Our large opco cluster and MTN Irancell's performance and outlook

Net additions of 2,6 million (2014: 7,2 million)
Net promoter score (NPS) of 16% (2014: 5%) LA
20 million MTN Mobile Money subscribers (2014: 14,9 million)

Iran revenue: R13 660 million
Iran EBITDA: R5 665 million
Iran capex: R4 180 million

MTN Irancell (joint venture, equity accounted, financial numbers reflected at 49%)

2015   2014   2016 guidance   Net additions (’000) 2 200   2 566   1 100   Revenue (Rm) 13 660   11 631       EBITDA margin (%) 41,5*   42,8*       Capex (Rm) 4 180   3 112   3 518

Benefiting from strong data revenue growth

MTN Irancell delivered a strong performance in 2015 despite sluggish economic activity related to lower world oil prices and continued sanctions against Iran. Supported by the continued adoption of 3G and LTE services by Iranian youth, MTN Irancell’s subscriber numbers increased by 5,0% to 46,1 million in a highly penetrated market.

Lower oil revenues took a toll on the economy, reducing government revenues and the availability of foreign currency. The average rial/US dollar rate declined 12% in the year. In July, Iran reached a landmark nuclear deal with six world powers, opening the way for a phased lifting of nuclear-related economic and financial sanctions from January 2016.

MTN Irancell’s total revenue increased by 11,6%^*, driven by a 90,2%^* acceleration in data revenue. This performance was achieved despite a steep fall in data prices and brought data’s contribution to total revenue to just under a third (30,2%).

This offset a 4,0%^* decline in outgoing voice revenue as a result of aggressive competition in the market and data substitution. Data revenue was supported by a strong 3G and LTE network as well as a 52,7% increase in the number of smartphones on the network to 26,4 million, representing more than half of the subscriber base.

In the year, MTN Irancell launched its Enterprise Business Unit (EBU) ahead of the easing of sanctions in the country to provide dedicated ICT and business-to-business (B2B) services to business customers.

MTN Irancell’s EBITDA margin decreased by 1,3 percentage points to 41,5%^* as a result of an increase in regulatory fees and transmission costs associated with 3G and LTE network rollout.

Capex for the year amounted to R8 531 million (100%) with a focus on network modernisation and the continued expansion of the 3G and LTE networks. In the year, the operation rolled out 432 2G sites, 2 443 co-located 3G sites and 1 266 co-located LTE sites.

Looking ahead

Following the easing of financial sanctions in January 2016, we are working on repatriating funds from Iran. This offers significant opportunities to expand services, particularly in the digital space, where we command a strong market position. We also expect economic growth to accelerate, inflation to reduce and the exchange rate to normalise somewhat. The renewal of MTN Irancell’s WiMax licence to TDD-LTE at the end of 2015 will support a nationwide expansion of fixed LTE services in the year ahead. MTN Group’s share of MTN Irancell’s capex in 2016 is expected to be R3,5 billion, when we forecast 1,1 million net subscriber additions.

MTN Ghana

2015   2014   2016 guidance   Net additions (’000) 2 403   923   800   Revenue (Rm) 7 903   7 149       EBITDA margin (%) 40,5*   37,4*       Capex (Rm) 1 831   1 400   901   MTN Mobile Money subscribers (m) 5,7   3,4

Progressing thanks to robust data growth

MTN Ghana delivered a solid performance despite a challenging economic environment. The operation increased its subscriber base by 17,3% to 16,2 million, largely because of attractive voice and data offers aimed at subscriber acquisition and churn management as well as digital and mobile financial services offerings.

The Ghanaian economy, until recently a top performer due to its political stability and rapid growth through commodity exports, is under a three-year IMF programme to restore fiscal balance. Its currency, the cedi, fell sharply in 2015 and it faced a prolonged energy crisis.

MTN Ghana’s total revenue increased by 15,9%^*, supported by a 85,2%^* growth in data revenue, which contributed 30,6% to total revenue. This was due to appealing data bundle packages, an improved device plan and an increased focus on 3G quality and coverage. The number of smartphones on the network increased by 40,8% to 3,2 million in the year.

Mobile financial services showed healthy growth with the number of MTN Mobile Money customers expanding by 68,1% to 5,7 million.

The EBITDA margin increased 3,1 percentage points to 40,5%^* despite an increase in US dollar-denominated expenses associated with the sharp depreciation of the cedi against the US dollar. The increase in margin was mainly due to well-maintained costs and no management fees paid to the Group in the year.

MTN Ghana invested R1 831 million in the network, adding 73 2G and 233 co-located 3G sites in the year. In December, the operation won a 4G/LTE licence in the 800MHz spectrum band, enabling MTN Ghana to improve the quality and capacity of its data network. Of the six quality of service metrics for which we obtain external assurance for Ghana, four improved in the year, and two ebbed (117).

We expect to commit some R901 million in capex to Ghana in 2016, when we expect to add a net 800 000 subscribers to our network.

MTN Cameroon

2015   2014   2016 guidance   Net additions (’000) (480)   947   1 000   Revenue (Rm) 5 806   6 194       EBITDA margin (%) 36,2*   42,8*       Capex (Rm) 1 911   862   1 157   MTN Mobile Money subscribers (m) 2,0   1,6

Contending with aggressive competition

MTN Cameroon’s performance was below expectations largely due to aggressive competition and a limited 3G network. Cameroon’s economy remained resilient in the year, growing at more than 5% in the face of security and humanitarian challenges at its northern borders with Nigeria and eastern borders with the Central African Republic. Subscriber numbers declined by 5,0% to 9,2 million, resulting in a decline in market share from 59,4% to 56,2%.

