MTN Profit Rises, Beating Estimates, as Subscribers Gain

MTN Group Ltd. (MTN), Africa’s largest wireless operator, said first-half profit rose 22 percent, exceeding estimates, after subscriber numbers increased in fast-growing markets including Nigeria and Ghana.

Sales advanced 9.8 percent to 65.2 billion rand ($6.5 billion), the Johannesburg-based company said in a statement today. So-called headline earnings per share, which exclude one-time items, were 6.54 rand for the six months through June, compared with 5.36 rand a year earlier, beating the 6.49 rand median profit estimate by four analysts in a Bloomberg survey.

Total subscribers increased 6.5 percent to 201.5 million, supported by 7.8 million net additions in Nigeria and further growth in smaller African markets such as Sudan and Ivory Coast. South African customer numbers declined slightly after weak consumer spending and tough competition hampered the business in Africa’s largest economy. MTN plans to add 21.1 million subscribers in the full year, the company said.

MTN will try to lower its cost base in South Africa in order to compete with aggressive rivals, Chief Financial Officer Brett Goschen told reporters at a press conference. Savings will probably come from a reduction in distribution and procurement costs, while the company is reviewing its headcount, he said.

Photographer: Nadine Hutton/Bloomberg

A technician tests an electrical system outside the headquarters of MTN Group Ltd. in Johannesburg. Close

A technician tests an electrical system outside the headquarters of MTN Group Ltd. in Johannesburg.

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Photographer: Nadine Hutton/Bloomberg

A technician tests an electrical system outside the headquarters of MTN Group Ltd. in Johannesburg.

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MTN shares advanced 1.3 percent to 198.50 rand by 1:31 p.m. in Johannesburg. The stock has increased 12 percent this year, compared with a 0.7 percent decline at Vodacom Group Ltd. (VOD)

South African wireless companies are looking at other African markets as consumers increasingly use more profitable data-enabled smartphones and domestic voice service revenue declines. MTN data subscriber numbers increased by almost 30 percent in the half year, while data traffic grew 56 percent, the company said.

MTN has expressed interest in expanding into Madagascar, according to people familiar with the matter. A move into India is also “worth considering”, Chief Executive Officer Sifiso Dabengwa told reporters. The company has held talks about a potential tie-up with Reliance Communications Ltd. (RCOM) of India this year, three people familiar with the matter said in May. MTN was also in discussions on the possible acquisition of Neotel, the South African unit of India’s Tata Communications Ltd. (TCOM), although it is no longer involved, Dabengwa said.

MTN plans to pay a gross dividend of 3.70 rand a share. The company said on Aug. 1 it made a currency gain of about 1 billion rand during the six-month period, compared with a 1.5 billion-rand loss the previous year.

MTN said last month its Chief Financial Officer Nazir Patel had resigned pending an internal investigation. The probe is being led by KPMG and is expected to be completed within three weeks, according to Dabengwa. The incident being investigated is an internal matter and isn’t connected with external interests, he said.

To contact the reporter on this story: Christopher Spillane in Johannesburg at cspillane3@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

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