Despite the hellish time it had in Nigeria in the final quarter of its 2015 financial year — facing a fine of US$3,9bn from regulators there — telecommunications group MTN has announced it is hiking its final dividend to R8,30/share, up by 3,8% on 2014’s payout.
The surprise move brings MTN’s total dividend for the year to 31 December 2015 to R13,10/share, up by 5,2% year on year. However, it has warned that 2016’s dividend call fall to as low as R7/share, depending on how various developments transpire this year, including the settlement of the Nigerian fine.
News of the increased dividend payout for 2015 helped lift MTN’s share price. In mid-morning trading on Thursday, it was up by more than 10%.
Headline earnings per share (Heps) for the full year declined by 51,4% to R7,46. However, this number includes the effects of hyperinflation and a related goodwill impairment, tower profits and the Nigerian regulatory fine.
Excluding these provisions, Heps fell by 14,3% on a like-for-like basis.
Revenue was flat at R146,4bn, while subscriber numbers rose by 4,1% to 232,5m. Group data revenue was a highlight, increasing by 30,2% to R33,9bn. Voice traffic and data traffic increased by 14,5% and 108,5% respectively.
Earnings before interest, tax, depreciation and amortisation (Ebitda), which is a measure of operating profit, fell by 8,6% to R59,9bn. That put pressure on Ebitda margin, which decreased by 3,9 percentage points to 40,9%.
Capital expenditure in the period rose by 15,7% to R29,2bn.
“MTN Group’s 2015 financial results reflect the challenging operating environment the business experienced in the year,” it told shareholders in notes accompanying the full-year numbers.
“Weak macroeconomic conditions, increased market competition, heightened regulatory pressures, notably in Nigeria, and operational challenges in some of our markets resulted in a lower-than-expected performance,” it added.
MTN made a provision of R9,3bn for the fine in Nigeria, which had a R4,02 negative impact on Heps. “Excluding the Nigerian regulatory fine provision, Heps declined by 25,3%.”
“Notwithstanding the challenging operating environment, MTN continued to benefit from its significant scale and footprint,” it said.
“The group’s subscriber base increased by 4,1% to 232,5m, despite the disconnection of 10,4m subscribers to ensure compliance with subscriber regulatory registration requirements in Nigeria and Uganda.”
Nigeria and Uganda disconnected 6,7m and 3,7m subscribers respectively.
“Subscriber growth was achieved through attractive, segmented, below-the-line campaigns and an increased focus on the customer experience enabling the group to maintain its leadership position in 15 markets.”
MTN blamed the lack of growth in revenue on a decline in voice revenue in Nigeria and a reduction in handset revenue in South Africa.
Also, MTN Nigeria’s competitiveness was “compromised by the suspension of regulatory services in October 2015”.
“Under this suspension, the Nigerian Communications Commission (NCC) withdrew its approval process for new tariff plans and promotions until certain tariff plans and promotions linked to the ‘dominant operator’ ruling were removed from the market,” it said.
“MTN Nigeria has complied with these requirements and now awaits the NCC’s approval of new tariff plans and promotions submitted. MTN Nigeria continues to engage with the regulator regarding the ‘dominant operator’ ruling and suspension of regulatory services to find an amicable resolution.”
South Africa ‘encouraging’
It said the South African operation showed “encouraging service revenue (which excludes handset revenue and other revenue) growth trends, regaining relevance in the prepaid segment in the second half of the year. Revenue growth in South Africa was supported by strong growth in data, benefiting from extensive 3G and LTE network roll-out in the year.”
MTN said it is “hopeful” of improvements in operating conditions during 2016. “The new operating structure, together with our strong platform, positions us well to take advantage of the next phase of evolution in the mobile telecoms sector.”
However, it warned that dividends could take a hit in 2016, with the group expecting to declare a minimum dividend of R7/share. “[This] takes into consideration the uncertainty regarding the regulatory fine imposed by the NCC and the dollar liquidity situation in Nigeria.
“We have adopted a cautious approach to the dividend outlook for FY2016, taking into account the interests of shareholders and lenders and the importance of maintaining an investment-grade credit rating.” — © 2016 NewsCentral Media