MTN expects profit jump, as Telkom sees modest revenue growth

Telecommunications giant MTN expects half-year profits to the end of June 2023 to rise up to 10%, while its rival Telkom says it expects to increase first-quarter revenue by nearly 4%.

The two network providers released trading updates on Monday, with MTN saying it expects to report headline earnings per share (Heps) of between 506 cents to 557 cents when it releases its interim results in August.

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MTN says earnings per share is expected to surge between 10% to 20 % to a range of between 490 cents to 534 cents per share, which includes impairment losses related to property, plant and equipment, and profits incurred from the disposal of its cellphone towers in South Africa.

The company sold its towers in a multibillion-rand deal to IHS Towers, which also provides the carrier with power management services.

MTN noted that it also carried some non-operational one-off costs of 207 cents, which negatively affected Heps.

Foreign exchange losses

These include hyperinflation, increased foreign exchange losses, and International Financial Reporting Standards (IFRS 2) charges arising from MTN’s Ghana localisation transaction that sought to increase local ownership in the company in the West African nation.

During the period, MTN also contended with forex volatility in key markets such as the recent rand weakening in the South African domestic market and the plunge in the Nigerian naria after it was allowed to freely float by its central bank. This means fixed prices for trading forex were removed, allowing investors to trade the naira freely.

Telkom and MTN share prices

Meanwhile, Telkom said on Monday that group revenue during the first quarter through to end of June grew 3.8% to R10.6 billion on the back of good revenue growth in most divisions, including key areas such as Telkom Mobile, Openserve, and its IT hardware and software subsidiary BCX.

In Telkom Mobile, revenue grew 5.2% to R5.4 billion as mobile data traffic and subscribers rose 25.1% and 6.9% respectively.

Openserve revenue was up 10%, while BCX was up 2.9% resulting from growth in IT business which saw revenue jump 17.5% to more than R2 billion.

The company said the quarter’s performance “demonstrates good performance by new generation network offerings despite challenging economic conditions prevailing in South Africa,”.

“Telkom has started the 2024 financial year with good momentum,” said group CEO Serame Taukobong.

“Group performance was pleasing in the face of rolling power outages [load shedding], muted economic growth, continuing inflationary pressures on consumers and an intensely competitive landscape,” he noted.

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Despite the better financial showing, Telkom is still reeling from revenue declines from its legacy business that has lost relevance in the evolved telecoms industry such as fixed voice services.

“That along with higher provisions has weighed on overall group profitability,” Taukobong said.

Load shedding

Telkom also lamented the impacts of load shedding on its business, saying that the increased intensity of rolling power cuts in the current financial year has forced it to incorporate the associated costs into its operating cost base.

“To this end, Telkom is investing in capital expenditure to improve our mobile and fibre networks’ resilience; as well as reduce diesel consumption by installing and upgrading to lithium batteries along with reconfiguring our sites for batteries to become the primary backup system,” Taukobong said.

“We are also increasing our solar power footprint at key properties/sites to reduce the impact of power outages caused by load shedding,” he added.

Shares in the part state-owned telecoms company were around 2% stronger during morning trade on Monday, while MTN saw its share price weaken around 1%.

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