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MTN results hit by Nigerian fine

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MTN showed a very modest revenue gain for the year ended 31 December 2015, but a R9,287-billion provision for its Nigerian fine puts it deep into the red.
Although group subscribers increased 4,1% to 232,5-million over the year, revenue increased just 0,1% to R146,353-billion – although data revenue increased 30,2% to R3,874-billion.
For the year, EBITDA decreased 8,6% to R59,918-billion and EBITDA margin decreased 3,9 percentage points to 40,9%.
Headline earnings per share (HEPS) decreased 51,4% to 746 cents.
MTN says group revenue remained flat in the year largely due to a decline in voice revenue in Nigeria and a reduction in handset revenue in South Africa following the industrial action experienced in the first half of the year which led to lower distribution of handsets. This was, however, largely offset by an increase in data revenue across the business.
Lower voice tariffs, which declined by 25% across operations in the year drove a 15% increase in billable minutes. Voice revenue continued to come under pressure as a result of heightened competition and the related use of multiple SIM cards as well as pressure on consumer spending.
The group benefited from a 108,5% increase in data traffic and an increased take-up of digital services. Despite a 45% decline in the effective data tariff, group data revenue increased by 30,2%, partly offsetting a 5,6% decline in voice revenue. Data revenue, including digital services, contributed 23,1% to total revenue.
MTN Nigeria’s competitiveness in the market was compromised by the suspension of regulatory services in October 2015.
Under this suspension, the Nigerian Communication Commission (NCC) withdrew its approval process for new tariff plans and promotions until certain tariff plans and promotions linked to the ‘dominant operator’ ruling were removed from the market.
Late last year, MTN Nigeria was fined N780-bbillion (equivalent to approximately $3,9-billion using the exchange rate at the time) because of the late disconnection of approximately 5,1-million subscribers whose registration documents were considered incomplete.
On 17 December 2015, MTN Nigeria proceeded with legal action in the Federal High Court in Lagos challenging the fine. On 22 January 2016, the matter was adjourned by the judge to allow parties to find an amicable solution. On 24 February 2016, MTN Nigeria made a without prejudice good faith payment of N50-billion (equivalent to approximately $250-million) to the Federal Government of Nigeria, on the basis that this will be applied towards a settlement, when one is eventually hopefully arrived at. In an effort to achieve an amicable settlement, MTN Nigeria, without prejudice, agreed to withdraw the matter from the Federal High Court.
MTN Nigeria recorded a R9,287-billion provision for the fine at the end of the reporting period, negatively impacting reported EBITDA by 13,6% and HEPS by 402 cents.