MTN is mulling ways to fine-tune its investment strategies across all its operations as it sets its sights on opportunities to grow its presence as the biggest cellular network operator in Africa.
In a presentation yesterday the company said the options available to it included consolidation and diversification, convergence and operational evolution, and leveraging its existing footprint and intellectual capacity to become the leader in telecommunications in emerging markets.
In an interview after the presentation, outgoing chief executive Phuthuma Nhleko cited Angola, Iraq, Saudi Arabia and Ethiopia as countries in which MTN had identified potential opportunities.
“In every region there is a country or a place which, if it availed itself at a decent price, we would consider.”
Nhleko ends a decade-long reign as MTN chief executive and president at the end of this month. Under his leadership, MTN grew from a five-projects operation to a 21 subsidiary company with a market cap expansion from R58 billion in 2000 to R253bn.
Sifiso Dabengwa, Nhleko’s successor and current MTN chief operations officer, will have the responsibility of overseeing consistent revenue generation but will be spared from spearheading international growth.
Nhleko, who will become chairman of the international division, will continue to craft a coherent strategy for MTN’s international ambitions.
Investors’ interest in MTN’s international operations will be drawn by Nhleko being credited with the acumen to take calculated risks and the understanding of the dynamics of overseas markets.
Some of the flashpoints include the Ivory Coast where revenue dropped 5 percent last year due to political instability. Others are Yemen, Libya and challenges in Sudan.
Nhleko said, however, political instability on the continent would not deter MTN.
“I don’t think it would put us off expansion in the region. No situation is permanent.”
India’s Bharti Airtel was considered a “viable” threat to MTN’s position in Africa, particularly in the low end and rural consumer segments that Bharti would target.
MTN stock rose the most in almost eight months after forecasting growth in subscriber numbers in 2011 and announcing a plan to raise the dividend. The dividend payout ratio would be 55 percent of earnings a share, excluding one-time gains or costs, of R9.09.
MTN’s shares gained 4.88 percent to R131.89 on the JSE yesterday, the biggest jump since July 15 last year. That pared the stock’s decline this year to 2.7 percent, valuing the company at R242.8bn.
The latest coup for the group was the conclusion of discussions with the Syrian government to convert its build-operate-transfer arrangement into a freehold licence valid for 20 years, which MTN expects to obtain by May.
During the year, MTN Syria added 415 base stations, bringing its total to 3,912. MTN’s R1.06bn investment in Syria for this year will fund capacity and infrastructure and increase its play in data.
Group capital expenditure, although declining, is planned to be marginally higher than last year due to a roll-over from last year.
For the 12 months to December last year, MTN’s free cash flow increased to R31bn. Group revenue grew 2.5 percent to R114.7bn and subscribers grew by 22 percent to 141.6 million.
The earnings before interest, tax, depreciation and amortisation (Ebitda) margin (excluding MTN Zakhele) rose to 44 percent from 41.9 percent in the previous year. Data revenue in South Africa rose 33 percent, although this was offset by a decrease of 13 percent in interconnect revenue. MTN aims to add another 16.9 million customers this year.
Rival Vodacom, however, maintains the biggest subscriber base and revenue generation in South Africa.
Spiwe Chireka, an industry analyst at Frost & Sullivan, said MTN’s investment into the rest of Africa had continued to pay dividends. “However, single digit growth in Ebitda across all its key African operations, including Nigeria, is a sign that the cost of doing business in Africa is increasingly becoming a challenge.”
She said MTN needed to focus on maintaining average revenue per user as the number of service provider options for customers was increasing, particularly in the cellphone data segment. She added that MTN Business had a greater chance of success in Africa, where the enterprise segment was “grossly under served”.
Source – Independent Online