MTN South Africa performance review

Zunaid Bulbulia CEO MTN South Africa

Although there is still much work to be done, MTN South Africa started to show some progress during the second half of the year after a challenging start to 2013. This improvement was largely a result of more relevant segmented offerings to the pre-paid segment, particularly the revised MTN Zone offering. An international calling campaign offering cheaper calls to other African countries and the discontinuation of value-eroding offers were also key contributors. The pre-paid subscriber base declined by 1,1%, bringing the total pre-paid base to 20,7 million subscribers. Most of the subscriber loss reported earlier in the year was recovered in the second half. The post-paid segment performed well, increasing its subscriber base by 11,3% to 5,0 million. MTN South Africa recorded an increase in the number of upgrades to higher tariff plans.

Total revenue declined by 6,1% to R39 707 million. This was impacted by a R1 888 million adjustment made to revenue as a result of management reviewing the accounting treatment for handset sales. Excluding this adjustment, revenue declined by 1,6% (including MTN Business). This was mainly a result of lower outgoing voice revenue, which declined by 8,3% to R19 327 million. Data revenue, including MTN Business, increased by 20,2% to R8 822 million and contributed 22,2% to total revenue. This was a positive result despite lower data pricing.

Increased 3G coverage, improved smartphone adoption and competitive data bundles were the main contributors to this growth. The number of smartphones on MTN’s network increased by 32,6% to 7,3 million, and the number of data users increased by 6,4% to 14,3 million.

The EBITDA margin declined by 1,8 percentage points excluding the impact of the handset sales adjustment and 0,3 percentage points including the impact of the adjustment. This decline was largely as a result of lower revenue growth. While cost increases in 2013 were kept to below the inflation rate, cost optimisation and labour productivity remains a priority. In December, MTN South Africa reduced the number of employees given its increased focus on aligning costs with revenue. The cost structures of the business will continue to be reviewed in 2014.

Capex for the period amounted to R5 835 million, which mainly related to improving quality and capacity on 2G and 3G networks. During the year, we added 516 new 2G sites and 1 133 co-located 3G sites. The 3G population coverage improved sharply and is now 75,8%.

We continue to have discussions with the authorities regarding the planned auction of 2.6 GHz and 3.5 GHz spectrum frequency and allocations.