Last night, when Paul Edwards presented his last set of results as CEO of M-Cell, the holding company for cellular network MTN, he did so with his characteristic smile.
"It looks good from all angles," Edwards said.
The company reported a 49% jump in revenue and a 36% increase in subscribers. Headline earnings and profits were down significantly, but well within expectations, and in morning trade today the M-Cell share price moved only marginally down.
The reason for the discrepancy in revenue versus earnings and profits lies in the heart of the African continent. While the South African MTN business is now considered mature, operations outside the country contributed 19% of revenue, or more than R2 billion.
M-Cell says it intends to earn 35% of its money outside SA within the next two years.
MTN Nigeria, which is now 77%-owned by the company, made a contribution befitting a country of its size and economic importance. The average Nigerian subscriber, of which there are no more than 300 000, spends R600 a month with the company, three times the average in SA.
Yet a lack of infrastructure in the country makes network roll-out difficult, MTN says, and it has intentionally slowed down its growth there.
"We made a conscious decision to slow down expansion to different cities," says Lazarus Zim, MD of wholly owned subsidiary MTN International. He cites poor service as the major reason behind the decision.
To counter this, and exploit the full potential of the market and the almost R3 billion MTN has already spent in Nigeria, the company has allocated more than R4 billion for capital spending in the country for next year alone. This is five times what it will spend in Cameroon and Uganda.
"In SA, the most we have spent in one year was R1.8 billion," says financial director Rob Nisbet, who does not deny that expansion throughout Africa means added risk. "We are looking at taking out political risk insurance on some of our investments," he says.
Despite the huge spending in Nigeria, the maturity of the local market - where the company now claims its network covers 74% of the country and 93% of the population - has M-Cell aiming to lower its total capital spending to 10% or less of its sales income.
SA, data services, SNO
Despite its offshore focus, MTN does not believe the South African market to be a completely dead fish. It has increased its estimates for the number of possible cellular users, to between 13 million and 14 million. It and rival Vodacom have just over 10 million combined subscribers, with newcomer Cell C claiming 500 000.
"There is still growth coming out of this market," says Edwards.
Data services remain a major hope to stem the decline of average revenue per user that all operators are facing as they delve deeper into a market of less well-heeled subscribers.
MTN has spent around R50 million to date on providing GPRS (general packet radio services) to its users. It says a current free trail period of the always-on data carrier has seen more than 80 000 subscribers give it a whirl.
Data revenue currently amounts to just over 3% of the company`s turnover, but it expects that to rise to at least 5% next year and continue to grow in future.
The other major growth area in SA, the second national operator (SNO) expected to start competing with Telkom in 2003, may or may not see an investment from M-Cell. The company says its major concern now is the impact the new player will have on its existing business and it has not yet made a decision as to bidding for a stake in it.
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