MTN warns its bottom line will be hit
TELECOMMUNICATIONS group MTN yesterday warned that its bottom line for the year ended December would take a beating as the Nigerian fine, foreign exchange losses and charges related to its empowerment vehicle Zakhele Futhi weighed heavily on its performance.
MTN said this meant it would report its first ever loss when it publishes its results for the period on Thursday.
The results would be the last set presented by interim executive chairman Phuthuma Nhleko, with former Vodafone executive Rob Shuter set to take over later this week.
The company said it expected a basic headline loss per share of between 74 cents and 81c and a basic loss per share of between 137c and 151c.
In the comparable period last year, the group reported headline earnings per share of 746c and earnings per share of 1 109c.
The group said the poor performance was largely due to the multibillion-rand regulator fine imposed on it by Nigerian authorities two years ago.
“The results for the year were impacted by the Nigerian regulatory fine, which had 455c per share (cps) negative impact,” the company said.
Charge The Nigerian fine might not be the last the company has to contend with from the country after the Nigerian Senate last year initiated investigations on allegations that the company had repatriated more than $13 billion (R168bn) out of the country over 10 years – a charge the group has vehemently denied.
MTN is the largest mobile phone company in Nigeria and revenue from the country accounts for a third of the group’s total revenue.
MTN yesterday said it suffered foreign exchange losses of 324 cps, while the MTN Zakhele Futhi Broad-Based Black Economic Empowerment (BBBEE) transaction charge had negative impact of 88 cps.
Zakhele Futhi failed to live up to expectations after it only garnered 81 000 new investors to raise R1.094bn and R817 million from Zakhele shareholders who decided to re-invest in the new scheme – significantly lower than the near R2.5bn it had set out to raise. After three years, the fund will be listed on the JSE.
Richard Hurst, a telecoms analyst at Africa Analysis, said Zakhele Fund did not go according to plan for the company. “The Zakhele Futhi transaction has had a negative impact on MTN’s income due to the fact that it was initially undersubscribed and fell short of its fund-raising target of R2.5bn, raising only R1.1bn, forcing the company to extend the deadline and incur additional costs,” Hurst said.
The company said it also expected losses from investments in Africa Internet, Middle East Internet and Iran Internet Group to cut some 39c and losses from the Nigeria tower company, mostly owing to foreign exchange losses on dollar-denominated loans, to impact earnings by 122c.
Hurst said MTN was in a position to reverse the losses it suffered in the period under review, but would need to look at other revenue sources for growth. “The company will need to begin focussing and winning business in the more complex solution sales environment of enterprise and business services, with several opportunities such as internet of things and cloud services presenting themselves in the market.”
MTN shares rose 0.8 percent on the JSE yesterdat to close at R119.75.