MTN Group delivered a satisfactory set of results to June 2012, increasing its subscriber numbers by 6.9% to 175,997 million from 31 December 2011. Market conditions continued to be impacted by increasing levels of competition, regulatory requirements, political unrest in certain countries and the global economic slowdown.
Despite these challenges, revenue showed solid growth of 17.5% (12.5%*) year on year, driven mainly by strong operational performance and competitive value propositions in South Africa, Iran and Ghana. The weaker rand exchange rate versus the USD and the relatively muted decline in the value of the naira to the USD, had a positive impact on rand reported results. Growth in Nigeria was lower than anticipated as a result of intense competition. The Group EBITDA margin expanded marginally to 44.9%** mainly due to greater efficiencies and tighter cost controls across most operations.
*constant currency
**2012 EBITDA includes the realisation of R19 million in respect of the previously deferred Ghana Tower Company profit to the income statement and R547 million profit from the sale of the Uganda tower portfolio. 2011 EBITDA includes R455 million profit from the sale of 400 of the Ghana towers.
The Group continued to deliver on its strategy to improve shareholder returns, develop existing and new revenue streams, optimise costs and enable an excellent customer experience through various key initiatives:
• During the six month period, MTN Holdings Proprietary Limited acquired 15.6 million MTN shares at a total cost of R2,088 million. In total, the Group has repurchased 1.2% of issued shares at the cost of R3,018 million since the buy-back initiative was implemented in late 2011.
• MTN remains focused on maintaining and enhancing its leadership position by offering competitive segmented voice offerings and loyalty programmes to its customers as competition increases. The Group also continues to increase its distribution footprint to ensure greater accessibility.
• Data usage continues to improve through an aggressive 3G rollout, a comprehensive device strategy and appealing local content across operations. Mobile Money, which has been launched in 13 countries, recorded 7,3 million users. Data, excluding SMS, contributed 10.0% to Group revenue, increasing 69.6% to R6,666 million. MTN’s data strategy will be further supported by the West African Cable System (WACS), which became operational in May 2012, with landing stations in eight countries.
• MTN’s ICT strategy remains a focus. ICT will now be streamlined under a newly established Enterprise Business function, which will coordinate, standardise and measure ICT implementation throughout the Group.
• The centralised procurement project continues to show steady progress with 40-45% of the Group’s procurement now centralised. Its priority is to establish an integrated supply chain organisation across the Group. The IT shared services project has expanded to include Uganda, Zambia and Swaziland. Rwanda is expected to be integrated later in the year. Some of the operational efficiencies include the standardisation of intelligent network platforms, billing systems and application transformation.
• Rationalisation of back office operations with a focus on transactional activities in human resources, finance and supply chain management is underway.
• Infrastructure investments for enhanced quality, capacity and to support 3G remains a priority for the Group, with R10,144 million of capital expenditure (capex) incurred in the first half of the year. More importantly, a total of 69% of the total approved capex has been committed by operations through orders placed with vendors. Although capex increased when compared to the corresponding period for 2011, the rate of capex is expected to accelerate in the second half of the year.
On 28 March 2012, Turkcell Iletisim AS and EAC (Turkcell) filed a legal action against MTN Group and MTN International (Mauritius) Limited (MTNI) in the United States district court in Washington, DC. Turkcell alleges principally that MTN violated the US Alien Tort Statute by engaging in the bribery of an Iranian and a South African government official in connection with MTN’s participation in the Irancell consortium, that MTN encouraged the South African government to take a favourable position toward Iran`s civil nuclear power development programme at a meeting of the International Atomic Energy Agency in November 2005, and that MTN enlisted South African government support for the provision of military equipment to Iran. Turkcell seeks damages in the amount of $4.2 billion. On 2 July 2012, MTN moved to dismiss the case on the basis that it lacks legal merit. On 30 July 2012, the Turkcell plaintiffs filed an opposition to the motion. MTN’s replying brief is due on 15 August 2012, at which point the motion will be fully briefed. MTN expects that the court will decide the motion in late 2012 or early 2013.
On 1 February 2012, the board of directors appointed a special committee to investigate the allegations made by Turkcell. The committee is chaired by an independent jurist, Lord Leonard Hoffmann, and has been directed to conduct an investigation and report its findings and recommendations to the board. The committee’s investigation is continuing.
MTN is working closely with all the relevant authorities to manage US sanctions against Iran and Syria. MTN continues to retain international legal advisors to assist the Group in remaining compliant with all applicable sanctions.
