Nigeria Becomes Cash Cow for MTN Group

MTN Group, Africa’s largest telecoms provider, reported a 27 percent rise in full-year earnings on Wednesday, but also revealed a dip in revenues in its home market South Africa due partly to fierce competition.

The revenue drop meant Nigeria overtook South Africa to become the group’s biggest revenue earner.

Reuters reported that South African revenue shrank by 6.1 percent to 39.7 billion rand ($3.7 billion) while in Nigeria, Africa’s most populous country, it rose nearly 6 percent to 48.2 billion rand.

MTN, which has operations in nearly two dozen countries across Africa and the Middle East, added 279,000 users in South Africa in 2013, compared with 9.3 million new Nigerian customers.

In South Africa, price competition between MTN and its rivals, including Vodacom, Cell C and Telkom’s 8ta has squeezed MTN’s margins.

“Our response to the competitive environment was probably not as effective but we are satisfied that the initiatives (around pricing) that were brought in during the second half have started showing some good results,” Sifiso Dabengwa, chief executive said.

The company is also challenging a South African regulatory decision to reduce the rates it charges competitors to carry calls on its network, arguing smaller operators stand to gain from the decision.

Johannesburg-based MTN said overall revenue rose 12 percent in 2013, underpinned by data revenue, which climbed more than 40 percent to 20.7 billion rand.

Mobile phone operators are reinventing themselves to rely less on telephone calls and pushing customers to use more data, which is seen as having growth potential on a continent where most people lack traditional internet access.

MTN said it was diversifying into e-commerce by forming a partnership with Germany’s Rocket Internet to launch services in Africa and the Middle East.

Dabengwa said e-commerce penetration was still below 1 percent in Africa.

MTN’s diluted headline earnings rose to 1,378 cents per share in the year to end-December, from 1,082 cents a year earlier. Headline EPS, the main profit measure in South Africa, excludes certain one-time items.

MTN had already flagged that earnings would be higher following foreign exchange gains of 1.1 billion rand ($101.96 million). The rand currency lost around 20 percent last year, hit by a sell-off in emerging market assets, and lifting overseas earnings for exporters and internationally focused companies such as MTN.