MTN realises headline loss of 77c/share

MTN full-year results for 2016 show that the company has realised a headline loss of 77c per share. The loss is the first annual loss in more than 20 years for the group and can be attributed to a number of factors.

The negative contributors to the headline loss per share are as follows:

- Nigerian regulatory fine  500c
- Foreign Exchange losses  329c
- MTN equity interest in Nigeria Tower – 122c
- MTN Zakhele Futhi – 88c
- Professional Fees in fine settlement – 73c
- Digital Group Investment loss  39c
- Hyperinflation – 37c

The Nigerian Regulatory Fine and professional fees relating to the fine, as well as the equity interest in Nigeria Towers are considered non-reoccurring items, although the group is still under investigation by the Nigerian authorities for allegedly repatriating around $14bn from the country illegally between 2006 and 2016, which remains a possible negative catalyst to future earnings.

Looking at the divisional performance, the group shows similar trends to that of the telecommunications sector, in that growth in data revenue remains strong, while voice revenue continues to decline.

The group will need to continue focusing on key initiatives to address the declining voice revenue trend as the division still accounts for the vast majority of group revenue (64% including incoming and outgoing). The new management team has reiterated its commitment to improving operational efficiencies though digitisation and finding new revenue streams particularly within the digital services offering.

Some of the other salient features of the group results are: 

- Group subscribers increased by 3.3%
- R12.5bn repatriated from MTN Irancell joint venture (continued repatriation going forward likely although at a more normalised rate)
- Final dividend of 450c proposed (down 54%)

The market has reacted very positively to the results despite the group positing a headline loss for the period. Earlier guidance via a company trading statement had perhaps prepared the market for the lacklustre performance to have been realised in the 2016 financial year. 

The results were however slightly ahead of consensus estimates, and perhaps the intraday rally in the MTN share price also reflects relief in the proposed dividend offering which might have been in doubt beforehand. The exaggerated gains do however suggest that part of the extended rally move may be related to short covering within the share. 

The average broker rating for MTN, according to a Thompsons Reuters survey of 13 analysts, suggests that the MTN Group remains a hold for now. 

Shaun Murison is a senior market analyst at IG.

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