MTN to Consider Raising Its Dividend If Business Picks Up

  • For now, Africa’s biggest mobile carrier has 7 rand/year goal
  • MTN paid $95 million in fees while settling Nigeria fine

MTN Group Ltd. will consider raising its full-year dividend above forecasts if business conditions improve after the settlement of a record fine in Nigeria led to the first-ever half-year loss at Africa’s biggest mobile-phone carrier.

The company will consider a higher full-year payout than the forecast 7 rand-a-share “if operating conditions improve materially,” the Johannesburg-based carrier said in its first-half earnings statement on Friday. MTN paid 13.10 rand a share in 2015, while the payout was set at 2.50 rand for the half year through June.

MTN agreed to settle a 330 billion naira ($1 billion) fine by Nigerian authorities for missing a deadline to disconnect unregistered customers. Weaker consumer spending and currency moves across many of its 22 markets in Africa and the Middle East also weighed on earnings. The negotiations over the Nigerian fine took eight months and cost 1.3 billion rand ($95 million) in professional-service fees, MTN said. The company hired Eric Holder, the former U.S. Attorney General, to negotiate with the government on its behalf.

MTN is in the process of “a deep and fundamental strategic review of its operations and processes to ensure it is operating far more optimally,” the company said. “The financial performance for the period reflects the confluence of a number of material issues, which created the perfect storm.”

The shares fell 2.1 percent to 130.70 rand as of 9:55 a.m. in Johannesburg, valuing the company at 241 billion rand. The stock is down about 30 percent since the Nigerian fine was levied in October.

“They are doing a strategic review of the business, as I think they should,” said Peter Takaendesa, a senior analyst at Mergence Investment. “They know that they are losing market share in some of the countries that they are operating in. The encouraging thing is that the company might be moving into a new era, with new management. Unfortunately this could take up to 12 months.”

The carrier now expects to add 8.1 million new customers in 2016, below an earlier forecast of 12 million. Subscriber numbers were little changed at 232.6 million at the end of June, compared with the end of 2015.

MTN made a provision for the full fine in its first-half results, drawing a line under the saga that’s hurt the stock and prompted the departures of company officials including Chief Executive Officer Sifiso Dabengwa. The so-called headline loss-per-share, which excludes one-time items, was 2.71 rand, in the middle of a forecast range of 2.55 rand and 2.85 rand.

Revenue increased 14 percent to 78.9 billion rand, propelled by a 32 percent rise in data sales.

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