MTN could spend $5 bln on N.Africa M&A -CEO

MTN operates in 21 countries across Africa and the Middle East, but lacks a presence in fast-growing North Africa

MTN Group would be willing to spend $5 billion on an acquisition in North Africa, its chief executive said on Wednesday, as the continent's top mobile operator looks to gain a foothold in that region.
MTN, which reported a narrow rise in first-half profit due to currency swings and slower growth in some of its major markets, operates in 21 countries across Africa and the Middle East, but lacks a presence in fast-growing North Africa.
"Our presence in North Africa is actually non-existent," Chief Executive Sifiso Dabengwa told Reuters in an interview at the company's headquarters in suburban Johannesburg.
"If we could get the right opportunity, we would go in," he said, adding that an asset with an enterprise value of $5 billion would be "do-able". Enterprise value is a measure of a company's combined debt and equity.
MTN last year failed to buy the Algerian unit of Egypt's Orascom Telecom after Algeria's government blocked the deal. The chairman of Orascom told Reuters at the time that MTN had offered $7.8 billion.
"The Algeria (deal) is a good example of what would be attractive to us," Dabengwa said.
MTN has transformed itself into a $36 billion mobile giant by focusing on fast-growing emerging markets, but with a dominant position in some of its major markets, analysts say its prospects for growth are subdued.
The company said last year it would look to pay out more money to shareholders because there are limited potential acquisitions in emerging-market telecoms.
MTN hiked its first-half dividend by 80 per cent to 273 cents per share. The first-half payout would likely represent about 40 per cent of the full-year dividend total, Dabengwa said.
The increase was higher that expected, said David Lerche, an analyst at Avior Research.
"The dividend, if anything, was welcome. The key point is that they've guided that H2 is going to be quite a bit higher."
BOOSTING DATA
MTN has also focused on increasing the money it makes from data services. Data revenue, excluding SMS text messages, rose by 24 per cent in the first half of the year, and Dabengwa said he expected that pace to continue in the second half.
Together, both data and SMS now make up 12 per cent of the company's revenue, Chief Financial Officer Nazir Patel told analysts at a briefing.
Increasing data revenue is critical for mobile operators, which face stiff competition in traditional voice services. Analysts say mobile Internet has huge potential in Africa, where most people lack access to computers.
Emerging markets telecoms research firm Delta Partners said at the start of this year it expected non-voice revenue in Africa, including short messaging services, to hit $10 billion by 2014, from about $5 billion currently.
"I remain on the optimistic side of things. I like the fact that they have grown data," said Byron Lotter, portfolio manager at Vestact.
"Long term, the stock is cheap at this price. We are happy to carry on buying at this level."
MTN said adjusted headline EPS for the six months to end-June was 470.1 cents, up 7.2 per cent from 438.6 cents a year earlier.
The company cautioned in June that revenue in the first four months of the year was only marginally higher, as a result of the stronger rand.
A firmer rand is a negative for MTN, because it eats into profits when overseas earnings are brought home.
Revenue totalled 56.5 billion rand ($7.9 billion) compared with 56 billion rand last year, while subscribers topped 152 million.
Shares in MTN were down 0.2 per cent at 136.71 rand at 1325 GMT, underperforming a 0.5 per cent rise in South Africa's Top-40 index of blue chips.