Home Tech News MTN disconnects 6.6m subscribers in first half of 2016

MTN disconnects 6.6m subscribers in first half of 2016

MTN disconnects 6.6m subscribers in first half of 2016
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South Africa’s MTN Group says that 6.6 million subscribers have been disconnected in the first half of 2016 across its operations, including Nigeria, to comply with mandatory phone subscriber registration rules.

According to MTN Group, owners of MTN Nigeria, the subscriber disconnections were carried out between January and June 2016 on the mobile networks of its business units in Nigeria, Uganda and Cameroon.

In the MTN financial performance report for six months ending June 30, 2016 made available to Technology Times, the mobile phone group indicated that it operated in a challenging environment for the past six months.

Executive Vice Chairman (EVC) of NCC, Professor Umar G. Danbatta, NCC (left) and Chief Executive Officer (CEO) of MTN, Fredinand (Fredi) Moolman, after the deal was signed
File photo shows Executive Vice Chairman (EVC) of NCC, Professor Umar G. Danbatta, (left) and Chief Executive Officer (CEO) of MTN, Fredinand (Fredi) Moolman, after both organisations sealed a deal on the fines imposed on MTN Nigeria by NCC

[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]Additionally, MTN Group reports that approximately 18 million subscribers across the group’s network were disconnected since October 2015, “to ensure compliance with the subscriber registration processes.”[/quote]Additionally, MTN Group reports that approximately 18 million subscribers across the group’s network were disconnected since October 2015, “to ensure compliance with the subscriber registration processes.”

MTN Group revenue increased by 1.5% but it recorded “a decline in outgoing voice and data revenue in Nigeria following the withdrawal of regulatory services from MTN Nigeria until May 2016. This had a significant negative impact on MTN Nigeria’s revenue growth for the first four months of the period. This was partly offset by higher revenue growth by MTN South Africa, supported by strong device sales and an increase in data revenue during the period.”

Market share of the top four mobile phone networks in Nigeria Source: NCC
Market share of the top four mobile phone networks in Nigeria Source: NCC

Closer home in Nigeria, the mobile phone group reports that “MTN Nigeria’s competitiveness was compromised by the mandatory disconnection of subscribers and the suspension of regulatory services until May 2016 when the operation attained the necessary approvals to introduce market-related pricing plans and promotions. In addition, the introduction of regulatory restrictions on “out-of-bundle” data tariffs impacted MTN Nigeria’s data revenue growth.”

MTN attributed the regulatory fine imposed on it by the Nigerian government, as well as currency fluctuation to be major factors impacting on its financial performance during the past six months.

“The Group’s reported results were significantly impacted by the Nigerian regulatory fine. On 10 June MTN Nigeria resolved this matter with the Federal Government of Nigeria (FGN) and agreed to pay the FGN a total cash amount of N330 billion Nigerian Naira ($1,671 billion, using the exchange rate prevailing at the time) over three years in a full and final settlement.

“This was agreed in addition to complying with certain other regulatory conditions imposed as part of the settlement reached. The 50 billion naira (US$250 million) paid in good faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the settlement, leaving a balance of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time) outstanding. In June 2016 the first scheduled payment of 30 billion naira (US$124 million) was made. The remaining cash payable at 30 June 2016 amounted to 250 billion naira (US$882 million).”

[quote font=”georgia” font_size=”22″ font_style=”italic” align=”left” arrow=”yes”]IHS continues to grow and develop its business with leading market positions in 5 markets and has recently led in-market consolidation in Africa through its acquisition of Helios Towers Nigeria. IHS is now the largest independent tower operator in EMEA by tower count and the tenth largest independent tower company in the world, with more than 24,000 towers. IHS is extremely well positioned for future growth and build-out from 3G upgrades and the move to LTE across its key markets.[/quote]According to MTN Group, “the depreciation of local currencies against the US dollar had a substantial impact on the Group’s results. This resulted in foreign exchange losses amounting to R3 606 million during the period. MTN South Sudan reported an impairment on property, plant and equipment (PPE) of R259 million (using a Rand/ Sudanese pound exchange rate of 0.376). When the impairment write-off is presented on an organic basis, the impairment amounts to R2 632 million (using a rand/Sudanese pound exchange rate of 3.837). This organic impairment write-off had a significant negative impact on organic EBITDA.”

The company further states that “excluding the impact of the Nigerian regulatory fine, hyperinflation and tower profits, the Group EBITDA margin declined by 6,6 pp to 37,1%. This was a result of the lower EBITDA margins in Nigeria and South Africa. The EBITDA margin in Nigeria was impacted by the 4,8% decline in revenue and an 11,3% increase in costs mainly as a result of the transfer of the second tranche of the previously sold passive infrastructure into the TowerCo as well as US dollar-denominated expenses associated with the TowerCo and build-to-suit sites.”

