MTN. Picture: BLOOMBERG/NADINE HUTTON
MTN. Picture: BLOOMBERG/NADINE HUTTON

Bucking the trend in corporate SA, MTN reaffirmed its targets for the next three to five years even as it slashed capital expenditure by as much as a quarter to cope with weak demand in the wake of a Covid 19-induced downturn.

MTN, Africa’s biggest mobile phone operator by subscribers, has pledged to raise R25bn through the sale of noncore assets and increase dividend payouts by 10%-20% as part of plans to shake off the shackles of being regarded as a company with limited growth outlook.

We maintain our medium-term guidance and will update the market in the future of any changes in that regard,” the company said in a quarterly earnings report.

“The group remains committed to delivering on its strategy, including delivering on our asset realisation programme, which aims to simplify our portfolio, reduce risk, improve returns and realise capital of at least a further R25bn over the medium term.”

Companies that include rival Vodacom have refrained from making earnings forecasts as a tsunami of corporate distress sweeps across corporate SA, raising concerns that consumers may cut back on internet data consumption and default on their cellphone contracts.  

But MTN said it would slash capital expenditure by as much as a quarter in 2020 as it focuses on saving cash and ensuring its networks remain operational during the Covid-19 pandemic. This would provide some cash to navigate the economic crisis and possibly help it keep its dividend payout promise.

In an update for its first quarter to end-March, the group has revised its capex guidance to between R21bn and R22bn, from R28.3bn previously, saying it expects Covid-19 to disrupt supply chains and cause problems in rolling out additional coverage.

The group said it was also seeking to save cash, though Covid-19 had a minimal effect on its first-quarter performance.

Petri Redelinghuys, founder of Herenya Capital Advisors, said MTN’s results “looked to be pretty decent”.

“The fact that they did not cut their dividend was definitely a positive, as the market had been speculating that there could be a possibility that they will cut their dividend in order to preserve cash but they didn’t,”  he said.

A strong performance in Ghana and Nigeria helped underpin double-digit service revenue growth across the group, which added 6.6-million subscribers during the quarter, bringing the total to 257.3-million.

Group service revenue, which includes handsets, rose 11.1% to more than R38bn in constant-currency terms year on year, but fell 6.2% in SA, partially due to the loss of a roaming agreement with Telkom, which came to an end in June 2019.

“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 socio-economic and macroeconomic levels,” said CEO Rob Shuter.

“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,” Shuter said.