MTN Group Limited Integrated Report 2016

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Financial review
For purposes of the commentary below, please refer
to the reconciliation of pro forma information
on 44 and 45 of the report and to the financial
results announcement which includes a full set of
the pro forma financial information which is available
Revenue
Group revenue increased marginally to R146 894
million. Revenue growth was impacted by the
depreciation of the rand and the significant
depreciation of the naira against the US dollar,
particularly in the second half of 2016 (average
exchange rate for the period). The average naira
depreciated by 19% against the US dollar and was
36% down against the US dollar at 31 December
2016 when compared to 2015. The average rand
weakened by 16% against the US dollar, 6% against
the Iranian rial, 10% against the Ghanaian cedi, 14%
against the Central African franc, 8% against the
Ugandan shilling and 9% against the Sudanese
pound. The rand, however, strengthened 17%
against the Nigerian naira and 50% against the
Syrian pound.
On an organic basis, Group revenue increased by
2,9%*. WECA’s revenue decreased by 0,3%* and
remained the largest contributor to total Group
revenue at 55% at the end of December 2016. SEA
grew revenue by 7,9%* and contributed 36% to total
Group revenue while MENA increased revenue by
3,8%* to contribute 10% to total Group revenue.
MTN’s top line was negatively impacted by a decline
in revenue in Nigeria (down 1,4%*), Cameroon
(down 6,7%*), Ivory Coast (down 2,0%*) and
Uganda (down 1,9%*). This was mainly as a result
of regulatory challenges including the disconnection
of subscribers as well as aggressive competition in
the first half of the year. However, these declines
were partly offset by growth of 4,7% and 19,8%* in
revenue in South Africa and Ghana respectively.
MTN South Africa’s increase was driven by higher
handset sales and data revenue, which benefited
from improved network quality, particularly in the
second half. MTN Sudan and MTN Syria also
supported growth in total Group revenue, and
increased revenue by 18,8%* and 20,3%*
respectively.
Total outgoing voice revenue declined 3,6%* to
contribute 55% to total Group revenue. While
average voice traffic decreased 1,7%, the Group
US dollar effective voice tariff in constant currency
terms declined 14,3%*. This was largely due to price
competition across markets and a tough economic
environment. Data revenue increased by 19,7%* to
contribute 27% to total Group revenue. Data revenue
growth was supported by strong growth in most
markets benefiting from significantly improved 3G
and LTE network quality. Data traffic increased 143%
while the effective data tariff declined 56,1%* (in
constant currency US dollar terms). Digital revenue
contributed 36% to total Group data revenue. This
was supported by increased smartphone penetration
and our expanded digital service offerings in the
year. Device revenue increased 21,5%* and
contributed 6% to total Group revenue. The remaining
4% of total Group revenue comprised SMS and other
revenue. SMS revenue decreased 20,0%*.
Costs
Group operating costs excluding the impact of the
Nigerian regulatory fine, hyperinflation, tower profits
and the MTN Zakhele Futhi share-based payment
expense, increased 9,8% to R94 913 million. On an
organic basis, total Group costs increased by 17,7%*.
Once-off costs in organic EBITDA included
professional fees of R1 324 million** incurred on a
range of professional services relating to the
negotiations that led to a reduction of R34 billion
in the Nigerian regulatory fine, costs related to
the reconnection of subscribers in Nigeria of
R535 million* and a property, plant and equipment
(PPE) impairment charge in South Sudan of
R2 679 million*.
Our financial results reflect the most difficult year in the Company’s history, with a number
of material regulatory, macro-economic and political challenges as well as operational
underperformance in the first half of the year. However, towards year-end the business
began to show encouraging first signs of a turnaround, with some of our larger markets
including Ghana, Uganda and Ivory Coast recording solid improvements in the final
quarter.
* Constant currency (organic) information.
** Reported – includes hyperinflation and the relating goodwill
impairment, tower profits, the Nigeria fine and the 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.
MTN Group Limited Integrated Report 2016 41
PERFORMANCE
DETAILS