MTN slashes capex guidance amid Covid-19 uncertainty

MTN Group said in a quarter update on Thursday that is implementing cost control measures, focusing on mission critical expenses and enhanced oversight of expenditure, amid uncertainty over the impact of the Covid-19 pandemic.

It reduced its capex guidance for 2020 to between R21-billion and R22-billion, from R28.3-billion guided at the 2019 full-year results.

“Our capital expenditure focus will be on ensuring the resilience and capacity of our networks,” it added. “We anticipate that disruptions in the supply chain and challenges in rolling out coverage under lockdown rules, combined with our emphasis on liquidity, will impact on our capex programme for the year.”

The group said that its margin, based on earnings before tax, interest, depreciation and amortisation (Ebitda), expanded to 43.2% in the first quarter of 2020, from 43.2% in the same quarter a year ago. However, this was largely before the full impact of Covid-19 lockdowns were felt across its various markets.

The group added 6.6 million customers quarter on quarter to reach 257.3 million subscribers at the end of March.

In the update, the group said service revenue increased by 11.1% year on year, aided by a 16.7% jump in Nigeria, its biggest market.

In South Africa, margins were, however, under pressure, with service revenue declining by 6.2% year on year. South African Ebitda margin fell to 36.6% from 38.8% a year ago. This operation was “negatively impacted by the wholesale business”, mainly because it is still accounting for Cell C roaming revenue on a cash basis, as well as the loss of revenue from the Telkom roaming agreement which came to an end in June 2019. Wholesale revenue slumped by 44%.

‘Encouraged’

Despite the margin erosion in the South African business, CEO Rob Shuter said the group is “encouraged by the stabilisation of the consumer prepaid business, which was affected by the implementation of the new out-of-bundle data usage rules”.

“Also pleasing was the continued progress in the enterprise business, which recorded 8.2% service revenue growth,” he said.

MTN South Africa recorded a slight increase in total subscribers (75 000 quarter on quarter) to end with a base of 29 million.

The consumer post-paid business service revenue was flat year on year in “a competitive market”. The post-paid subscriber base was also flat, “reflective of the tight competitive environment and pressure on consumers due to tough economic conditions”.

MTN Nigeria, meanwhile, had a solid performance in the first quarter. Voice revenue growth remained healthy at 7.4%, supported by subscriber growth. MTN Nigeria continued to gain market share and added 4.2 million subscribers to its network to end the quarter at 68.5 million. Data revenue in Nigeria continued to accelerate, with growth of 59.2% year on year.

MTN Irancell also delivered a “solid performance despite its challenging operating environment, the depreciation of the currency and the high rate of inflation”. It was the only MTN operation to be significantly affected by Covid-19 during the first quarter.

Still, service revenue grew by 29.8%, with data revenue up by 43.5%, and the Ebitda margin improving by 1.8 percentage points to 37.9%.

The group said the environment across the markets in which it operates is “marked by significant uncertainties”.

“It is still too early to assess the economic impact of the pandemic on our customers and reliably quantify the direct or indirect financial effects on our business. The remainder of the year will be shaped by the ramifications of the pandemic, and we will continue to update shareholders as the effects become clearer.” – © 2020 NewsCentral Media