MTN South Africa said in a quarterly update for the period ended March 2020, that service revenue declined by 6.2% owing largely to a sharp reduction in wholesale revenue resulting from the effects of a change to cash accounting for Cell C roaming revenue and the loss of the Telkom roaming agreement. MTN South Africa roaming

The mobile operator said that by removing national roaming – both Cell C and Telkom – overall Q1 service revenue for MTN SA would have been flat, highlighting the progress made in the underlying business.

For the first quarter, MTN said it delivered a solid performance increasing constant currency service revenue by 11.1% and EBITDA by 15.6%.

The group recorded voice, data and fintech revenue growth of 6.3%, 26.4% and 26% respectively, while digital revenue has returned to growth, increasing by 15.6%.

Salient features

• Subscribers increased by 6.6 million to 257.3 million;
• Active data subscribers increased by 2.9 million to 98.3 million;
• Active MTN Mobile Money (MoMo) customers increased by 0,4 million to 35.1 million;
• Group earnings before interest, tax, depreciation and amortization (EBITDA) margin of 43.2% (from 41.1%).

Group president and chief executive officer, Rob Shuter, said: “The effects of the Covid-19 pandemic on the global economy have brought about unprecedented uncertainty, volatility and challenges which are impacting our markets at both the socio-economic and macroeconomic levels.

“The impact of the pandemic on our quarter one performance was not significant as lockdown restrictions for our consolidated subsidiaries were only implemented from the last week of March 2020.”

MTN South Africa

MTN South Africa’s (MTN SA) performance was negatively impacted by the wholesale business, as we continue to account 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.

“We are 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,” Shuter said. MTN South Africa roaming

MTN SA has seen its prepaid business starting to recover, following the impact of regulation changes, while the postpaid customer base saw an increase in net additions in challenging macro and competitive environment, it said.

The revival in the enterprise business continued, with growth for a second consecutive quarter, MTN said.

MTN SA recorded a slight increase in total subscribers (by 75,000 QoQ) to end the quarter with a base of 29 million.

“The momentum in overall data revenue in MTN SA has also been pleasing and grew by 7.1%, supported by a 53% YoY increase in traffic,” said Shuter.

“The overall first quarter performance was impacted by a challenging trading environment brought about by weak macroeconomic conditions compounded by the global outbreak of the Covid-19 pandemic, currency depreciation and loadshedding.”

The consumer prepaid business continued on its improving trajectory, with service revenue coming in flat YoY, compared to a decline of 4,1% in 2019. The performance of the business remained affected by the base effects of ICASA’s end-user subscriber regulations, with out-of-bundle (OOB) data revenue still included in the first two months of the prior period before the new regulations took effect from 1 March 2019.

There was encouraging momentum in prepaid data revenue, which increased by 3.3% YoY, MTN said. This was driven by a 31% increase in prepaid data traffic following a slight decline of 0.7% in 2019.

For Cell C specifically, roaming revenue continued to be accounted for on a cash basis in line with IFRS 15 and MTN SA recognised approximately R292 million in revenue during the quarter.

At 31 March 2020, R450 million in Cell C revenue remained unrecognised. MTN SA commenced phase two of the roaming agreement with Cell C, effective 1 May 2020.

MTN said that data traffic on its networks has, on aggregate, accelerated by more than 30% when comparing traffic levels at the end of April 2020 against February 2020, which is before Covid-19-related behaviour began.

MTN SA traffic was up 56%.

Looking ahead, the operator said that the current environment 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.

“The effects of Covid-19, and other macro developments, have increased risks such as exchange rate volatility, economic growth and capital flows in our markets.”

“We have seen the sovereign credit ratings of our two largest markets, South Africa and Nigeria, downgraded by credit rating agencies in the past few months. This will have an impact on economic prospects of the markets as well as MTN at a group and opco levels.”

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