MTN Group is strategizing to mitigate losses in the Nigerian market following the depreciation of the naira by seeking regulatory support for industry-wide tariff increases for voice and data services.
MTN Group Seek Regulatory Support for Tariff Increases in Nigeria
Ralph Mupita, CEO of MTN Group, revealed this strategy during a media briefing discussing the group’s 2023 financial results.
Mupita emphasized the necessity of tariff increases, citing the absence of adjustments in the Nigerian market for an extended period.
The proposed approach entails aligning tariff hikes with inflation rates over the next two to three years, alongside implementing cost-cutting measures and minimizing foreign exchange risks.
The decision stems from the adverse effects of new foreign exchange regulations adopted by Nigeria’s central bank in June, which precipitated a significant decline in the value of the naira against the US dollar.
Resilient Financial Performance
The naira plummeted from ₦462 on June 13, 2023, to ₦907 by the end of December.
Despite these challenges, MTN Nigeria delivered resilient financial performance, with service revenue increasing by 22.1%, second only to Ghana within the group’s operating portfolio.
Notably, both voice and data revenues recorded notable growth rates of 10.2% and 38.6%, respectively. However, the EBITDA margin experienced a decline of 3.6 percentage points to 49.7%.
MTN Nigeria reported a loss after tax of R2.4 billion, primarily attributed to net forex losses, naira devaluation impact on operational expenses, and a one-off provision for the FIRS VAT assessment.
Adjusting for these factors, profit after tax would have increased by 12% to R13.5 billion.
Renegotiating Network Management Contracts
To address the challenges posed by currency devaluation, MTN is renegotiating network management contracts with tower operator IHS Holding.
Restructuring these contracts is deemed crucial, given that the majority of MTN’s costs are associated with network management.
Additionally, MTN is actively working to minimize its dollar exposure on the balance sheet to mitigate currency risks.
However, achieving complete derisking from the dollar is deemed challenging, necessitating strategic measures to navigate the volatile macroeconomic environment.
Benefit From Group-wide Cost-efficiency Initiatives
Looking ahead, MTN expects its Nigerian operations to benefit from group-wide cost-efficiency initiatives in the upcoming reporting period.
Nevertheless, the company remains cautious about the persisting macroeconomic headwinds, including volatility in the naira and elevated inflation rates.
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