Mobile operator MTN has published a quarterly update on its business, reporting solid growth despite headwinds in South Africa from unprecedented levels of load shedding and concessions supporting Cell C’s turnaround.
For the nine months ended September, group service revenue grew by 14.3%, led by data revenue (up 33.2%) and fintech (up 12.9%). Earnings before interest, tax, depreciation and amortisation was up 24.7%.
Total MTN Group subscribers increased by 6.8% to 285 million.
“Supported by the solid performance of large subsidiary MTN South Africa, MTN Group reported resilient overall results for the first nine months of 2022, under difficult macroeconomic, geopolitical and regulatory conditions across our markets,” it said.
MTN South Africa – which is the second-largest contributor to MTN Group service revenue after MTN Nigeria – grew subscriber numbers by more than 800,000, or 8.1%, to 35.9 million in the period to 30 September 2022.
Service revenue growth of 3.5% was impacted by load shedding and revenue concessions that supported the recapitalisation of national roaming customer Cell C, however.
Wholesale revenue increased by 0.7%, thanks to the national roaming deals with Cell C and Telkom. In September 2022, Cell C concluded its recapitalisation, significantly improving its financial position. Based on this, MTN SA assessed that it is now appropriate to recognise revenue for national roaming services on an accrual basis of accounting.
Revenue from Cell C related to BTS rental remains on a cash basis of accounting.
The national roaming agreement with Telkom, aligned with the Group’s work to monetise investments in networks, took effect on 1 November 2021. Off a low base, it gained traction in the nine months to 30 September 2022, increasing its contribution to revenue and scaling steadily.
MTN South Africa’s enterprise business continued to expand, delivering service revenue growth of 19.7%. The consumer postpaid business was resilient, MTN said, with growth of 4.2%.
“The rising cost of living and the impact of load shedding was felt most acutely in the consumer prepaid market, where service revenue grew by 0.4% in the period,” it said.
“Amid unprecedented load shedding which negatively affected network availability, MTN South Africa expanded market share, delivered encouraging underlying service revenue growth, strong expense controls and investment in network resilience and expanding the 5G coverage,” said MTN Group President and CEO Ralph Mupita.
“Supported by an increase in smartphone penetration, MTN SA continued to make data more affordable: the effective data tariff was reduced by 23.4% year on year. This helped stimulate usage for both prepaid and postpaid subscribers.
“Work on network resilience and availability progressed well, but persistent load shedding in the last quarter of the year could impact revenue growth, particularly in the consumer prepaid market,” he said.
MTN said it is also making progress with its process of a strategic minority investment into the fintech business, noting that it was now in the binding offer phase and expecting outcomes in early Q1 2023.
“We are encouraged by the growth and expansion of the fintech ecosystem as we see robust transaction volumes driven by growth in customers, agents and merchants,” said Mupita.
“In the near term, revenue growth has been impacted by new taxes in a few markets, but we continue to see the case for structural and compelling growth for fintech services in the medium term that will deepen financial inclusion across Africa.”
As to the outlook for the rest of the year, Mupita said it remained challenging given the difficult geopolitical conditions and the macroeconomic environment globally.
The macroeconomic pressures experienced in Q3 – including load shedding, inflation, deteriorating exchange rates and rising interest rates – are expected to continue straining consumer spending, thus impacting performance in Q4.