MTN South Africa’s margins climb as its customer base shrinks

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MTN South Africa had its most profitable quarter of the year in the three months to September, but it got there by cutting costs, not by growing. Service revenue was flat, and the company shed about two million prepaid customers in 12 months.

The local unit’s Ebitda (earnings before interest, tax, depreciation and amortisation) rose 7% year on year in the third quarter, and its Ebitda margin widened by 3.6 percentage points to 38.1%, above its medium-term target range of 35-37%, MTN Group said in a trading update on Monday. The margin has climbed every quarter this year, from 32.6% in the first quarter and 35.9% in the second, as “structural cost interventions” begin to take effect. MTN South Africa is targeting R4-billion to R6-billion in savings by 2029.

The top line is another matter. MTN South Africa’s service revenue was flat in the third quarter and up just 1% over the nine months, short of its target of low-to-mid single-digit growth. The company expects full-year growth to miss that range.

“While MTN SA’s service revenue was flat in Q3 2026 and up 1% year on year, it remains below our medium-term target,” group CEO Ralph Mupita said. “We were, however, encouraged by the month-on-month improvement in prepaid trends.”

While MTN SA’s service revenue was flat in Q3 2026 and up 1% year on year, it remains below our medium-term target.

MTN says it has “deliberately prioritised a healthier, more valuable customer base over volume”. Its prepaid base fell 6.9% year on year to 27.4 million, taking the total base down 2.7% to 39 million. The prepaid count has fallen every quarter this year, from 29.7 million at the end of December to 29.3 million in March and 28.2 million in June.

Wholesale grew 10.4%, driven by national and international roaming, but slowed to 3.9% in the third quarter on lower traffic from major wholesale customers. The same trading update disclosed that MTN and Cell C have failed to agree on terms of their commercial relationship.

Data revenue rose 4.7%, accelerating to 6% in the third quarter, and now makes up 50.5% of service revenue. Network traffic grew 27.9%. Post-paid data users consumed an average of 32.8GB/month, up 31.9%, helped by fixed-wireless access, while prepaid users averaged 5.2GB, up 28.9%. Smartphone penetration reached 70.6%.

Voice revenue fell 10.5% as customers moved to data and messaging apps. Interconnect revenue fell 20.4% after cuts to mobile termination rates in July 2025 and July 2026. Digital services revenue fell 10.2%, though gaming grew 15.5%.

On costs, network and IT spending fell 5%, marketing spending was lower and doubtful debts fell 16.2%. Over the nine months, reported Ebitda was down 2.9%, with a margin of 35.5%, weighed down by the prepaid reset and an employee share-scheme charge.

“Performance is not yet at the level of our ambitions, but Q3 marks a clear improvement,” MTN said. “Our cost base is leaner, our customer base healthier and our margin stronger.”

At group level, the picture was much stronger. Service revenue rose 17.2% in constant currency to R176.2-billion in the nine months, accelerating every month from May to reach 18.1% in September. Ebitda grew 22.9% in constant currency to R86-billion, and the margin widened by 2.8 percentage points to 47.9%. In rand terms, growth was lower, with service revenue up 9.9%, because the rand was about 10% stronger against the dollar.

MTN Nigeria drove much of the acceleration. Its third-quarter service revenue grew 19.7%, up from 13.2% in the second quarter. MTN Ghana grew service revenue 33.5% over the nine months. Fintech revenue grew 12.7%, below the group’s medium-term target of growth in the high 20s to low 30s, after a regulatory intervention in Nigeria forced a temporary suspension of its airtime advance service in the second quarter.

“Q3 was our strongest quarter of 2026 and demonstrates the resilience and quality of the MTN portfolio,” Mupita said.

The group generated R22.4-billion in free cash flow and ended the period with net debt of just 0.2 times Ebitda. It bought back R2-billion of shares under a R6-billion programme and expects to complete its acquisition of IHS Towers before the end of the year, pending approval from South Africa’s Competition Tribunal and regional regulators. – (c) 2026 NewsCentral Media

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