MTN South Africa’s margins remain under pressure as the company invests significant capital in making its network resilient against load shedding.
MTN Group said on Tuesday in a trading update for the third quarter ended September 2023 that the Ebitda margin at its South African operation came in at 36.4% in the first nine months of the year (excluding a gain from the sale of its tower assets), down from 39.5% in the same period a year ago.
Ebitda, or earnings before interest, tax, depreciation and amortisation, is a measure of operating profitability and is an important financial metric used by investors in the sector.
However, MTN pointed out that the Ebitda margin improved quarter on quarter as it “continued to execute on its aggressive drive to cut costs and safeguard profitability and cash flows”.
Despite the short-term impact on margins, MTN said the investment in its network resilience has already resulted in a “substantially better network experience” for its customers. That helped grow subscriber numbers by 2.6% to 36.8 million (excluding telemetry). Encouragingly, all that growth came from post-paid subscribers; prepaid was flat.
“Supported by investment and significant progress to enhance network resilience, MTN South Africa’s network availability rose to above 95% at the end of September 2023 from just above 90% three months earlier,” it said. “This was despite the business contending with 273 days of load shedding in the first nine months of the year, compared to 117 days in the same period of 2022.”
Group CEO Ralph Mupita said the network resilience programme is tracking “slightly ahead of plan”. This underpinned a “substantial rise in customer satisfaction, as measured by customer feedback obtained through the Net Promoter Score measurement”.
MTN South Africa said it grew service revenue by 4.1% year on year in the third quarter to R31-billion. That was an acceleration from growth of 2.5% in the second quarter.
In the quarter, MTN South Africa also made the outstanding payment of R1.9 billion for “digital dividend” spectrum acquired in the 2022 auction by communications regulator Icasa.
“This spectrum will enable the efficient deployment in South Africa of capex going forward,” said MTN South Africa CEO Charles Molapisi.
He said to mitigate the effects of economic headwinds, the operator will continue to enhance its customer experience, expand its customer value management offers, scale the fintech business and drive further expense efficiencies.
“MTN South Africa is tracking well to return service revenue growth and Ebitda margin to medium-term guidance ranges. We expect this to underpin its attractive cash-flow generation profile over the medium term, guided by our disciplined capital allocation framework,” added Mupita.