Burdened By Mega Fine, MTN Issues Profit Warning

MTN

MTN Group has issued a profit warning to its investors and shareholders, citing its fine payments in Nigeria.

In a statement released later on Tuesday, MTN said it “expects to report negative basic headline earnings per share, HEPS and basic earnings per share,EPS” for the first half of the year.

This is regarded as inevitable by analysts because MTN had agreed to pay a NGN330 billion ZAR24.94 billion negotiated fine to the Nigeria.

“The expected decline in the HEPS and EPS is primarily as a result of the Regulatory fine imposed on MTN Nigeria (‘the Nigerian regulatory fine’) following a resolution with the Federal Government of Nigeria on 10 June 2016,” the company added.

“The Nigerian regulatory fine is expected to have an estimated negative impact of 474 cents on HEPS and EPS, respectively,”

MTN’s operation in Iran was also exposed to “foreign exchange losses in a number of operations, losses from joint ventures and associates and hyperinflation adjustments on MTN Irancell”.

Meanwhile, under-performances in MTN’s Nigeria and South African markets are also set to weigh down Africa’s biggest mobile network.

“MTN Nigeria’s performance was impacted by the disconnection of 4.5 million subscribers in February 2016, the final batch of subscribers to be disconnected in compliance with the Nigerian Communications Commission subscriber registration requirements,” the company added

“The withdrawal of regulatory services which was re-instated on 15 March 2016 with approval for promotions and price plans granted in early May 2016 also negatively impacted MTN Nigeria’s performance,”

As regards its South African operations, the company said “decline in the Earnings Before Interest, Tax, Depreciation and Amortisation (EBITDA) margin, impacted by the marked increase in handsets sold during HY2016”.

In Q1 2016, MTN’s customer base dropped by 1.4%. Part of its major milestone for the second quarter was the appointment of Rob Shuter. Shuter is a South African who currently works for Vodafone Group, MTN’s bigger rival in South Africa. His appointment is followed the eventual resolution of the company’s dispute with the Nigerian government.

MTN Group [MTN:SJ] stock on the Johannesburg Stock Exchange currently trades at ZAR14,420 per share.

 

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