MTN 9 month numbers - huge data growth

25-OCT-16

MTN reported numbers for their nine months to end September. Rob Shuter is going to join earlier than previously thought. 13 March next year, which is still a long way away. I guess it cannot actually come sooner for current chief Phuthuma Nhleko. As he is quoted in the SENS, he continues to shift more and more responsibilities to both Stephen Van Coller (who is the Vice President of Mergers and Acquisitions, as well as Strategy) and Gunter Engling, the acting CFO. Nhleko has stuck in some "hard targets" for the 12, 18 and 24 months, with the first half of the next financial year set to reveal the results of these targets.

Group subscribers increased 0.9 percent quarter on quarter, that is a good thing, the base now stands at 234,7 million, across 22 different countries and territories. That is a whole lot of people. 29,7 million here in South Africa (a decline of half a percent), 60,5 million in Nigeria (an increase of 2.5 percent) and 47,8 million in Iran (up 1.1 percent). Those three countries, out of the 22, account for 138 of the 234.7 million, or nearly 59 percent of all subscribers. Other West and Central Africa (which includes Ivory Coast and Ghana, as well as Cameroon), has 47.6 million customers, or another 20 percent of the subscriber base. I must have missed the fact that large OPCO and old reporting methods have been replaced by regional reporting.

In terms of subscriber numbers and expectations, the group have revised to include nearly a million net subscribers for the year. ARPUs are very important, those are average revenue per user. For MTN Nigeria in Dollar terms, they have understandably plunged as a result of the currency being rubbished. Down 32 percent quarter on quarter. Whoa!

Check this out: "Voice and data traffic increased 1,8% and 142% respectively YoY" Data? WhatsApp, Facebook, YouTube, you get the drift. And notwithstanding the fact that global call rates are on the down, across their network it is plateaued for the time being. What I also find interesting is the following, this is here in South Africa: "Revenue improved by more than 3,6% QoQ while the EBITDA margin expanded by more than 200 bp QoQ." Margins expanding and revenue on the up? That goes against recent "wisdom" here in South Africa, that is not what the chattering classes would have been putting forward.

Iran seems to be "getting better", the group are able to repatriate monies out, which is more than just a positive development. They expect to have got all the money they need to out over the next six months. Nigeria is still nothing short of a lurch from problem to problem, politicians have suggested that the company improperly repatriated funds out over a decade, nearly 14 billion Dollars worth. As the release says: "Consequently MTN Nigeria will strongly defend any action that would be prejudicial to its interest."

Data is the next big leap. What is quite interesting is that not all countries are the same, some countries like Ghana (41.7 percent of total revenues) and Iran (41.5 percent) are using more data per customer than South Africa (34.4 percent of total revenue) and even Cameroon (19 percent), who lag, as do Nigeria (20.4 percent). So different countries and their respective populations have different consumption patterns at a data level. Whether or not data will become commoditised remains to be seen, we all consume a whole lot more than we used to, streaming music and videos has become a way of life. More smartphones joining the networks will do more and more in time, consume more data. Whether or not the networks can balance the fine line between huge capex (MTN have invested 21.230 billion Rand over the last 9 months, an increase of 10.5 percent year on year) and charging the right rate, remains to be seen, I suspect that they will definitely pull this off. As more and more entertainment takes place on mobile devices, MTN will be a benefactor of this trend.

The stock has responded as you would expect, relief at some level that "things" are not as bad as the headlines. Nor are they great, Nigeria needs to somehow be stabilised (at least the bad news), the business in that country is currently in a state of "severe storm" that is being weathered. To this point. I suspect that a local listing and local ownership (in Nigeria) would go a long way to improving local sentiment to the company. The oil price and a stabilisation of all things Nigerian budget, well, stick that down in the category of cannot do anything about. Owning this business on the basis that data continues to supply internet, and will continue to do so, for millions of people across our continent.