MTN Group, Africa’s biggest mobile phone operator, on Thursday returned to profit in the first half of the year, helping the company to move on from a turbulent 2016 that highlighted the risks of its emerging markets strategy.
The results were bolstered by the absence of charges related to a $1.1 billion fine imposed by Nigerian authorities last year in a long-running dispute over unregistered SIM cards.
“These numbers give us hope for the future. It’s a very encouraging platform upon which to build our strategy,” said Rob Shuter, former Vodafone European head, who became chief executive in March.
But the profits disappointed analysts and investors partly because of the impact of foreign currency translation.
MTN’s shares were more than 3 percent lower by 1353 GMT.
“The actual underlying results were not bad but when you translate them all back into rand then it was a disappointing result because the naira and all other currencies were weak,” Ashburton Investments’ portfolio manager Wayne McCurrie said.
“The market also takes a long time to forget when a company has had a bad year. MTN is going to have to come up with really good earnings numbers before the market starts to forget and forgive.”
MTN’s headline earnings came in at 3.9 billion rand or 212 cents per share, in the six months to end June compared with a loss of 4.9 billion rand, or 271 cents per share, a year earlier. Its subscribers fell 3.6 percent to 232 million due to losses in Nigeria, its biggest market, and Ghana.
Founded at the end of white rule in 1994, MTN’s regulatory troubles in the past few years had held back growth and threatened its image as one of post-apartheid South Africa’s biggest commercial successes, with operations in over 20 countries in the Middle East and Africa.
Shuter’s appointment is expected to put the company back on a growth path with a shift away from basic telecoms services towards offering its more than 200 million users the ability to pay bills or watch live football matches on their phones.
Shuter, along with his new executive team that include the new head of M&A Stephen van Coller and finance head Ralph Mupita, may have other tricky issues to tackle.
In Nigeria, for example, MTN has been investigated over allegations of illegally repatriating $14 billion. Last month, a report on the allegations largely cleared MTN, but the report was then withdrawn by the Nigerian Senate.
“We haven’t had sight of the report but we understand that there had been some questions about the role of the banking authorities and our banking partner, not so much focusing on MTN,” Shuter said. “We still firmly believe we complied with all the regulations,” he said on a conference call following the results. MTN has denied any wrongdoing.
Reuters
