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MTN GROUP LIMITED - Quarterly update for the period ended 30 September 2014

Release Date: 23/10/2014 07:05
Code(s): MTN     PDF:  
Wrap Text
Quarterly update for the period ended 30 September 2014

MTN Group Limited
(Incorporated in the Republic of South Africa)
Registration number: 1994/009584/06
ISIN: ZAE000042164
Share code: MTN
(“MTN” or “the Group”)


MTN Group Limited
Quarterly update for the period ended 30 September 2014


MTN is a leading emerging market mobile operator, connecting approximately 219 million people
in 22 countries across Africa and the Middle East. MTN is at the forefront of global
technological changes, delivering a bold, new Digital World to our customers. 


MTN Group records 219,2 million subscribers 


Highlights
Satisfactory subscriber growth of 2,0% to 219 million subscribers quarter-on-quarter (QoQ).
Data revenue increased by 34% year-to-date (YTD), now contributing 17,8% to total revenue.
Registered Mobile Money subscribers of 22,2 million, up 20,2% QoQ.
South African operation regaining traction with 1,4 million net additions for the quarter.
Constrained subscriber growth in Nigeria as a result of regulatory pressure.
Iran local currency data revenue up 102,8% YTD, following the launch of 3G services. 


MTN Group president and CEO, Sifiso Dabengwa comments:

“MTN reported encouraging results for the third quarter, delivering subscriber growth of 2,0%
QoQ, however, performance was impacted by continued aggressive competition and stringent
regulatory requirements. The South African operation delivered an improved performance in the
prepaid segment supported by competitive offers while the Nigerian operation faced a 
challenging regulatory environment resulting in lower-than-expected growth. Group net addition 
subscriber guidance for the full year has increased marginally to 17,5 million.

The Group continued to benefit from good growth in non-voice revenue driven by data and
Mobile Money across key markets. Data revenue increased by 34,4% year-on-year and now 
contributes 17,8% of total revenue. Good progress was also achieved in the optimisation of 
our operating model, particularly in reducing costs and the monetisation of assets with the 
announcement of the tower transaction in Nigeria during the quarter.”


Operational review

MTN Group 
This commentary includes an analysis of the performance of MTN South Africa, MTN Nigeria and
the Group’s large opco cluster. A detailed schedule of subscriber numbers and quarterly average
revenue per user (ARPU) data for all 22 operations is also included. ARPU is based on actual
quarterly ARPU and is disclosed in both US dollars and local currency.

MTN South Africa showed good progress from the first half of the year. The operation
increased its subscriber base by 5,7% to 26,7 million, adding 1,4 million net additions for the
quarter, mainly attributable to competitive offers such as “rush hour” and “talk free” in the 
prepaid segment. As a result, the prepaid subscriber base increased by 7,1% to 21,2 million, 
with encouraging growth in minutes of use during the quarter. The postpaid segment delivered a
satisfactory performance and grew its subscribers marginally to 5,5 million, 2,0 million of 
which were telemetry SIMs. 

Data revenue growth was muted, largely impacted by a 17,9% decrease in the average effective 
rate per megabyte. Data now contributes 22,7% to the operation’s total revenue. Data 
subscribers increased to 16,1 million and data usage grew by 55,9% supported by attractive 
data promotions and improved network quality. In addition to improving revenue growth, MTN 
South Africa continues to focus on various cost containment initiatives and on optimising its 
operating model. Blended ARPU decreased by 4,6% to R89,26.

MTN Nigeria reported a marginal decline in its subscribers to 58,4 million, largely impacted
by regulatory restrictions relating to the “dominant operator” ruling and continued unrest in
the northern region during the quarter. While this muted subscriber performance is expected to
impact revenue growth for the second half of the year, by mid-September the operation had
resolved a number of issues with the regulator resulting in an improvement in subscriber 
growth. 

