Afirca’s dominant cellular operator, MTN, will spend up to R30,5bn in capex this year, after admitting its networks in SA, Nigeria and Ghana in particular do not meet an acceptable standard .

It has already had to stop promoting its services in Ghana to quell demand, and is in a legal wrangle with the Nigerian regulator, which wants to impose daily fines and force it to pay compensation to customers for network congestion.

Yesterday, CEO Phuthuma Nhleko pledged that more would be spent on easing congestion and increasing capacity after he reported a net profit of R11,9bn for the year to December. Last year, MTN spent R15,3bn, or 21% of its revenue, on boosting its networks, and will double its budget this year.

“We are dealing with significant growth in demand that’s outstripped capacity. We have resolved to make 2008 a very large capex year to try to ensure we fully exploit the demand and don’t find ourselves losing out on this growth,” Nhleko said.

Its annual results show the MTN cash machine is still in full swing, with revenue of R73bn up by 42% from R51,5bn a year ago. Earnings per share of 569,9c were down from 605,4c, mainly because its tax rate soared to 49% as its tax holiday in Nigeria ended. Subscriber numbers leapt 53% to 61,4-million across its operations in 21 countries. Much of the growth came from its $5,5bn acquisition of Middle East operator Investcom, although 27% of its growth was organic.

The pretax profit margin was stable at 43,5%, a little short of the target 45%, and it declared a dividend of 136c a share, paying out R2,5bn.

Frost & Sullivan analyst Spiwe Chireka said the emphasis on improving its network quality was essential.

“It is only a matter of time before other regulators across the continent follow Nigeria’s example, and MTN needs to be prepared,” she said.

Chireka also said data services would become increasingly important if MTN was to continue its rate of growth. Most countries where it operated had mobile data penetration rates of less than 10%, and a lack of fixed lines made wireless the only way to access the internet.

Even in SA, data accounts for just 10% of MTN’s revenue.

Now data has been identified as a priority area and the group plans to buy internet service providers in various countries including SA so it can offer a fuller range of voice and data services. MTN would continue to buy other mobile operators, perhaps in emerging markets further afield.

“Economies of scale in this business are very important,” Nhleko said. “We have got to a stage where if there are opportunities outside Africa and the Middle East, provided they give us some critical mass and make sense for that region, we’d consider them.”

In SA, MTN’s subscribers grew 17% to 14,8-million, giving it a 36% market share. It expects another 2,2-million to sign up this year, while 5-million more are expected to join in Nigeria, which already serves 16,5- million. Even bigger gains should come in Iran where 7-million new users are expected as its geographic reach spreads. Nhleko expects Iran to generate as much traffic in two years as its network in SA has achieved in 14 years.