Ongoing loadshedding and muted economic growth is impacting MTN South Africa’s (MTN SA’s) growth.

During the first quarter of 2023, JSE-listed MTN Group reported that loadshedding had slowed MTN SA’s top-line and increased operating expenditure, leading to a decrease in its earnings before interest, taxes, depreciation and amortisation (Ebitda).

MTN SA’s Ebitda contracted 6.9% to R4.55-billion, with a 3.8 percentage point decline in its Ebitda margin to 36.1% during the three months ended March 31, 2023.

“Over and above reduced economic activity in South Africa, MTN SA’s network availability remained under pressure owing to ongoing power outages across the country,” says MTN Group president and CEO Ralph Mupita.

“The extent of power outages in the country remained elevated with 90 days of loadshedding during the quarter, compared with 14 in the first quarter of 2022. This heavily disrupted network availability, on a year-on-year basis, which affected MTN SA’s growth trajectory; especially in its voice segment.”

Further, the economy remained under pressure with rising inflation and ongoing volatility in the rand against the dollar.

During the quarter under review, inflation averaged 7%, compared with 5.8% in the corresponding quarter in 2022, above the upper limit of the South African Reserve Bank target range of 3% to 6% and placing additional pressure on customers and business operations.

Despite this, MTN SA, which expanded its subscriber base by 4.1% to 35.9-million, achieved relatively resilient service revenue growth of 1.3% to R10.1-billion during the first quarter of the year, with voice, which plunged 16%, dragging overall performance.

Data continued to be a key growth driver for the business, contributing 47.9% to MTN SA’s total service revenue in the first quarter of 2023, while mobile data revenue grew by 9%, on the back of an 11.2% increase in active data users to 19.3-million and 19.5% growth in data traffic.

The enterprise business unit also delivered robust double-digit service revenue growth of 11.4% underpinned by growth in data and new contracts acquired in information and communications technology, while the wholesale business grew service revenue by 14.9% as national roaming continued to scale.

The fintech business continued to progress, with about 1.1-million monthly active mobile money (MoMo) users as at March 31, 2023, representing growth of 31.8%. MTN SA focused on scaling its fintech ecosystem, including payments availability at more than 27 000 retail points.

During the quarter under review, MTN continued implementing its comprehensive network resilience plan, which was initiated in the second half of 2022, with the aim of improving network availability.

MTN upgraded sites with additional battery capacity to allow for a minimum of six hours of battery autonomy, deployed a mix of static and mobile generators and started piloting solar solutions on a limited number of sites.

The group also implemented active infrastructure changes, including replacement of copper cabling with aluminium.

“The improvements seen so far in the Johannesburg clusters where resilience has progressed, even during continuous Stage 6 loadshedding, provide some encouragement regarding the plan to roll out the new design across the network.”

“High-priority sites in key provinces are expected to be completed in the second half of 2023, with the balance of the regions and network being completed in the first half of 2024,” says Mupita.

GROUP PERFORMANCE

During the first quarter of 2023, MTN Group’s overall Ebitda increased 8.6% to R24-billion, with an Ebitda margin of 43.7%, a 2.7 percentage point contraction on the 46.4% in the corresponding period in the prior year, impacted by higher inflation across its markets in addition to increased costs associated with site rollouts in Nigeria and Ghana, as well as the network resilience plan in South Africa.

“We remained focused on our expense efficiency programme to contain the effects of higher inflation in the period,” he continues.

Overall group service revenue increased by 15.6% to R52.8-billion, in line with MTN’s medium-term target, supported by voice revenue growth of 6.6%, data revenue growth of 26.9% and fintech revenue growth of 11.5%, as well as double-digit service revenue growth from MTN Nigeria, MTN Ghana and MTN Uganda.

The company’s Southern and East Africa region reported a 17.7% service revenue growth, while the West and Central Africa region delivered double-digit service revenue growth of 10.8%. In the Middle East and North Africa region, service revenue expanded 73.6%.

During the first quarter of 2023, the group’s total subscribers increased by 5.2% to 290.6-million, despite headwinds such as loadshedding in South Africa and SIM registration in Ghana.

Overall active data subscribers and MoMo users increased 11.9% to 140.4-million and 5.2% to 61.7-million respectively, while data traffic increased by 19.3% to 3 221.26 PB and fintech transaction volumes increased by 38.8% to 4.1-billion.

To support the structurally higher demand, MTN invested R6.4-billion into its networks and platforms in the first quarter of 2023.

Meanwhile, MTN is evaluating an orderly exit of three operations in West Africa over the medium term, namely MTN Guinea-Bissau, MTN Guinea-Conakry and MTN Liberia.

“In this regard, the group has received an offer for our equity interests in these operating companies (Opcos), from Axian Telecom, which is being evaluated,” says Mupita.

As at March 31, 2023, the combined subscriber base of the three Opcos represented about 6.1-million of the group’s total 291-million subscribers and contributed 0.7% to Ebitda.

The process to exit Afghanistan in an orderly fashion through the sale of MTN’s entire shareholding to a wholly-owned subsidiary of M1 remains on track, with regulatory engagements well progressed.