MTN Group plans to ask for regulatory support in the form of industry-wide tariff increases for voice and data services in Nigeria as part of a multipronged strategy to help offset some its losses in that market after the naira crashed.
“Our focus is to work with regulators for tariff increases in voice and data as there haven’t been any increases for quite some time in that market,” said MTN Group CEO Ralph Mupita in a media call on Monday to discuss the group’s 2023 financial results.
“Our view is that if we have two-thirds of inflation as a tariff increase in the next two to three years then it’s a good idea. We will supplement that with cost-cutting initiatives and efforts to minimise our foreign exchange risk.”
In June, Nigeria’s central bank adopted new foreign exchange regulations that MTN said have since led to a collapse in the naira versus the US dollar. The naira stood at ₦462 on 13 June 2023 but was down to ₦907 at the end of December.
Despite these headwinds, MTN Nigeria produced a “resilient” set of results for the year ended December 2023, the group said.
Service revenue was up 22.1%, second only to Ghana (35%) in the group’s operating portfolio. Voice and data revenues climbed by 10.2% and 38.6%, respectively. Ebitda – earnings before interest, tax, depreciation and amortisation – increased by 14.2%, though Ebitda margin fell by 3.6 percentage points to 49.7%.
“The operating performance remained solid, with good underlying commercial momentum,” MTN said.
Towers contract
“Overall, MTN Nigeria recorded a loss after tax of R2.4-billion. Adjusting for net forex losses, the impact of naira devaluation in opex and the once-off provision for the Firs (Nigerian tax authority) VAT assessment, profit after tax would have been up by 12% to R13.5-billion.”
According to Mupita, the operator is in the process of renegotiating its network management contracts with tower operator IHS Holding in light of the steep devaluations in the local currency. He said it’s important that these contracts are restructured because the bulk of MTN’s costs are in network management.
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A third initiative it’s undertaking to rein in losses from its Nigerian operations is minimising dollar exposure on its balance sheet. “The point is to try and minimise FX exposure as much as possible,” said Mupita – although, by his own admission, this is going to be difficult to achieve and a complete derisking from the dollar is “just about impossible”.
Mupita added that the results of a group-wide cost efficiency initiative should also have a positive impact on the operator’s Nigerian operations in the upcoming reporting period. However, he cautioned that the group’s internal adjustments will remain subject to a hostile macroeconomic environment.
“We anticipate that we are going to continue to have some macro headwinds. The naira will remain volatile for some time to come, and inflation will remain relatively sticky and high.” — © 2024 NewsCentral Media
