MTN SA has witnessed a dramatic growth rate in terms of data revenues, up 27.7 % for the year ended December 2011 – but this revenue is likely to grow at a slower rate in the short-term amid the price war in data services, argues Frost & Sullivan.
The business research & consulting firm said that MTN’s 3G network expansion across the country is a positive indication that the company has shifted its focus to data services, as voice service revenues have been declining year-on-year.
“However, with the current price wars on data services in the country, MTN SA’s data revenue is likely to grow at a slower rate in the short term, if no strategies are put in place to boost broadband subscriptions,” it said.
MTN Group released results for the year-ended December 31, 2011, reporting a 16.2% growth in group subscriber numbers, to 164.5 million; and a 6.3% increase in revenues, to R121.884 billion. The group’s adjusted headline earnings per share increased 43.2%, to R10.70 cents.
Despite the implementation of compulsory SIM card-registration in most of its operations – as well as intense competition – MTN Group experienced an impressive increase in subscriber numbers; this has offset the detrimental effects of the social unrest in the Middle East and African regions, the advisory group opined.
“MTN South Africa (SA) has recorded 22 million subscribers, representing a growth rate of 16.9%,” stated Frost & Sullivan’s ICT research analyst, Mervin Miemoukanda, “This is impressive in a saturated market, and can be attributed to the company’s many promotional campaigns”.
However, the company has a lot of work ahead, because most of these new subscribers are multiple SIM card holders. They are, therefore, more likely to become inactive subscribers in the following months, Miemoukanda said.
Frost & Sullivan cautioned that possible restraints to the future growth of MTN Group will most likely take place in Iran, which accounts for approximately 20% of its overall subscriber base.
With the recent economic sanctions imposed on Iran by the European Union and the United States of America, MTN Group is likely to freeze its expansion investment plans, which may hamper its growth.
With uncertain prospects in Middle East – particularly in Iran, Syria, Afghanistan and Yemen – F&S advised MTN Group to invest in network expansion in the remaining countries to boost subscriber acquisitions.
In conclusion, F&S said that MTN Group is likely to enjoy healthy growth rates in terms of subscribers and revenues in 2012, because the SIM card-registrations in key markets, such as Nigeria and Ghana, will no longer have a detrimental effect on its subscriber growth.
“In addition, the increased uptake of data services across its operations, as well as the launch of mobile money in the remaining operations, will help increase its revenues,” it concluded.
MTN indicated that it increased the payout ratio to 70% from 65%. Fred Teeling-Smith, telecoms analyst at STANLIB, said that the focus is all-round sustainability of returns.
“Any excess cash is likely to be utilized for share buybacks in the short term. An increase in the dividend and commentary around the share buybacks will be positively received by the market and I expect the share price to react positively to this development,” he said.
Suraj Sookdhew, RMB Private Bank Portfolio manager says that the inability of MTN to find further acquisitions could result in the company lifting its pay-out ratio further and to continue with share buy-backs.
“Continued revenue growth, excellent free cash flow generation and increasing dividend pay-out policy augers well for the company. We remain positive on their prospects and are buyers of MTN Group,” the analyst said.