MTN Group Suffers $108 Million Loss For 2016 But Remains Largest Digital Music Distributor In Afrika

For the financial year of 2016 which ended on 31 December 2016, MTN Group, Afrika's largest mobile services provider, reported a headline loss of approximately $108 million (R 1,4 billion). The loss, MTN Group's first reported loss in twenty years, is said to have been caused mainly by the fine imposed on the company by the Nigerian Communications Comission and unfavourable currency fluctuations (specifically the depreciation of the Rand and Naira against the US Dollar).

"Depreciation in local currencies resulted in higher US dollar expenses, impacting EBITDA."Phuthuma Nhleko, MTN Group

For the 2015 financial year MTN Group had headline earnings of 13.6 billion rand, or 746 cents per share, compared to 2016's 77 cents per share.

Although local currency devaluation against the US Dollar were also to blame for the loss, it seems the bigger culprit is the Nigerian Communications Comission which MTN Geoup say wiped off 10.5 billion rand ($768 million) -- 500 cents per share -- from headline earnings. MTN Group reached an agreement with Nigerian officials to pay a fine of 330 billion naira ($1.1 billion), reduced from $5.2 billion, in June 2016 for missing a deadline to cut off unregistered SIM cards.

The results were not all gloomy as MTN Group's subcribers increased by 3,3% to a total of 240,4 million subscribers.

"Despite challenges, we declared final dividend of 450 cents per share for the period."Phuthuma Nhleko, MTN Group

Also interesting to note is the 17% rise in data revenues which came as a result of data usage increasing by 143%. The importance of data related services and revenue was echoed by Nhleko when he said that they are "transforming internal structures towards a data and digital organisation." The data revenues are also likely improved the fact that MTN Group is the "largest distributor of digital music in Afrika*" as Nhleko stated.

MTN Group's pre-tax profit fell to ZAR 18.21 billion from ZAR 36.58 billion in 2015. The group reported a basic headline loss per share of ZAR 0.77, largely caused by the Nigerian regulatory fine. Excluding this impact in both years, HEPS declined 63.2 percent to ZAR 4.23. The attributable loss per share was ZAR 1.44, from attributable EPS of ZAR 1.11 in the prior year.

Group EBITDA decreased by 13.2 percent to ZAR 51.98 billion from ZAR 59.92 billion in 2015, while EBITDA on an organic basis declined 18.5 percent.

Cash inflows from operations decreased by 3.3 percent to ZAR 55.68 billion. This was mainly as a result of the Nigeria payment towards the regulatory fine of ZAR 5.87 billion, which was offset by an increase in working capital movements. Cash flows were also affected by dividend payments of ZAR 19.79 billion to equity holders, dividend payments of ZAR 1.18 billion to minorities and tax payments of ZAR 11.70 billion.

Group cash capex amounted to ZAR 35.25 billion and included the purchase of a 4G licence and spectrum in Ghana (ZAR 973 million), LTE and fibre licences in Congo-Brazzaville (ZAR 266 million) and a Nigerian spectrum licence (ZAR 1.39 billion).

It remains to be seen how MTN Group will fair in the 2017 financial year given challenges with the regulatory environment and dollar liquidity in the markets it operates in.

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