MTN posts $357 million loss, cuts dividend

Nigeria’s Revenue Down By 4.8%

For the first time in 22 years of operations, MTN, Africa’s biggest mobile phone operator, reported a $357 million half-year loss.The headline loss, according to the telecommunications firm, came in at 4.9 billion rand, or 271 cents per share, in the six months. This is compared with headline earnings of almost 12 billion rand, or 654 cents per share, a year earlier.

MTN, in its half-year report for the financial year 2016, released yesterday blamed the losses and cut in dividend payouts on a hefty regulatory fine in Nigeria and under-performance in its South African home market.

MTN cut investors’ payouts by almost 50 per cent.For contravening regulatory orders in Nigeria, its largest and most profitable market, MTN was last October slammed with a fine of $5.2 billion. After much bickering and pleading, the telecommunications firm, agreed in June to pay a N330 billion ($1.05 billion), staggered till 2019.The South African firm claimed that its Nigerian arm suffered revenue dip of 4.8 per cent.

MTN said the Nigerian fine, a third of the proposed initial penalty, wiped 10.5 billion rand ($768 million) – 474 cents per share – from headline earnings, South Africa’s main measure of profit, in the first six months of the year.

The telecommunications firm had in any case been struggling to accelerate subscriber and profit growth as years of price wars and regulatory pressure hit margins and weakening economies squeezed consumer income.

The Group’s results are presented on a regional basis in line with the Group’s new operational structure. This comprised South and East Africa (SEA), West and Central Africa (WECA) and Middle East and North Africa (MENA).

The firm claimed that MTN Nigeria’s competitiveness was compromised by the mandatory disconnection of subscribers and the suspension of regulatory services until May 2016 when the operation attained the necessary approvals to introduce market-related pricing plans and promotions.”In addition, the introduction of regulatory restrictions on ‘out-of-bundle’ data tariffs impacted MTN Nigeria’s data revenue growth”, it stated.

MTN, held by many investors for its dividend flows, will pay out 250 cents per share for the first half of the year, down nearly 50 per cent on a year earlier.The headline loss came in at 4.9 billion rand, or 271 cents per share, in the six months. This is compared with headline earnings of almost 12 billion rand, or 654 cents per share, a year earlier.

However, the company said full-year dividend could top the previously forecast 700 cents per share if operating conditions materially improve.Reuters quoted a shareholder, who preferred anonymity as saying, “What you have here is a company that was gung-ho about Africa, where the operating environment has become difficult but they have shot themselves in both feet by losing control of the key markets and not paying attention to regulators.”

Founded with the South African government’s help after the end of apartheid in 1994, MTN had been seen as one of post-apartheid South Africa’s biggest commercial successes.It has hired Vodafone European head Rob Shuter to lead its development, aiming to persuade its millions of clients to use their handsets for everything from shopping, paying bills to storing money.

Shuter, who will take over as chief executive by next July, replaces Sifiso Dabengwa who resigned last November after Nigeria imposed the penalty – which will be paid by the Nigerian business in the local currency.Nigeria has been trying to halt the use of unregistered cards over concerns they are being used for criminal activity, including by Islamist militant group Boko Haram.Shares in MTN, which had dropped by nearly one-third since October when Nigeria imposed the fine, see-sawed as investors digested the earnings statement.