Harsh economy threatens telecom as MTN reports N515bn loss in 9 months
Maureen Aguta
Nigeria’s economic crisis which sent most multinational companies out of the country, has taken toll on the telecom sector as MTN Nigeria Plc net losses grew by more than 3335 per cent year on year to N514.928 billion, details from the telecommunication company’s unaudited financial statement revealed, from N14.984 billion in the comparable period in 2023.
Its unaudited financial statement for 9M-2024 showed that total revenue surged by 33.7 per cent year on year to N2.370 trillion from restated amount of N1.772 trillion in the comparable period in 2023.
This was supported by growth in voice, data, digital, fintechs and other services revenue in the period. The telecom company report revealed that service revenue increased by 33.6 per cent to N2.4 trillion at the end of the 9M-2024 despite the fact that subscribers reduced.
MTN Nigeria’s total subscribers decreased by 0.9 per cent to 77.0 million, impacted by the NIN-SIM regulations. However, active data users increased by 5.1 per cent to 45.3 million while active mobile money (MoMo PSB) wallets decreased by 21.8 per cent to 2.8 million.
The Senior Analysts Team reports that total operating expenses surged by about 75 per cent year-on-year to N1.510 trillion from N865 billion in the equivalent period in 2023. Without forex related losses, MTN Nigeria profit after tax (PAT) would have settled at N118.5 billion, which is a significant 59.2 per cent year on year drop in bottom line. This resulted in negative Earnings per share (EPS) of N24.51 kobo.
Forex losses increased by 90.8 per cent year on year to N904.932 billion from N474.252 billion in the comparable period. MTN Nigeria reported that it has N404.309 billion of the net forex loss a 1267 per cent increase from realised forex loss of N29.585 billion in the comparable period in 2023.
Unrealised forex loss increased by 12.6 per cent year on year from N444. 6 billion to N500.6 billion, according to details from the telecom company’s financial statement. “We made significant strides in reducing our outstanding trade line US$ obligations, thereby helping to reduce the impact on our earnings from the volatility caused by forex losses.
“As at the end of September 2024, the outstanding trade line obligations were approximately $57 million, down significantly from $416.6 million at 31 December 2023.
“The reduction led to a realised forex losses of approximately N365 billion but helped to reduce the effect of future Naira depreciation and attendant finance costs”, MTN Nigeria said in its outlook statement.
The telecom unimpressive operating performance has plunged its shareholders and retain earnings to a negative level. At the end of 9M-2024, MTN Nigeria retained earnings and shareholders’ funds were negative at N723.0 billion and N573.6 billion, respectively.
The tight operating conditions has caused the company to reduce its capital projects. Details showed that capital expenditure (capex) excluding leases was down 27.8 per cent to N217.6 billion at the end of 9M-2024. Though, the company achieved positive free cash flow of N536.8 billion, an increase of 21.9 per cent year on year in the period.
Speaking, Karl Toriola said: “In the first nine months of 2024, we sustained the growth in our underlying operating performance – underpinned by our resilient business model and operational agility – despite challenging conditions.
“The inflation rate remained elevated amidst rising energy prices and naira depreciation. Inflation averaged 32.8 per cent in the nine months 2024 compared to an average of 24.5 per cent in 2023.
To curb inflation, the Central Bank of Nigeria (CBN) increased the Monetary Policy Rate (MPR) by 8.5pp to 27.25 per cent during the period, resulting in higher funding costs, although this helped reduce volatility and improve liquidity in the forex market.
The higher inflation and interest rates weighed on consumers’ spending power and impacted business activity. However, we remain focused on enhancing operational efficiency and driving the growth of our commercial operations.
“Additionally, the Naira closed at the Nigerian Autonomous Foreign Exchange Market (NAFEM) in September 2024 at N1,542/$ (December 2023: N907/$), exerting pressure on business activity. The improvement in liquidity in the foreign exchange (forex) market has helped us reduce our exposure to foreign currency-denominated obligations”.
Toriola said MTN Nigeria continued to manage the effects of the Nigerian Communications Commission’s (NCC) industry-wide NIN-SIM directive, which has impacted the evolution of our customer base.
“Having implemented the directive with all our subscribers fully compliant, we continue our drive towards reconnecting those affected to reduce churn while extracting increased value from the market”.
The company said sustained its commercial momentum notwithstanding the macro headwinds. “Our commercial momentum drove broad-based growth across all revenue segments, demonstrating the underlying strength and resilience of the business.
“We recorded an increase in service revenue of 33.6 per cent, which was ahead of the average inflation rate in the period. This growth was led by data and supported by voice, fintech and digital services.
“We recorded a 9.8 per cent increase in voice traffic and a 42.1 per cent increase in data traffic. In addition, data usage per user grew by 31.2 per cent to 11.3GB, supported by the rising demand for data and digital services, which has contributed to revenue growth.
“In the fintech business, we focused on executing our growth strategy, prioritising increasing wallet quality, focusing on advanced services and the MoMo PSB app to enhance the user experience and engagement.
“We have introduced cross-border remittances with thirteen fellow African countries to boost adoption and monetisation. Taking advantage of their interoperability, we are now leveraging the existing network of agent and merchant ecosystem in the industry to bring our services closer to our customers”.
MTN Nigeria CEO said despite the topline growth, EBITDA remained under severe pressure primarily because of naira depreciation, exacerbated by higher energy costs and general inflation.
He noted that the introduction of VAT on leases in September 2023 also affected the earnings before interest tax depreciation and amortisation (EBITDA) performance.
“We are pleased to report that the renegotiated tower lease contracts with IHS Towers led to savings in operating expenses, which positively impacted our EBITDA margin by 2.3 per cent, helping to mitigate the effects of macroeconomic challenges.”
MTN Nigeria chief said EBITDA declined by 5.3 per cent, and the EBITDA margin decreased by 14.9pp cent to 36.3 per cent. “The growth trajectory in our Q3 EBITDA turned positive (up 6.5 per cent) with a more moderate decline in EBITDA margin to 37.6 per cent; albeit with some benefit from the Q2 catch-up built into the tower lease renegotiation with HIS.
The further depreciation of the Naira arising from the revaluation of foreign currency denominated obligations resulted in a loss after tax for the 9-month period of N514.9 billion (2023: 15.0 billion loss, restated).