25 / 96
Our executive chairman’s report
Weathering the perfect storm
MTN’s operating environment remained challenging
in 2016. Global economic growth slowed and sub-
Saharan Africa followed suit, with many of its
economies constrained by their reliance on
commodity exports. This put consumer spending
under pressure, restricting the Group’s revenue
growth, and triggered currency volatility across our
footprint, which drove up foreign-denominated
expenses and foreign exchange losses in the year.
Regulatory requirements intensified, with economic
vulnerability prompting unfortunate policy reactions
and additional taxes in some markets. SIM card
registration requirements remained a feature, with
the consequential disconnections most keenly felt
in Nigeria, Uganda and Cameroon. In South Africa,
there were further delays in awarding spectrum,
to the detriment of the country’s ICT development –
a situation that requires urgent resolution. In Nigeria,
the regulator’s classification of MTN as a
“dominant operator” continued to undermine our
competitiveness, affecting pricing and efficiency of
offers approved. There was no respite from difficult
competitive conditions as regards to voice and data
services across all markets.
After extensive engagement with the Federal
Government of Nigeria (FGN), on 10 June 2016, we
resolved to pay 330 billion Nigerian naira
(R25,1 billion based on a fixed exchange rate at the
time) over three years in full and final settlement of
the regulatory fine imposed on MTN Nigeria in 2015.
This represents a reduction of R34 billion in the
original fine. Our relationship with the regulatory
authorities in Nigeria improved considerably over
the course of resolving this matter, auguring well for
MTN Nigeria’s continued recovery, especially as we
seek to address the impact on our competitive
position on the “dominant operator” categorisation
by the NCC.
*
Constant currency (organic) information.
** Reported – includes hyperinflation and the relating goodwill
impairment, tower profits, Nigeria fine and MTN Zakhele Futhi impact.
*** The forward-looking financial information disclosed in this Integrated
Report has not been reviewed or audited or otherwise reported on by
our external joint auditors.
We continued to engage constructively with various
agents of the FGN with the view to meeting the other
regulatory conditions imposed as part of the
settlement of the fine, including a planned listing of
MTN Nigeria on the Nigerian Stock Exchange when
conditions are favourable.
Despite the weak economic environment and the
significant disruption of the Nigerian fine, there were
early signs of being on the road to recovery in both
South Africa and Nigeria. Towards the end of 2016,
the turnaround reflected in revenue growth and
market share gains in MTN Nigeria, and a more
favourable revenue mix and better profitability in
MTN South Africa. Both operations achieved
meaningful improvements in their net promoter
scores (NPS) and this trend extended into the first
few months of 2017.
MTN Irancell reported a strong performance driven
by data revenue growth. Youthful demographics,
higher GDP and increased smartphone penetration
provided a conducive environment for its
performance.
MTN Ghana also reported a solid performance
supported by data revenue growth, while MTN
Uganda, MTN Cameroon and MTN Ivory Coast
showed improved momentum towards the fourth
quarter of 2016.
The depreciation of the rand and the significant fall
in the naira against the US dollar constrained growth
in Group revenue. However, data revenue grew by
19,7%* to contribute 27% of total revenue,
supported by the decision to accelerate network
investment particularly in South Africa, Nigeria and
Iran. Our NPS improved in many markets as we
The last 18 months have undoubtedly been the most difficult period in MTN’s history.
We faced unprecedented challenges, precipitated by regulatory, macro-economic,
political and competitive forces in our two largest markets, Nigeria and South Africa. With
the Nigerian fine settled and deeper senior management capacity and skills in place, the
board conducted a fundamental review of the business. The review flagged a number of
issues in need of attention and affirmed the Group’s unique strategic advantages on
which we continue to build a sustainable business. The findings necessitated a decisive
response, precipitating our business transformation initiative, IGNITE, which sets out a
roadmap for the next 18 months. There is still much to be done, but also much to look
forward to for the people and stakeholders of MTN.
MTN Group Limited
Integrated Report 2016
23
STRATEGIC
OVERVIEW