Following three consecutive quarters of losses, MTN Nigeria Communications Plc has mapped out a route back to profitability. In the third quarter of 2024, the telco reported an N4.13 billion profit after taxes.
However, the telco’s financial statement showed that it had lost N514.93 billion for the nine months ending September 2024, following consecutive quarters of losses.
Its nine-month deficit shows deceleration since it is 0.80% lower than the N519.1 billion it reported for the six months ending June 2024. Record-high inflation and the depreciation of the naira have affected MTN’s financial performance by increasing the firm’s operating costs.
MTN Nigeria CEO Karl Toriola stated, “Despite difficult circumstances, we maintained the growth in our underlying operating performance in the first nine months of 2024, supported by our robust business model and operational agility.”
Despite economic challenges, data revenues of N1.14 trillion helped the telco increase its service income by 33.6 percent to N2.4 trillion.
The naira fell from N471/$ in mid-June 2023 to over N1,500 by September due to the Central Bank of Nigeria’s (CBN) unification of the foreign exchange market in 2023. As a result, the telecom industry suffered losses; in 2023, Airtel Africa and MTN Nigeria lost N1.29 trillion in foreign exchange.
After experiencing $1.56 billion in foreign exchange losses in 2023, the News Chronicles has previously reported that telcos were pursuing a naira-focused route to profitability. MTN and Airtel have renegotiated contracts, lowered foreign loans, bulk-paid for FX-denominated inputs, and slashed their dollar liabilities since the end of 2023.
In June 2024, MTN and Airtel lowered their foreign debts from $966.6 million in December 2023 to $100 million. MTN detailed the company’s actions to turn things around and return to profitability in its financial statement for the nine months ending in September 2024.
- Margin Recovery: MTN stabilized and improved margins by growing revenue and cutting costs, including renegotiating IHS contracts, saving about N54 billion.
- Capex Optimization: With capex intensity at 9.8%, MTN prioritized forex liquidity and minimized dollar obligations, reducing capex (excluding leases) by 27.8% to N217.6 billion.
- Dollar Exposure Reduction: Trade line obligations fell from $416.6 million in December 2023 to $57 million in September 2024, incurring a forex loss of N365 billion but cushioning against future naira depreciation.
- Tower Lease Review: Revised IHS contracts cut the dollar-linked lease component, eliminating technology-based pricing and ensuring payments are based on tower space and power usage.
It emphasized that the new agreements include an energy cost component linked to the price of diesel power supply. “As of the end of September, the accrued operating expense (OPEX) savings from the contract’s effective date of April 1, 2024, were approximately N54 billion, and the free cash flow savings amounted to approximately N45 billion,” the statement said.
However, because the lease period has been extended to December 31, 2032, it anticipates greater financing and depreciation costs in the early going, but the advantages will become more noticeable in subsequent years. “Based on current assumptions, we expect to record a net positive impact of between N3.5 and 4 trillion on PBT over the duration of the contracts,” it continued.
MTN added that to lessen the effects of macro volatility, it is still working with authorities to address tariff rises.
Telcos have been advocating for their first upward tariff review in eleven years since 2022. However, those with knowledge of the situation at the Nigerian Communications Commission claim that because telecom services are so important to everyone, the issue is delicate. They stated that in an effort to ensure that services are as cost-reflective as feasible, the regulator is still examining the sector’s requests.
