MTN revealed its strategy to “restore profitability” in its Nigerian unit which includes raising tariff prices, after being hit by a sharp devaluation in the local currency.
In a trading update, MTN stated: “Continued elevated inflation and unpredictable foreign exchange rates remain significant challenges for the businesses. However, we remain focused on sustaining our commercial momentum, accelerating our service revenue growth, unlocking operational efficiencies and strengthening our balance sheet to improve the profitability of our businesses.
“We do, however also require regulated tariff increases to restore the profitability of the company.”
The company also outlined that it will cut back on capex in 2024 to “upper single digits” with an “expense efficiency programme and value-based capex allocation”.
Its strategy will involve optimising latent capacity and implement fresh radio planning to minimise disruption to its network and maintain services in Nigeria.
A key contributor to the plunge in MTN Nigeria’s financial health has been its outstanding letters of credit obligations which are “largely foreign currency dominated”. The company highlighted that it is looking to reduce its exposure to US dollar volatility.
MTN had outstanding letters of credit obligations totalling US$416.6 million at the end of December 2023, and reduced this to US$243.4 million at the end of March this year.
Negotiations are currently underway to change conditions of current tower leases, which if successful can “mitigate macro risks” to the business.
MTN Nigeria recorded 77.1 million subscribers in its unaudited results for Q1 ending March 31, 2024. This declined by two million compared to Q4 2023 due to the implementation of Nigeria’s SIM registration programme, and “affected the development of our user base”.
Profit after tax plunged 57.8% to NGN47.1 billion (US$33.8 million) and service revenue increased by 32% to NGN 47.3 billion. Loss after tax was NGN392.7 billion. Capex stood at NGN179.7 billion, up by 49.1%.