Local currency data revenue continued to grow strongly, increasing by 26,4% YTD and now
contributes 17,8% to total revenue. This was mainly attributable to the growth in data users, 
which increased by 31,7% YTD and the introduction of a low-cost MTN smartphone during the 
quarter. The operation successfully sold 58 300 of such devices in Q3. The Mobile Money 
offering, Diamond Yellow, gained encouraging momentum while the launch of other innovative 
data products including MTN Yello Health, MTN Music plus MTN Yello, Cover, MTN Biz Plus and 
MTN SME plus will further assist MTN Nigeria’s growth in the digital space. Local currency 
ARPU declined by 0,1%.

Other operations: Large opco cluster
MTN Irancell delivered a solid performance despite the high mobile penetration rate and
aggressive competition, increasing its subscriber base by 2,0% to 43,5 million. The operation
continues to focus on innovative offers to address subscriber acquisition and retention. Local
currency data revenue increased by 102,8% YTD and now contributes 17,1% to total revenue. This 
was mainly attributable by the launch of 3G services and attractive bundled data packages. 
MTN Irancell added 1 291 3G sites and 70 4G sites YTD. Local currency ARPU increased by 1,1%.

MTN Ghana’s performance was satisfactory despite a weak macro-economic environment. The
operation grew its subscribers marginally by 0,8% to 13,5 million impacted by aggressive 
competition during the quarter. Local currency data revenue increased by 156,0% YTD and now 
contributes 18,3% to total revenue. The strong growth in data was a result of improved 3G 
coverage and innovative data offerings. Mobile Money showed positive momentum, recording 
3,0 million registered customers at the end of the quarter. MTN Ghana continues to focus on 
cost optimisation as the weakening of the Ghanaian cedi against the US dollar has resulted in 
pressure on fuel costs and other US dollar denominated expenses. Local currency ARPU increased 
by 0,4% for the quarter.

MTN Cameroon delivered a solid performance, increasing its subscribers by 9,7% to 11,2
million. This was attributable to segmented bonus offerings for voice and data and a well-
executed churn and dormancy management programme. Local currency data revenue increased by 
45,2% YTD, contributing 8,2% to total revenue. The operation ended the quarter with 
1,5 million Mobile Money customers and continued to focus on increasing its active subscribers 
and transaction volumes. Mobile Money revenue more than doubled YoY. A third mobile operator 
launched commercially in September 2014 with an exclusive 3G licence. Local currency ARPU 
increased by 3,7%. 

MTN Ivory Coast maintained market share notwithstanding a marginal decline in its subscriber
base to 7,7 million. This was mainly due to seasonality and aggressive bonus promotions offered
by competitors during the quarter. The operation made good progress in expanding 3G coverage
and improving its Mobile Money subscriber activity. Local currency data revenue increased by
60,8% YTD and now contributes 10,1% to total revenue and Mobile Money gained momentum, 
increasing its subscribers to 2,2 million. Mobile Money revenue now exceeds US$1 million per 
month. Local currency ARPU declined by 1,9%.

MTN Uganda surpassed 10 million subscribers, increasing its base by 2,6% to 10,1 million in a
competitive market. Local currency data revenue increased by 37,7% YTD and now contributes
24,4% to total revenue. This was attributable to improved 3G coverage, customer internet 
education forums and Mobile Money. Mobile Money subscriber activity continued to advance with
approximately 18% of airtime sales distributed through Mobile Money. At the end of September, 
MTN Uganda recorded 6,8 million Mobile Money subscribers. Local currency ARPU increased by 1,3%. 

MTN Sudan reported a net reduction of 361 000 subscribers largely impacted by a weak economy
and subscriber registration requirements. The operation continued to enhance churn and 
dormancy management initiatives and launched its Mobile Money offering during the quarter. 
These initiatives are expected to support positive subscriber growth for the remainder of the 
year. Local currency data revenue increased by 101,2% YTD, contributing 12,1% to total revenue, 
mainly attributable to attractive data bundles. Local currency ARPU decreased by 1,0%. 

MTN Syria continues to operate in extremely challenging conditions reporting a marginal
increase in subscribers to 5,7 million. Some of the key challenges remain security, 
transmission, power outages and insufficient fuel supply. Local currency data revenue continued 
to gain momentum and increased by 124,1% YTD, while local currency ARPU declined by 2,4%. 


