MTN CONSIDERS RAISING TARIFFS IN NIGERIA TO MAKE UP FOR LOSSES IN FOREIGN EXCHANGE

Strong signs suggest that MTN, the largest telecom company in Africa, may raise rates and impose cost-cutting measures in its Nigerian division. This is a component of the company's attempts to improve its balance sheet and return it to profitability following the group company's disappointing annual profit report on Monday.

Reports state that MTN is collaborating with authorities in a number of nations, including Nigeria, to obtain permission to raise voice and data rates.

“We need some tariff increases to mitigate the cost of running the networks, given our expense profile in Nigeria.” The CEO of MTN Group, Ralph Mupita, spoke with the media yesterday to discuss the company's financial results for 2023. “Our focus is to work with regulators for tariff increases in voice and data as there haven't been any increases in that market for quite some time,” Mupita said.

For MTN Nigeria, the difficult operating climate of 2023—which was characterized by rising inflation, currency depreciation, and shortages of foreign exchange—posed serious challenges. Cash shortages and geopolitical unrest in Q1 made matters worse, and the naira's redesign made matters worse.

Furthermore, Nigeria experienced a 28.9% increase in inflation in December 2023—the greatest level in 18 years—with an average annual rate of 24.5%. Retained earnings and shareholders' funds were depleted to a negative N208.0 billion and N40.8 billion, respectively, as a result of these reasons.

The company, which has its headquarters in South Africa, reported that its headline profits per share (HEPS), one of the primary profit indicators, decreased by 72.3% to 315 cents in 2023 from a restated 1,137 cents in the previous year. The largest company in the group, MTN Nigeria, reported a loss after taxes of 137 billion naira ($101.48 million) and negative equity as a result of the steep devaluation of the Nigerian naira, according to the company's report.

“We think it's a good idea if we have a tariff increase of two-thirds of inflation within the next two to three years.” The CEO continued, We'll complement that with cost-cutting measures and attempts to reduce our foreign exchange risk.

According to MTN, new foreign exchange rules implemented by Nigeria's central bank in June caused the value of the naira to plummet in relation to the US dollar. The value of the naira decreased from ₦462 on June 13, 2023, to ₦907 by the end of December.

As a result, the company's service revenue in Nigeria increased by 22.1%. In terms of the group's operational portfolio, this is ranked second only to Ghana (35%). Additionally, sales from phone and data increased by 10.2% and 38.6%, respectively.

EBITDA's (earnings before interest, tax, depreciation, and amortization) margin decreased by 3.6 percentage points to 49.7% even though EBITDA climbed by 14.2%.

The contracts that MTN Nigeria has with cell tower operators ATC and IHS Holdings account for the majority of the company's expenses. The CEO added that in an effort to prevent further cost increases brought on by potential naira devaluations, the business is renegotiating some of its tower contracts with these companies.

In order to protect profitability and cash flows, the company will launch a cost optimization campaign, Mr. Mupita said journalists. This will be supported, he claims, by its FX expense efficiency initiative.

Mr. Mupita stated, “The goal is to try and minimize FX exposure as much as possible.”

In the next reporting period, the operator's operations in Nigeria should benefit from the outcomes of a group-wide cost-efficiency drive, he continued.

He also noted that the group's internal changes will continue to be influenced by an unfavorable macroeconomic climate. “On Nigeria, I believe we expect to continue to have some significant challenges. Ralph Mupita said, ”We expect that the naira will stay unstable for a while.