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MTN Group of South Africa to Boost Dividends as Takeover Prospects Fade

MTN Group Ltd., Africa’s largest mobile-phone operator, said it will increase dividend payouts because there are few takeover opportunities that will add to earnings.

The company will pay a first-half dividend, the first ever for that period, of 1.51 rand a share, Johannesburg-based MTN said in a statement today. It also intends to increase the total annual dividend payout to 40 percent of full-year adjusted headline earnings per share.

MTN has been stymied in four attempts to buy competitors in the last two years. The company ended talks in June with Weather Investments SpA on buying as much as $10 billion in assets of Egyptian operator Orascom Telecom Holding SAE. MTN and India’s Bharti Airtel Ltd. failed in 2009 to reach agreement on a deal for the second time in as many years, while talks with Mumbai- based Reliance Communications Ltd. collapsed in 2008.

While MTN will continue to evaluate “value accretive opportunities,” the limited number of these prospects has prompted the company to focus on existing business, reducing suppliers and monitoring spending on infrastructure, it said. MTN said it can meet its growth aspirations while improving returns to shareholders.

“We will increase dividend significantly as we have done but leave some powder dry for what we think will be an inevitable consolidation,” Chief Executive Officer Phuthuma Nhleko said in an interview in Johannesburg today.

“There will be more consolidation in this sector, not only in Africa, but outside of Africa as well, and in emerging markets.”MTN gained 1.3 percent to close at 119 rand as of 5 p.m. in Johannesburg trading.

Net income increased 6.2 percent to 8.1 billion rand ($1.1 billion) in the six months through June, MTN said. Sales declined 2.2 percent to 56 billion rand as gains in the rand cut income the company makes outside of South Africa when converted back into the local currency.

Most of the 21 countries in which MTN operates showed growth in the number of customers served. Subscriber numbers rose 11 percent to 129.2 million customers, including gains of 14 percent to 35.1 million in Nigeria, 6.4 percent to 17.1 million in South Africa and 16 percent to 27 million in Iran.

The company expects to add a total of 21.2 million customers for the full year, it said.
MTN expanded its share of Nigeria, Africa’s largest market with a population of about 150 million people, to 51 percent. Growth may slow after the introduction of customer registration laws implemented in May.

“The Nigerian market as a whole is becoming tougher,” Spiwe Chireka, an analyst with consultant Frost & Sullivan, said in a research note today, citing a “price war” within a “crowded market.”

Chireka also predicts that new subscriber registration legislation will discourage consumers from adopting mobile phones. “By the end of the year, we may even see Nigeria reporting a decline in subscriber numbers for the first time,” he said.

MTN said the new legislation may pose a risk to growth in the market. “We are doing things to pre-empt” any declines, Nhleko said. “We are doing more marketing and more communication but you can’t discount that we might feel some impact.”


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