Total revenue declined by 4,6%^* mainly due to a 12,5%^* decrease in outgoing voice revenue. This was the result of lower effective tariffs and network challenges in the first half of the year. Following corrective measures, network quality showed improvements and stabilised revenue performance in the fourth quarter. Data revenue increased by 65,7%* and contributed 14,2% to total revenue. This was supported by attractive data promotions, growth in digital services and MTN Mobile Money. MTN Mobile Money subscribers increased 23,8% to 2,0 million in the year.

MTN Cameroon’s EBITDA margin decreased by 6,6 percentage points to 36,2%* as a result of an increase in rent and utilities as well as maintenance and transmission costs associated with strengthening the 3G and 4G network.

Capex increased by 122,7%^* to R1 911 million as a result of a focused 3G and 4G network rollout. During the year, the operation rolled out 162 2G and 609 largely co-located 3G sites. The renewal of the operation’s licence in the year allowed for a significant increase in the capacity of the network and enhanced data traffic speed. In 2016, we expect to incur capex of R1,2 billion, and record one million net additions.

 

MTN Syria

	2015		2014		2016 guidance
Net additions (’000)	111		33		50
Revenue (Rm)	2 605		3 449
EBITDA margin (%)	17,7*		18,9*
Capex (Rm)	974		357		1 543

Growing despite deteriorating conditions

In MTN Syria, we faced considerable challenges related to the civil war, not least the reduction in the population; however, we managed to continue to offer telecoms services.

We increased our subscriber base by 1,9% to 5,9 million.

Despite a deterioration of conditions in the country, the operation increased total revenue by 4,7%^* mainly as a result of strong data revenue growth. Data revenue increased by 22,8%^* and contributed 27,7% of total revenue.

The EBITDA margin declined by 1,2 percentage points to 17,7%^*. Capex amounted to R974 million in the year, and we expect to spend R1,5 billion in 2016, when we predict net additions of 50 000.

MTN Sudan

	2015		2014		2016 guidance
Net additions (’000)	(489)		226		125
Revenue (Rm)	3 472		2 701
EBITDA margin (%)	35,0*		33,8*
Capex (Rm)	819		1 392		832

Making progress in a tough operating environment

MTN Sudan showed good progress despite a 5,5% decline in subscribers to 8,5 million due to subscriber registration requirements. Sudan’s economy remained fragile, amid continued conflicts between government and rebel forces, sanctions and diminished oil revenue because of lower international crude prices.

Total revenue increased by 14,8%^* supported by a 59,8%^* increase in data revenue. At year end, data contributed 21,9% to total revenue.

The EBITDA margin improved 1,2 percentage points to 35,0%^* despite the high inflation environment. Capex in the year amounted to R819 million, and we expect to incur capex of R832 million in 2016, when we predict net additions of 125 000 subscribers.

MTN Ivory Coast

	2015		2014		2016 guidance
Net additions (’000)	330		939		75
Revenue (Rm)	6 424		6 418
EBITDA margin (%)	34,2*		38,6*
Capex (Rm)	833		1 185		815
MTN Mobile Money subscribers (m)	2,9		2,5

Rolling out 3G aggressively

MTN Ivory Coast increased its subscriber base by 4,1% to 8,3 million in a competitive market. This was supported by segmented offerings and bonus bundle promotions.

Presidential elections in Ivory Coast in October were peaceful, allowing the country to move on after years of turmoil. The economy continued to expand in an extended revival since the end in 2011 of a decadelong crisis.

Total revenue increased by 2,2%^*, supported by encouraging growth in data revenue. Data revenue increased by 41,5%^* to contribute 15,6% to total revenue. The increased uptake of digital services, MTN Mobile Money offerings and an aggressive rollout of 3G sites contributed to data growth. MTN Mobile Money subscribers increased 12,8% to 2,9 million. The focus ahead is on the expansion of distribution channels and the introduction of new products.

The operation’s EBITDA margin declined by 4,4 percentage points to 34,2%^*. This was a result of high maintenance costs and an increase in rent and utilities associated with network rollout.

MTN Ivory Coast spent R833 million on its capex programme and rolled out 132 2G and 339 co-located 3G sites in the year. We expect to incur capex of R815 million in 2016, when we predict net additions of 75 000 subscribers.

MTN Uganda

	2015		2014		2016 guidance
Net additions (’000)	(1 467)		1 588		2 000
Revenue (Rm)	5 148		5 289
EBITDA margin (%)	34,5*		39,2*
Capex (Rm)	951		667		807
MTN Mobile Money subscribers (m)	9,5		7,3

Feeling the impact of subscriber disconnections

MTN Uganda’s subscriber base declined by 14,1% to 8,9 million, impacted by the disconnection of 3,7 million subscribers in the fourth quarter who did not fully comply with regulatory subscriber registration requirements. Uganda’s economy grew, but inflation accelerated and the currency lost value.

Total revenue increased by 2,8%^*, supported by a 17,4%^* increase in data revenue that contributed 28,3% to total revenue. This was attributable to the launch of LTE services in the year, an increase in 3G and LTE devices and the continued success of MTN Mobile Money. Voice revenue continued to be impacted by high excise duties and the One Network Area initiative implemented in the region. Outgoing voice revenue decreased by 2,1%^* mainly due to lower effective voice tariffs. Outgoing voice revenue, excluding roaming, decreased by 0,7%^*. MTN Mobile Money recorded a 30,2% increase in registered subscribers to 9,5 million.

The EBITDA margin decreased by 4,7 percentage points to 34,5%^*, negatively impacted by US dollar-denominated expenses.

Capex in the year amounted to R951 million with 161 new 2G sites and 100 co-located 3G sites rolled out, improving quality and capacity on the network. We expect to incur capex of R807 million in 2016, when we predict the net addition of two million subscribers.