On March 11, MTN reported its results for the year ended on the December 31, 2009. With group revenues up by 9.2%, organic customer growth at 28% and group EBITDA margin above the 40% landmark, MTN shows notable resiliency in the face of a global economic slowdown and an operating environment that has become much tougher.

• Revenues:  MTN’s revenue growth has decelerated markedly; for the first time, group revenue growth has slipped into single digits.  African revenue rose 6% only to about $13.5bn (vs. 20% in South East Africa and 55% in West Africa in 2008). This evolution owes as much to  a tougher competitive environment, lower ARPUs and slower growth in volumes as it does to the negative impact of foreign exchange depreciation across African markets. At constant FX, revenue growth was a solid 20%.  
• EBITDA: The EBITDA picture is also challenging. Group EBITDA rose by 7% only, a sharp decline from the average of 27% experienced over the three years to 2008. EBITDA margin dropped three percentage points to 41%, with most markets feeling the pressure. The operations in WECA (West, East and Central Africa) and Nigeria showed EBITDA growth in line with group figures at around 7-8% while SEA (South and East Africa) were hurt by bad results in South Africa. The mother operation witnessed a -2% decrease in EBITDA as a result of regulatory pressures and an EBITDA margin down by 4%.The foreign exchange impact was notable here as well, with EBITDA growing at close to 20% prior to the exchange effect.     
• Data & CapEx: Data revenues in South Africa are in strong progression representing 14% of revenue at YE2009; a year on year growth of 22% vs. 11% in 2008. Most importantly non-messaging data is in strong progression representing 55% of total data revenues at YE2009 against 50% a year earlier. The evolution to data is ongoing at group level. In Nigeria the operator reported 78k active mobile internet users via data modems. MTN now operates WiMAX networks in 7 African markets and is rolling out 3G across operations.  Also notable is the fact that MTN’s 2009 CapEx actually rose, in a year when many operators cut CapEx in the face of the global credit crunch. CapEx level reached 28% of revenues, up 31% from 2007 levels (21% to revenues). These efforts reflect MTN’s investment efforts in terms of 3G roll out as well as network expansion to Greenfield areas.

On March 1, Vivendi reported 2009 results in line with the group’s expectations. Vivendi revenues were up 6.9% at €27.1 billion and its EBITDA up by 8.8% YoY at €5.3 billion. Although most activities but Universal witnessed revenue growth, the EBITDA growth was another story; Activision and Maroc Telecom (MT) were the only units to report an increase. Moreover, MT’s share of the group EBITDA was resilient in 2009 despite a challenging economic environment. These results confirm and reinforce Vivendi’s emerging market investment strategy.  Some takeaways:

Maroc Telecom from mere subsidiary to crown jewel

- MT reported revenues up by 3% YoY on a comparable basis and a 1.6% increase in EBITDA. By contrast, Vivendi’s other major telco operation, SFR, reported a 7.5% growth in revenues but a disappointing 0.5% decrease in EBITDA. MT’s share of group EBITDA dropped by 4 percentage points in 2009 to 23% while SFR’s contribution dropped from 57% to 46%. MT’s contribution to group revenue remained stable at around 12%. Most importantly, MT remains Vivendi’s most profitable telecom operation with EBITDA margins at 46% while SFR barely reached the 20%.   

- Vivendi expects Maroc Telecom to be a driver of growth in 2010 thanks in part to African subsidiaries.  In 2009, 57% of group mobile subscribers net additions were acquired across MT’s African operations, up from 50% in 2008.

Outlining African Investment Criteria

- Vivendi has invested nearly €550 million in acquisition across sub-Saharan Africa over the past three years. The group’s four African operations (Gabon, Burkina Faso, Mauritanie and Mali) generated an EBITDA of €83 million in 2009, up 186% from 2008. This performance has likely whetted the company’s appetite for more African acquisitions, as evidenced by a flirtation with Zain’s African assets last year, but in a context of rising African asset prices. In 2006, the median African mobile operator valuation was around 6.3x EBITDA according to our Mobile Profitability report. Two years later, that median had reached around 9x EBITDA. Bharti valued Zain at around 8x EBITDA in February 2010.

In its annual results statement, Vivendi’s board laid out key guidelines for further investments in emerging markets:  

• “Seize external growth opportunities with a focus on fast-growing regions / businesses, assessed under a selective, rigorous and financially disciplined process
• Focus on media and telecom subscription-based business models
• Profitable assets with strong growth prospects
• ROCE to exceed local risk adjusted WACC within 3 to 5 years
• EPS accretive in the short term”