MTN
MTN
MTN - MTN Group Limited - 15TH Annual general meeting business update and future
prospects
MTN Group Limited
(Incorporated in the Republic of South Africa)
(Registration number 1994/009584/06)
(Share code MTN)
(ISIN code ZAE000042164)
("MTN" or "the Group")
15TH ANNUAL GENERAL MEETING BUSINESS UPDATE AND FUTURE PROSPECTS
1. BUSINESS UPDATE
At the Annual General Meeting to be held later today, Chief executive and
president, Phuthuma Nhleko will make the following comments regarding the
Group`s performance for the first five months of 2010 in comparison with the
similar period for 2009:
The majority of the markets in which MTN operates have continued to show strong
subscriber growth to the end of May 2010 despite increasing competition. Group
subscribers increased nearly 10% for the 5 months to the end of May 2010. This
positive subscriber growth translated to sound revenue growth and profitability
in the various local currencies. As the Group`s non-SA operations contribute in
excess of 70% of MTN`s revenue, the continuing strength of the South African
currency has again had a negative impact on the translation of these earnings
resulting in a marginal reduction in rand reported revenue and EBITDA relative
to the same period last year. Had rates been the same as the prior year, revenue
and EBITDA would have been meaningfully higher.
Group EBITDA margins improved marginally as a result of an increase in margin in
its three larger operations, although margin declines were experienced in some
of the medium and smaller operations. Margins for the first five months of 2010
have as a result strengthened in comparison with the margins experienced in the
second half of 2009.
MTN`s spend on capital expenditure was lower, partially due to the stronger rand
and partially due to slower deliveries. The current capital expenditure levels
are anticipated to pick up during the rest of the year to levels closer to those
guided in March of this year excluding the impact of the stronger rand.
MTN`s Nigerian operation recorded sound organic revenue growth albeit at a lower
rate than last year falling to the mid to low teens. Future competition is
anticipated to increase pressure on revenue growth and EBITDA margin in the
medium term although short term profitability remains robust.
MTN`s operations in Iran have continued to exceed expectations with margin
improvement together with a solid growth in market share. There is still limited
clarity on the launch of the third operator.
South African margins improved in the first half of the year, mainly due to
better distribution cost management and lower handset costs. There was also an
improvement in MTN`s market share although future competition and regulatory
impacts remain uncertain. Diversification of revenue from voice to data has
continued with strong volume growth.
In line with an increased focus on procurement and products, a dedicated
function, VP Commercial, has been created at the Group level. Examples of
products being leveraged across the Group include Mobile money which shows
strong potential and is now launched in 5 countries with over 2.1 million
customers across the footprint. Cost efficiencies will also be driven more
effectively from the core.
MTN announced separately on SENS and the media this morning its proposed R8.1
billion Broad-Based Black Economic Empowerment Transaction and ESOP scheme, the
highlights of which are:
- Execution of MTN`s continued commitment to BEE in South
Africa through its local listing
- R8.1 billion BEE transaction consisting of up to 4%
equity ownership in MTN - the largest empowerment
transaction in the telecommunications sector in South
Africa to date
- Translates to an additional effective indirect black
ownership of up to 29.1% of MTN`s South African
operations
- Broadening MTN South Africa`s effective BEE ownership
through a black public offer to black individuals and
groups
- An ESOP, excluding management and directors, requiring
no equity contribution from eligible participants to
augment MTN South Africa`s BEE initiatives
- Provides exposure to MTN`s diversified operations and
growth markets
- Facilitation that is in line with precedent transactions
- MTN to provide additional equity for the MTN BEE
Transaction equal to 80% of the equity raised from the
black public
- Transaction leveraged through vendor and third party
funding
2. FUTURE PROSPECTS
The activities of MTN have for many years been guided by its vision to be a
leader in telecommunications in emerging markets supported by the following key
strategic pillars:
- participating in the consolidation of the emerging
markets telecoms sector and reducing the concentration
of MTN`s earnings; and
- leveraging MTN`s existing footprint and intellectual
capacity; and
- pursuing convergence and operational evolution.
MTN has delivered on this strategy through the numerous organic and acquisitive
opportunities it has invested in to date. However, the board of MTN ("the
Board") recognises that as the sector continues to mature there are a limited
number of value accretive consolidation opportunities left within emerging
market telecoms. The Group has also invested heavily in infrastructure across
all its operations over the past few years. Therefore, the level of capital
expenditure investments in infrastructure is anticipated to be lower as emerging
markets enter a phase of higher penetration. As a consequence of the sector
evolution and MTN`s anticipated future cash generation, going forward, the Board
is able to more easily balance its growth aspirations with that of ensuring
improved short term returns to shareholders.
Accordingly, while MTN will continue to evaluate and consider value accretive
opportunities, the Group will increase its focus on the following issues:
- optimising efficiencies including infrastructure
sharing, standardisation of systems and processes,
rationalisation of suppliers, cost management and cash
optimisation; and
- monitoring infrastructure investments to ensure
appropriate levels of capacity and quality of service,
incorporating continued investment in fibre and cable
requirements to service evolving voice and data
requirements;
- continued engagement with regulatory authorities in the
development and refinement of the telecommunications
sector in its markets;
- investigating options to meaningfully improve cash
returns to shareholders; and
- conclusion of the MTN BEE transaction announced earlier
today.
MTN is well positioned in its markets to compete within a changing competitive
and regulatory landscape with a strong focus on cost management as pressure on
the revenue line increases.
Given the above, the Board is investigating options to meaningfully improve cash
returns to MTN shareholders and envisage the declaration of a top up dividend at
the interim stage as part of a sustainable strategy towards improving the annual
dividend payout ratio to MTN shareholders.
The information in this Business Update has not been reviewed or reported on by
the Group`s external auditors. MTN is currently in a closed period and will be
announcing its interim results on the 19 August 2010.
Fairland
15 July 2010
Sponsor
Deutsche Securities (SA) (Pty) Ltd
Date: 15/07/2010 12:37:01 Produced by the JSE SENS Department.
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