Africa’s biggest mobile operator, MTN Group says it is in the process of undertaking, with external assistance, a deep and fundamental strategic review of its operations and processes to ensure it is operating far more optimally given the pressure on voice revenues, evolving customer needs for high quality data and more complex and competitive market environments.
The strategic review is intended to reset and position the business for future growth in a rapidly evolving sector.
The Group made this disclosure in its half year report in which it reported a 4.9 billion Rand ($357 million) loss for 6 months of operations, a sharp contrast to headline earnings of almost 12 billion Rand ($874 million) a year earlier. The company blames the loss on the hefty fine imposed on it by the Nigerian regulator and its underperformance in South Africa, its home market.
It would be recalled that on 10 June MTN Nigeria resolved to pay the fine imposed on it by the Federal Government of Nigeria (FGN) and agreed to pay the FGN a total cash amount of 330 billion Nigerian naira (US$1,671 billion, using the exchange rate prevailing at the time) over three years in a full and final settlement. This was agreed in addition to complying with certain other regulatory conditions imposed as part of the settlement reached. The 50 billion naira (US$250 million) paid in good faith and without prejudice by MTN Nigeria on 24 February 2016 forms part of the monetary component of the settlement, leaving a balance of 280 billion naira (US$1,418 billion, using the exchange rate prevailing at the time) outstanding. In June 2016 the first scheduled payment of 30 billion naira (US$124 million) was made. The remaining cash payable at 30 June 2016 amounted to 250 billion naira (US$882 million).
The Group also pointed out that aside from the Nigerian regulatory fine, the depreciation of local currencies against the US dollar had a substantial impact on the Group’s results. This resulted in foreign exchange losses amounting to R3 606 million during the period.
Other factors that affected the Group’s underlying performance was the weak macro-economic conditions affecting consumer spending, the withdrawal of regulatory services in MTN Nigeria from July 2015 until May 2016 and disconnections of subscribers related to subscriber registration requirements, mainly in Nigeria. “6.6 million Subscribers were disconnected over the six month period in Nigeria, Uganda and Cameroon. Since October 2015 approximately 18 million subscribers across the Group were disconnected to ensure compliance with the subscriber registration processes. MTN South Africa reported a decline in subscriber numbers mainly as a result of strong competition and economic pressure in a highly penetrated market,” the reported noted.
However, MTN Nigeria increased market share to 46,2%, despite the decline in its subscriber base by 3,7% to 58,9 million (including 568 000 Visafone subscribers) but the Group’s subscriber numbers remained flat at 232.6 million.
Consequently, the Group plans to undertake a strategic review of its operations with a view to continuing to work towards achieving its vision of “leading the delivery of a bold, new Digital World to our customers,” according to the report.
Key areas to be addressed include: “network quality and high-speed data connectivity especially in key locations with high demand, provide compelling segmented offerings to consumers and enterprises, improve customer service and increase targeted smartphone uptake.
• Operating efficiencies and improving customer service remain a priority with a focus on the service channels productivity through digitisation and leveraging Mobile Money as a distribution channel. Continued network optimisation and improved opex management, including the implementation of zero-based budgeting, will also contribute to improving efficiencies.
• The Group will continue to explore opportunities to create value through leveraging its extensive infrastructure across Africa and the Middle East.
• Improving the way of work through increased co-ordination between different parts of the business is key to the success of this strategy.
• The Group will embark on a process of housing new revenue streams, particularly Digital services, outside the core business. This will allow for more agility and greater flexibility to accelerate growth in these areas. New revenue streams are expected to increase their contribution to revenue over the next 12-18 months,” the report stated.
In addition, the Group said it will continue to seek value-accretive expansion opportunities in selected geographies across Africa and the Middle East.
Launched in 1994, the MTN Group is a leading emerging market operator, connecting subscribers in 22 countries in Africa, Asia and the Middle East. The MTN Group is listed on the JSE Securities Exchange in South Africa under the share code: “MTN.” As of 30 June 2016, MTN recorded 232.6 million subscribers across its operations in Afghanistan, Benin, Botswana, Cameroon, Cote d’Ivoire, Cyprus, Ghana, Guinea Bissau, Guinea Republic, Iran, Liberia, and Nigeria.