shares were down more than 3%, and they have fallen by over a third in the past one year.

The company is also investing on its rollout of its network in Nigeria, and difficult trading conditions across its markets as local currencies weakened against the dollar.

Inflation averaged more than more 18% across its markets, with higher interest rates and general prices eroding the spending power of customers. Both Sudan and Iran are suffering hyperinflation, with Sudan having now been hit by a conflict in mid-April that has led to a shortage of basic goods. In Nigeria, companies have also been hit by the introduction of a new currency, which has led to a shortage of notes, suppressing economic activity.

"Against this challenging backdrop we continued to implement proactive measures to sustain top-line growth and mitigate against inflationary pressures. In support of these interventions, we invested R6.4 billion in our networks and platforms in the first quarter," said group CEO Ralph Mupita said in a statement.

Across its 19 markets, MTN grew its subscribers by just over 5% to about 291 million, but it said it is considering an "orderly exit" from three west African operations: Guinea-Bissau, Guinea-Conakry and Liberia.

MTN has already received an offer for these assets from Axian Telecom, which it is evaluating the offer. These operations total 6.1 million subscribers and contribute only about 0.7% of the group's core profit.

"As we are at an early stage of deliberations, we emphasise that any process of this nature will entail extensive engagements with stakeholders who will be appropriately informed as and when the evaluation process has materially progressed," it said.

On the other hand, MTN said its process to exit Afghanistan remained on track.