Glimmer of light for MTN despite Nigeria cloud

But biggest market shows no sign of recovery as company scrambles to reduce sim card fine

MTN Group’s first quarter figures indicate that the company’s turnaround strategy might be working, although it is early days yet.

Executive chairman Phuthuma Nhleko’s restructuring and turnaround plan has yielded some positive results in South Africa with a 7% year-on-year increase in subscribers, a 4% gain in revenue and a 23% jump in data revenue in the first four months of the year.

But its biggest market, Nigeria, which is still battling to recover from the sim registration scandal that hit the company in September last year, is yet to show any signs of improvement.

The effects of 11.5 million subscribers being disconnected between October and January after it was discovered that MTN had not complied with regulations to disconnect unregistered sim cards on its network in Nigeria — and which attracted a massive fine that the company is still trying to negotiate down — was evident in the first-quarter numbers.

From January to the end of April, subscriber growth in MTN Nigeria fell 7% year on year and revenue dipped 6%. Data revenue, a significant growth area in many markets, declined 12%, according to figures released this week at the company’s AGM.

In a bid to drive spend in this market, MTN Nigeria will roll out 262 3G and 378 LTE sites that will improve the network’s data capability.

The company is planning to open additional sites next year.

The dark cloud of the $3.9billion (about R61-billion) fine, reduced from $5.2-billion, imposed by Nigeria’s regulators still hangs over the company, which has been in talks with the Nigerian Communications Commission to further reduce the fine.

At the AGM on Thursday, Nhleko provided scant details on the suspended negotiations, but assured investors that the company was on top of things.

“We continue to engage the regulator in Nigeria on preserving a sustainable industry structure and ensure that the whole digital structure service continues to grow to the benefit of the consumers,” said Nhleko.

Apart from the fine, Nigeria’s economic outlook, high inflation and power supply issues put pressure on the company, he said.

MTN is also eyeing new markets by investing in Africa Internet Group — along with Goldman Sachs and Rocket — in telecoms order to increase revenue streams for shareholders.

Iran presented opportunities for MTN “to expand both digital and enterprise business units that look considerably better as time goes”, said Nhleko.

“We’re not out of the woods completely as yet, but it looks better as time goes on and assumptions fall away.”

The Iranian market has been another headache for the group, which faced allegations of bribery and was unable to repatriate funds after sanctions were imposed on the country. Those sanctions were lifted in January this year.

For some analysts, MTN remains a good investment, although they still feel left in the dark when it comes to Nigeria.

“You can’t keep shareholders in the dark forever, and investor confidence is reflected in the share price,” said Bright Khumalo, a portfolio manager at Vestact Asset Management.

Shareholders took umbrage at the large remuneration package MTN gave Sifiso Dabengwa, who resigned after the mobile company was slapped with the massive fine by the Nigerian Communications Commission.

Concerns about the group’s lack of effective succession planning was another issue shareholders want addressed.

“There should have been proper succession planning in place when the former CEO left,” said Eskom Pension and Provident Fund CEO Luthuli at the AGM.

Luthuli said he remained concerned about the “effectiveness of risk management within the organisation. If you’re operating in an environment like Nigeria, which is a difficult environment, you ought to have processes and systems in place to highlight risk.”

Nhleko said a new CEO would be appointed in June and assured shareholders that measures had been taken to avoid problems relating to sim registrations in future.

Nhleko was brought back into MTN in September to facilitate negotiations with the Nigerian Communications Commission over the fine. Sbu

His appointment as executive chairman “shows you the level of confidence the company has in Phuthuma. The moment they had a problem they brought him in,” said Khumalo.

Nhleko took over the reigns in 2002 after MTN entered the Nigerian market in 2001 and oversaw the group’s growth into the rest of the continent and the Middle East.

He stepped down as CEO in 2011, and was replaced by Dabengwa.

Nhleko rejoined MTN in 2013 as group chairman, replacing Cyril Ramaphosa.

We’re not out of the woods completely as yet, but it looks better

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