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Wild Nigerian naira volatility takes MTN Group’s profits

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 25 Mar 2024
MTN Group CEO and president Ralph Mupita.
MTN Group CEO and president Ralph Mupita.

MTN Group, Africa's largest telecom carrier, announced a steep decrease in earnings during its full-year 2023 financial results, as wild Nigerian naira volatility ate into the telco's profitability.

The telecom provider announced headline earnings per share (HEPS) of 315 cents per share (cps), down 72.3% from a restated R11.37 a year earlier, while adjusted HEPS fell 9.5% to 1 203cps for the financial year ending December 2023.

MTN says the rapid devaluation of the Naira versus the US dollar in the second half of 2023 had negative impact on Nigeria's financial performance.

According to MTN Nigeria, the main consequence is increased operating and net finance expenses, as well as foreign exchange losses.

MTN Nigeria, the most profitable of MTN Group's 19 markets, released its performance for the year ended December 2023 last month.

The unit reported loss after tax of $87 million (N137 billion), compared to a restated profit after tax of $221 million (N348.7 billion) in 2022.

This resulted in negative retained earnings and total equity at the end of December 2023 of $132 million (N208 billion) and $26 million (N40.8 billion), respectively.

Today, Ralph Mupita, MTN Group CEO, said: “The sharp devaluation of the Naira during the period impacted our reported results for both MTN Nigeria and MTN Group.”

According to Mupita, more broadly across MTN markets, inflation rates and interest rates may stay elevated as a result tariff increases for voice and data, will be required in the period ahead to mitigate network related expenses, and these will require regulatory approval across several markets.

Nonetheless, Mupita is optimistic of the group’s future, saying: “We continued to invest in our business and execute on our Ambition 2025 strategy given the sustained structural high demand for data and fintech services evident across our markets.

“Data traffic across our operations grew at 26.3% (35.4% excluding JVs) while fintech transaction volumes grew at 32.2% in the period.”

Mupita added MTN Group deployed billion of rands of capex (ex-leases) to support the focused execution of its Ambition 2025 strategy.

In its home market, he said, the progress of MTN South Africa’s (MTN SA) network resilience plan was a key success in the year, which significantly improved network availability and supported commercial initiatives, despite ongoing loadshedding.

“By the close of 2023, MTN SA had achieved network availability of approximately 95% ahead of schedule, with availability of approximately 98% on the cohort of sites where resilience investment had been completed,” said Mupita.

More broadly, Mupita said: “The business' customer base was resilient ending 2023 at 295 million (up 2%), despite the adverse effects of SIM registration regulations in key markets, supporting robust service revenue growth of 13.5%.”

In terms of service revenue growth in its larger markets, Mupita said, MTN Nigeria was up by 22.1%, MTN South Africa (MTN SA) by 2.5% and MTN Ghana by 35.0%.

In terms of other key metrics for the year, group voice revenue increased by 3.3% (+6.3% excluding SA), data revenue increased by 23.0%, fintech revenue increased by 21.8%, subscribers increased by 2.0% year on year (YoY) to 294.8 million, and active data subscribers increased by 9.3% to 149.7 million

Data traffic on MTN's networks (excluding joint ventures) increased by more than a third, reaching an average of more than 6GB per user each month, said the company.

To sustain this growth, as well as network coverage and quality, MTN deployed capital expenditure (excluding leases) of R41 billion in the year, said the company.

In the year, earnings before interest, taxes, depreciation, and amortization (EBITDA) surged 9.8% and MTN Group reported EBITDA margin of 41.5%, from 42.7%.

MTN Group board declared a dividend of 330cps for the year.

Mupita gave MTN Group’s outlook, priorities and medium-term guidance during his presentation today.

He said: “MTN Nigeria’s near-term focus will be to drive margin recovery and strengthen its balance sheet given the sharp devaluation of the naira since June 2023.

“Engagements with regulatory authorities on much-needed tariff increases for the industry remain ongoing and a priority, and there is comprehensive work in progress to look at reducing and mitigating the foreign exchange exposures impacting its business, including tower operating costs.”