Africa’s top mobile phone operator, MTN Group, gave a downbeat outlook for Nigeria, its biggest market, on Wednesday after losing high-end users to Gulf rival, Etisalat.
South Africa-based MTN, which reported a 10 percent decline in first-half earnings, is fighting to maintain its lead in Nigeria ahead of competitors such as Etisalat, India’s Bharti Airtel and Nigeria’s Second National Carrier, Globacom.
But poor network quality in vital areas of the nation’s capital, Abuja, and in the commercial hub Lagos, has prompted its more affluent clients to switch to Etisalat.
MTN’s Chief Executive, Sifiso Dabengwa, was frank about the network superiority of the Gulf’s second-biggest mobile phone operator.
“The key issue really for us has been to improve the data quality and speeds,” Dabengwa told reporters and analysts at the company’s results presentation. “Clearly, Etisalat’s network, from a data point view, has been better than ours.”
MTN will use 19 billion rand ($1.5 billion), which is over N300billion spending package for the rest of this year to expand high-speed networks in Nigeria and South Africa, where rivals such as Vodacom Group and Cell C have slashed voice tariffs to gain market share.
However, spending on a network in Nigeria, Africa’s most populous country is unlikely to deliver a strong enough performance to offset the impact of a sharp economic slowdown, which is curbing consumers’ disposable income.
“We expect the balance of the year to remain challenging for MTN Nigeria,” the company said in its results announcement.
MTN reported a 10.3 percent fall in headline Earnings Per Share (EPS) from a year earlier to 654 cents for January-June.
Its shares, down 6 percent this year, slipped just 0.3 percent after the results as the company had warned that headline EPS would fall by 10-15 percent.
Headline EPS is the main profit measure in South Africa and it strips out certain one-off items.
Handset supply disruptions in South Africa, due to a seven-week strike by about 2,000 entry-level staff over pay, also hurt earnings. It prompted MTN to slash its full-year forecast for subscriber growth in South Africa, its second-biggest market, by 25 percent.
Globally, its subscribers rose by just over 3 percent to 231 million during the first half.
MTN’s third-largest market is Iran and it hopes to repatriate about $1.1 billion rand in accumulated dividends frozen by international sanctions once Iran’s nuclear deal with world powers is finalised, said MTN’s Chief Financial Officer, Brett Goschen.