MTN Nigeria Communications Plc is on course to return to profitability after three consecutive quarters of losses. The telco announced a profit after tax for the third quarter of 2024 of N4.13 billion.
Due to the 2023 foreign exchange market integration by the Central Bank of Nigeria (CBN), the naira depreciated from 471 naira/dollar in mid-June 2023 to over 1,500 naira by September. This led to losses in the telecommunications sector, with Airtel Africa and MTN Nigeria losing N1.29 trillion in exchange losses in 2023.
Business Day had earlier reported that the telco is charting a naira-centric path towards profitability in 2023 after suffering a foreign exchange loss of $1.56 billion. Since the end of 2023, MTN and Airtel have reduced dollar debt, reduced overseas loans and made lump-sum exchange payments. – Construction input, and renegotiated contracts.
MTN and Airtel have reduced their external financing from $966.6 million in December 2023 to $100 million in June 2024. In its financial statements for the nine months to September 2024, MTN outlined the steps it has taken to return to profitability.
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1. Driving profit margin recovery: MTN said it has made progress in stabilizing and recovering profit margins by driving sales growth and increasing cost efficiency. This included efforts to reduce operating expenses, including renegotiated contracts with IHS, resulting in approximately N54 billion in savings over the same period.
2. Optimization of capex: The telco said that capex deployment was well managed with an intensity of 9.8% over the nine-month period. This allowed us to prioritize available foreign exchange liquidity and reduce exposure to dollar debt. The statement disclosed that capital expenditures excluding leases decreased by 27.8% to NGN217.6 billion during the same period.
3. Reduced dollar exposure: The carrier reduced its trade line debt balance from $416.6 million in December 2023 to $57 million in September 2024. This reduction resulted in a realized currency loss of N365 billion, but helped reduce future currency impacts. Naira cheap.
4. Tower Lease Agreement Review: MTNN has renegotiated its tower lease agreement with IHS to reduce the dollar-linked portion of the lease link, remove technology-based pricing, and ensure that new upgrade payments are based on tower space. He pointed out that this is now based on electricity usage.
He emphasized that the new agreement incorporates an indexed energy cost component into the cost of supplying diesel electricity. “For the current period, the reduction in accrued operating expenses (OPEX) from the contract effective date of April 1, 2024 is approximately N54 billion as of the end of September, and the reduction in free cash flow is approximately N45 billion. reached,” the report said. .
However, as the lease term has been extended to December 31, 2032, depreciation and finance costs are expected to increase in the initial stage, but the benefits will be more pronounced in later years, it said. “Overall, based on current assumptions, we expect to record a net positive impact of N3.5 trillion to N400 billion on PBT over the life of the agreement,” it added.
MTN also said it continues to work with authorities to address tariff increases to reduce the impact of macro volatility.
Telecommunications companies are promoting a review of rate hikes starting in 2022, the first in 11 years. But sources close to the matter at the Nigerian Communications Commission say the issue is a sensitive one as telecommunications services play an important role for everyone. They noted that the regulator is still considering industry requirements and working to ensure that services reflect costs as much as possible.
