MTN cutting network investments in South Africa

MTN plans to spend between R5.7 billion and R6.7 billion on capital expenditure in South Africa to bolster its competitiveness within the prepaid market segment.

This is 19% of the MTN Group’s total capex and between R3.1 billion and R4.1 billion less than it spent in South Africa during its past financial year. MTN recently released its financial results for the year ending 31 December 2024.

MTN SA’s capex budget is significantly less than Vodacom’s recent announcement that it plans to invest between R11 billion and R11.2 billion into its network this financial year.

Network quality is closely linked to an operator’s capex, which are the costs of maintaining and upgrading its network.

It costs billions to roll out new sites and deploy the latest mobile network technologies — like 5G, 4×4 MIMO, 3CC (3 Carrier Combining), and 256QAM — on existing sites.

Unless a mobile network consistently invests in its network and the latest technologies, its performance will start to lag behind its competitors.

Over the past few years, MTN and Vodacom have invested close to R10 billion a year in capex, sometimes coming close to R12 billion, emphasising the importance of remaining competitive on the network quality front.

A significant portion of this was invested in network resilience, ensuring sites remain online during load-shedding and other power outages.

Currently, MTN has the best overall mobile network in South Africa. However, this can change quickly should the company begin cutting corners with its network investments.

MyBroadband Insights’ 2024 Mobile Network Quality Report found that MTN has the best network in South Africa.

The report was based on 1.17 million speed tests performed by 18,649 mobile data users across South Africa between 1 January 2024 and 31 December 2024.

MTN Group CEO Ralph Mupita told the Sunday Times that the reduction in capex should not affect the network’s growth.

He added that MTN has enough capacity and needs to see a return on its R4.5 billion investment in network resilience.

Mupita said the network’s postpaid, enterprise, digital, and fintech offerings performed well during the past financial year.

However, he said its current pressure point is the prepaid segment, which was struggling in two major provinces or regions in South Africa. He did not name the two provinces.

MTN South Africa CEO Charles Molapisi told the Times that the company was seeing decent growth in other areas of the country and confirmed that its prepaid difficulties were isolated to these two regions.

Molapisi also said MTN SA was comfortable that it would remain competitive with a R6.5-billion capex budget.

Despite these prepaid challenges in parts of the country, MTN saw a 5.5% increase in consumer prepaid customers at the end of December 2024 and 0.8% growth in service revenue.

It also noticed a 9.5% year-on-year increase in prepaid data consumption and a massive 36.5% increase in postpaid data usage.

MTN said the bulk of this growth could be attributed to its residential customers’ uptake of fixed wireless access products.

MTN South Africa’s overall revenue increased by 1.5% from R51.8 billion to R52.6 billion, while service revenue grew by 3.1% from R41.9 billion to R43.2 billion. Service revenue increased despite a 5.5% decrease in voice revenue.

Earnings before interest, taxation, depreciation, and amortisation (Ebitda) in South Africa rose by 5.1%. Excluding gains from the disposal of towers and R212 million from the sale of insurance receivable, Ebitda was up 4.4% year-on-year.

MTN said South Africa’s overall result was supported by a 6.4% increase in subscribers to 39.8 million, a net addition of 2.4 million during the year.

“Postpaid subscribers, excluding telemetry, increased by 6.1% to 4.3 million, driven by stronger uptake of home propositions, as well as integrated voice and data plans,” MTN said.

MTN said its South African business would continue to evolve its data propositions, with a focus on 5G, to enhance value share in the market and accelerate revenue growth.

“Executing on the home strategy will remain a key priority, to accelerate growth in residential customers on both FTTH and FWA,” it said.

“As some key enterprise contracts come up for renewal and MTN SA drives initiatives to sustain penetration growth in the segment, it is anticipated to result in some short-term pressure on margin performance.”

However, MTN said the initiatives are expected to accelerate enterprise revenue expansion, supporting margin recovery as the year progresses.

“The priority for MTN SA is to recover its profitability and cash flow profile, underpinned by the focus on accelerating topline growth and Ebitda margin towards its medium-term targets,” it said.