MTN Nigeria Pushes for Tariff Hikes

As economic headwinds batter Nigeria, telecom heavyweight MTN and industry peers are urgently lobbying the communications regulator for controlled tariff increases. This forms one pillar of MTN’s multifaceted strategy to fortify its precarious capital position.

MTN Nigeria Pushes for Tariff Hikes
MTN Nigeria Pushes for Tariff Hikes

Unveiling Q1 2024 results, CEO Karl Toriola outlined the company’s three-pronged approach: “accelerating revenue growth, repairing margins, and rebuilding reserves to strengthen our balance sheet.”

Central to this is securing regulatory approval for tariff hikes to offset the “challenging operating conditions.” According to Toriola, “Appropriate increases are necessary to support continued investment and long-term industry sustainability.”

The tariff push aligns with MTN’s commercial interventions to fuel topline acceleration. However, the operator is complementing this with stringent cost discipline.

“We’ll focus on initiatives driving operational efficiency, with a disciplined approach to expenses and value-based capital allocation,” Toriola stated. This includes optimizing capex after years of intensive network investment.

Leveraging its modernized infrastructure and recent spectrum acquisition, MTN plans to reduce capex intensity into the upper single digits for FY2024 through strategies like radio planning optimization.

Dollar Exposure and Lease Contracts Under Review

Beyond cost controls, MTN is actively reducing its U.S. dollar exposure while reviewing tower lease agreements to alleviate pressures. These measures are vital given the punishing macroeconomic forces at play.

Inflation has skyrocketed, prompting the Central Bank to hike the monetary policy rate by 4 percentage points to 22.75% – a funding cost deterrent. Toriola cited “significant difficulties for Nigerian businesses” from mounting consumer strain, high operating expenses, and currency volatility driving forex losses.

Additionally, an industry directive by the Nigerian Communications Commission (NCC) to bar subscribers without verified national IDs hampered user growth across MTN’s voice, data, and fintech verticals.

Solid Commercial Momentum Despite Headwinds

Yet, MTN displayed resilience with 32% service revenue growth in Q1 outpacing inflation – a testament to its business model’s core strengths. Voice and data traffic grew 5.1% and 40.6% respectively despite an 8.6 million subscriber base reduction from the NCC directive.

As Toriola affirmed, “It’s imperative that sizeable, regulated tariff increases are granted to ensure the sector’s future sustainability.” For MTN, navigating Nigeria’s turbulent landscape demands aggressive interventions on multiple fronts to buoy its long-term viability.

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