The costs of running MTN Group’s operations across Africa and the Middle East were further impacted by increased marketing and commission spending on re-connecting the mobile phone company’s subscribers affected by the subscriber registration process.

In MTN South Africa, its EBITDA margin was negatively impacted by lower handset margins following aggressive handset sales and increased network-related costs associated with the expansion of 3G and LTE sites, according to MTN Group.

In addition to that, MTN also highlighted that “the Group’s underlying performance was impacted by weak macro-economic conditions affecting consumer spending, the withdrawal of regulatory services in MTN Nigeria from July 2015 until May 2016 and disconnections of subscribers related to subscriber registration requirements, mainly in Nigeria.”

MTN Group reports that “MTN Nigeria disconnected the last batch of 4.5 million subscribers in February 2016. MTN Uganda and MTN Cameroon were also impacted by subscriber registration requirements. This resulted in significant free minutes provided for subscriber re-registration campaigns, contributing to a 12.2% decline in the effective voice tariff. The Group’s performance was further impacted by aggressive price competition and under-performance of MTN South Africa.”

Barrister Adebayo Shittu, the new Minister of Communications, speaks at the A4AI Stakeholders Forum held today in Lagos
Barrister Adebayo Shittu, Minister of Communications

MTN Group says its cash inflows generated by operations decreased by 9.2% to R23 870 million “mainly as a result of the down payment of R5 870 million relating to the Nigerian regulatory fine during the period.”

MTN Group says it “continued to increase investment in the network with a focus on increasing coverage, speed and quality of 3G and LTE in prime areas to support the increasing demand for data services. Capital expenditure (capex) increased by 26.9% (15,4%) to R13 772 million. MTN South Africa’s capex amounted to R4 773 million, representing 34.7% of total capex. Capex in Nigeria amounted to R2 534 million and was impacted by delays in network re-planning more recently, our capex in Nigeria was impacted by the limited availability of US dollars.”

The mobile phone group adds further that “during the period, the Group rolled out 873 2G sites, 3 660 co-located 3G sites and 2 691 LTE sites. The Group also rolled out 1 132 km of long-distance fibre and connected a total of 422 sites to fibre. Capex spend included the purchase of LTE spectrum and licences in various markets to enable better quality data networks across its operations.”

However, the group had some major development during the period, which include the appointment of new executives and additional independent non-executive directors to the board, which according to MTN, is aimed at strengthening management, enhancing governance and aiding the strategy of the Group.

MTN announced among others, the appointment of Rob Shuter as the new Group president and CEO, to join MTN as soon as is practically possible in 2017 but no later than 1 July 2017; Stephen van Coller, VP for M&A and Strategy, effective 1 October 2016; Godfrey Motsa, VP for the South and East Africa region (excluding South Africa), who brings vast experience in telecoms and operating within Sub- Saharan Africa; and Kholekile Ndamase, as deputy head of mergers and acquisitions, with effect from 10 September 2016.

In addition to that, the Group also refreshed the composition of the board of directors for MTN Group and MTN South Africa, providing more in-depth commercial, risk and governance skills and experience.

According to the company, the Group is currently “in the process of undertaking, with external assistance, a deep and fundamental strategic review of its operations and processes  to ensure it is operating far more optimally given the pressure on voice revenues, evolving customer needs for high quality data and more complex and competitive market environments. This will reset and position the business for future growth in a rapidly evolving sector.”

MTN says its investments in towers with IHS Holding Limited are evidenced of by its substantial ownership interest in INT Towers Limited and its direct investment in IHS.

GSM base station
A telecoms base station

“IHS continues to grow and develop its business with leading market positions in 5 markets and has recently led in-market consolidation in Africa through its acquisition of Helios Towers Nigeria. IHS is now the largest independent tower operator in EMEA by tower count and the tenth largest independent tower company in the world, with more than 24,000 towers. IHS is extremely well positioned for future growth and build-out from 3G upgrades and the move to LTE across its key markets. MTN will benefit from IHS’ strong growth, IHS will also help us accelerate our network expansion in markets such as Nigeria further improving the benefits and services for our customers,” according to MTN Group.

MTN Group also says it hopes “to list MTN Nigeria on The Nigerian Stock Exchange during 2017 and has established a management task team with the responsibility to guide the company towards such a listing. The proposed listing is subject to suitable market prevailing circumstances and conditions and the appropriate approvals from relevant regulators and other stakeholders.”

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Success Kafoi Journalist at Technology Times Media. Mobile: 08077671673 email: success.kafoi@technologytimes.ng

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