Subscriber net additions guidance
                     June 2014        September 2014   
                          ‘000                  ‘000   
  South Africa           1 500                 2 000   
  Nigeria                5 000                 3 500   
  Large opco             8 050                 9 300   
 Iran                    2 500                 2 750   
 Ghana                     900                 1 000   
 Cameroon                2 000                 3 000   
 Ivory Coast             1 000                   900   
 Sudan                     400                   400   
 Syria                    (250)                 (250)  
 Uganda                  1 500                 1 500   
  Small opco             2 700                 2 700   
  Total                 17 250                17 500   
                                                       


Subscribers 
(‘000)
  Country                      3Q13           4Q13           1Q14           2Q14           3Q14         QoQ %   
  South Africa               25 235         25 700         24 875         25 269         26 701          5,7%   
  Postpaid                    4 875          5 005          5 192          5 458          5 477          0,3%   
  Prepaid                    20 360         20 695         19 683         19 811         21 224          7,1%   
  Nigeria                    55 596         56 766         57 224         58 446         58 363         (0,1%)  
  Large opco cluster         91 499         93 453         95 540         98 519        100 358          1,9%   
  Iran                       41 295         41 374         41 783         42 697         43 533          2,0%   
  Ghana                      12 765         12 930         13 055         13 439         13 547          0,8%   
  Syria                       5 787          5 829          5 723          5 653          5 676          0,4%   
  Ivory Coast                 6 683          7 078          7 521          7 742          7 723         (0,2%)  
  Cameroon                    8 160          8 711          9 236         10 233         11 223          9,7%   
  Uganda                      8 386          8 808          9 549          9 920         10 181          2,6%   
  Sudan                       8 423          8 724          8 672          8 836          8 474         (4,1%)  
  Small opco cluster         31 432         31 881         32 426         32 726         33 770          3,2%   
  Yemen                       5 010          5 055          5 185          5 268          5 300          0,6%   
  Afghanistan                 5 650          5 890          6 058          6 182          6 339          2,5%   
  Benin                       2 976          3 130          3 259          3 337          3 455          3,5%   
  Congo B                     1 757          1 764          1 865          1 911          1 972          3,2%   
  Zambia                      4 471          4 410          4 161          4 010          4 447         10,9%   
  Conakry                     2 524          2 723          2 885          2 929          2 890         (1,3%)  
  Rwanda                      3 637          3 556          3 525          3 621          3 743          3,4%   
  Cyprus                        328            331            399            336            339          1,0%   
  Liberia                     1 278          1 317          1 355          1 308          1 299         (0,7%)  
  Botswana                    1 691          1 712          1 700          1 702          1 696         (0,3%)  
  Bissau                        603            463            490            550            575          4,4%   
  Swaziland                     852            811            813            868            928          6,8%   
  South Sudan                   654            720            732            704            787         11,9%   
  Total subscribers         203 762        207 801        210 065        214 961        219 191          2,0%   



