MTN Group’s Nigerian subsidiary continues to struggle, buckling under high inflation and the continued sharp devaluation of the local currency, the naira.
MTN Nigeria reported losses after tax of ₦392.7-billion (R5.4-billion) for the first quarter of 2024, with earnings before interest, taxes, depreciation and amortisation (Ebitda) down 1.9% to ₦297-billion (R4.1-billion) year on year.
“The operating environment in the first quarter remained very challenging, with rising inflation and continued naira depreciation off an already low base,” said Karl Toriola, CEO of MTN Nigeria, in a statement alongside the group’s quarterly financial update. “The naira depreciated to an all-time low of ₦1 672 to the dollar in March, from ₦907/$ at the end of December.”
MTN Nigeria said further depreciation of the naira led to higher net forex losses of ₦656.4-billion (R9.1-billion) arising from the revaluation of foreign currency-denominated obligations.
As the naira continues to slide, Nigeria’s inflation rate remains on an upward trajectory, rising to 33.2% in March and averaging 31.6% in the first quarter.
According to Toriola, this, combined with higher energy costs, exacerbated the effects of the naira’s devaluation, leading to the 1.9% year-on-year drop in Ebitda. Ebitda margin fell by 13.9 percentage points to 39.4% but would have been 51% were it not for the crashing currency, he said.
Net losses for the quarter resulted in a further increase in accumulated losses and negative shareholder funds, which stood at ₦599.2-billion (R8.3-billion) and ₦434.7-billion (R6-billion), respectively.
Meanwhile, regulatory pressures have had a dampening effect on subscriber growth as the Nigerian Communications Commission’s (NCC’s) deadline for the barring of subscribers whose accounts are not linked to their national identity numbers (NINs) looms closer. The process is akin to South Africa’s Rica Sim-card registration system. Consequently, total subscriber growth slowed to 1.3% year on year in the first quarter to a total of 77.7 million – and down two million when compared to the fourth quarter of 2023.
Subscriber registration
“We implemented the NCC’s directive on those subscribers who did not submit their national identity numbers and those with more than five lines linked to an unverified NIN. However, to provide more time for subscribers with less than five lines linked to an unverified NIN to complete the necessary verification exercise, the NCC has extended the 15 April deadline to 31 July 2024,” said Toriola.
Despite economic headwinds, MTN Nigeria’s underlying business remains sound. Service revenue grew by 32.5% year on year to ₦753-billion in the first quarter of 2024. Although revenue from fintech remained relatively flat, reaching ₦22.8-billion, active mobile money subscribers grew by 48% to 4.8 million.
In the group’s 2023 annual integrated report, also published on Tuesday, MTN Group CEO Ralph Mupita said that although the effects of naira devaluation and inflation were particularly pernicious in Nigeria, the group was battling the effects of a tough global economic climate, with consumer spending constrained across its entire operational footprint.
Read: MTN says it must hike tariffs in Nigeria after naira collapse
“The macroeconomic environment was challenging in 2023. There are a few factors worth highlighting in this regard – particularly devaluation of the naira against the US dollar, which was the strongest headwind to our business. Despite these effects, we are encouraged by the solid underlying operational momentum and momentum of the business, as well as progress in key strategic initiatives. We believe we are well positioned to continue delivering on our growth ambitions over the medium term,” said Mupita.
MTN Nigeria, meanwhile, said that its strategy is focused on addressing its current negative capital position. As part of this initiative, it is engaging with authorities to negotiate industry-wide tariff increases to help manage the effects of the difficult operating environment. Reducing dollar exposure and reviewing its tower lease contracts to adjust for the changes in costs have also been listed as strategic priorities.
“We will continue to evaluate the conditions and developments in our operating environment and evolve our approach to address the negative capital position as required,” said Toriola. – © 2024 NewsCentral Media