ARPU 
(Local currency)
                               3Q13             4Q13             1Q14             2Q14             3Q14       QoQ %   
  South Africa*              102,08           108,35            95,21            93,58            89,26       (4,6%)  
  Postpaid                   194,63           198,42           189,30           166,37           159,76       (4,0%)  
  Prepaid                     80,20            86,48            71,98            74,16            70,40       (5,1%)  
  Nigeria                  1 148,78         1 217,14         1 177,82         1 124,34         1 123,29       (0,1%)  
  Large opco                                                                                                          
  Iran                   100 548,63       100 380,99       102 834,76       108 478,89       109 683,56        1,1%   
  Ghana                       11,16            11,54            11,73            11,97            12,02        0,4%   
  Syria                      639,84           676,78           718,37           797,17           778,42       (2,4%)  
  Ivory Coast              3 115,99         3 237,58         3 095,89         2 883,62         2 830,00       (1,9%)  
  Cameroon                 2 715,32         2 715,03         2 469,15         2 193,14         2 274,49        3,7%   
  Uganda                   9 761,85        10 379,00         8 974,72         8 688,11         8 801,30        1,3%   
  Sudan                       11,09            11,13            12,36            13,21            13,07       (1,0%)  
  Small opco                                                                                                          
  Yemen                    1 302,91         1 232,02         1 182,54         1 171,57         1 159,58       (1,0%)  
  Afghanistan                204,79           197,23           180,62           195,43           190,33       (2,6%)  
  Benin                    3 678,13         4 169,04         3 764,70         3 613,43         3 689,51        2,1%   
  Congo B                  5 979,58         5 669,93         5 494,05         5 350,72         5 985,40       11,9%   
  Zambia                      27,22            29,31            28,58            32,57            38,33       17,7%   
  Conakry                 33 273,31        32 156,58        29 163,91        22 552,64        18 718,42      (17,0%)  
  Rwanda                   1 728,22         1 853,42         1 655,75         1 684,02         1 763,68        4,7%   
  Cyprus                      18,58            15,01            18,20            19,90            19,12       (3,9%)  
  Liberia                      7,92             9,92             6,98             6,34             3,93      (37,9%)  
  Botswana                    67,25            66,16            65,00            66,00            72,00        9,1%   
  Bissau                   1 540,66         1 878,41         2 315,70         2 619,19         2 323,20      (11,3%)  
  Swaziland                   96,00           100,36           100,88           100,03            98,17       (1,9%)  
  South Sudan                 28,26            27,72            24,82            26,14            29,08       11,3%   
  *MTN SA’s current and prior period ARPU restated to adjust for change in accounting policy for revenue recognition 
   and handset adjustment.                                                                                              



ARPU 
(US dollar)
                         3Q13         4Q13         1Q14         2Q14         3Q14        QoQ %   
  South Africa*         10,74        11,21         8,83         8,77         8,34        (4,9%)  
  Nigeria                7,11         7,63         7,21         6,92         6,91        (0,2%)  
  Large opco                                                                                     
  Iran                   4,06         4,04         4,13         4,26         4,18        (2,0%)  
  Ghana                  5,40         5,17         4,70         4,04         3,35       (17,1%)  
  Syria                  3,70         4,31         4,81         4,88         4,60        (5,7%)  
  Ivory Coast            6,30         6,72         6,46         6,04         5,70        (5,6%)  
  Cameroon               5,49         5,63         5,15         4,60         4,58        (0,3%)  
  Uganda                 3,79         4,13         3,58         3,45         3,36        (2,4%)  
  Sudan                  2,40         1,96         2,17         2,32         2,29        (1,2%)  
  Small opco                                                                                     
  Yemen                  6,06         5,73         5,50         5,45         5,39        (1,0%)  
  Afghanistan            3,64         3,42         3,16         3,39         3,34        (1,6%)  
  Benin                  7,43         8,65         7,86         7,57         7,43        (1,8%)  
  Congo B               12,08        11,77        11,46        11,21        12,06         7,6%   
  Zambia                 5,03         5,36         4,97         5,05         6,26        23,9%   
  Conakry                4,93         4,72         4,23         3,28         2,72       (17,0%)  
  Rwanda                 2,66         2,78         2,46         2,49         2,58         3,8%   
  Cyprus                24,62        20,43        24,91        27,35        25,39        (7,2%)  
  Liberia                7,92         9,92         6,98         6,34         3,93       (37,9%)  
  Botswana               7,80         7,67         7,28         7,52         8,10         7,8%   
  Bissau                 3,11         3,90         4,83         5,49         4,68       (14,7%)  
  Swaziland              9,55         9,88         9,35         9,47         9,12        (3,8%)  
  South Sudan            8,94         8,76         7,85         8,27         9,20        11,3%   
  *MTN SA’s current and prior period ARPU restated to adjust for change in accounting policy for 
   revenue recognition and handset adjustment.                                                                     


The financial information on which this quarterly update is based has not been reviewed or
reported on by MTN’s external auditors.

Fairland
23 October 2014

Sponsor
Deutsche Securities (SA) Proprietary Limited
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