Nigeria’s biggest company by market value MTN Nigeria saw its bottom line for the first half of 2022 take a bashing from a recent weakening of the local currency by as much as 40 per cent last month.
The development left the company’s net profit 29.1 per cent weaker than the level it was a year ago.
According to a financial statement published on the Nigerian Exchange Group (NGX), MTN Nigeria has reported a drop in its H1 result in 2023— January 1 to June 30, 2023. MTN reported a 29.14% decline in its profit for the period under review of ₦128 billion, compared to ₦181 billion during the same period in 2022. Conversely, the telco’s revenue grew by 21.96% to ₦1.15 trillion in H1 2023, compared to ₦950 billion in the same period in 2022.
Commenting on the financial performance, MTN Nigeria’s CEO,
Karl Toriola, stated that operating conditions in the first half of 2023
remained challenging with energy, food, and general inflation at elevated
levels. This was due to the ongoing
adverse global macroeconomic and geopolitical environment, the cash shortages
experienced in Q1, forex volatility and supply chain uncertainties witnessed
during the period.
“Following the inauguration of President Bola Ahmed Tinubu
in May 2023, swift reforms were implemented to remove the fuel subsidy and
liberalise foreign exchange management, to bolster investor confidence and
drive growth and investment in Nigeria. These policy reforms are expected to be
positive for the economy in the medium to long term. However, in the short
term, they have created additional financial burdens on consumers and
businesses, and these will be fully reflected in the pressures on our margins
in H2,” Toriola said.
Toriola explained that MTN had robust commercial and
financial performances in H1 and would continue to invest in the business to
further improve the quality of their delivery. The MTN boss said H1 helped the
telco gain 1.5 million new subscribers, taking its total tally to over 77
million subscribers. Already the firm prioritised enhancing the capacity and
coverage of its 4G and 5G networks. According to its CEO, 4G traffic
constituted 82.5% of its total data traffic while 5G constituted 21% on all
5G-colocated clusters. In all of the wins, higher energy prices and rising
costs impacted growth.
“Our margins were impacted by higher energy prices and
rising costs, but the impact was moderated by provisions in our tower contracts
and the timing of the forex harmonisation. Notwithstanding, we will continue to
execute our commercial strategy with a focus on unlocking efficiencies and
driving operating leverage to support growth in earnings, cash flow, and
returns over the medium term,” the report read.
It stressed that unrealised forex losses included in its net finance
charges affected the telco, adding that there was no impact on EBITDA due to
the quarterly nature of its tower contracts. However, it expects full impact by
the end of H2.
Mobile services
The telco’s financial statement also reported that its
services revenue grew by 21.6%, driven by voice revenue growth of 12.1% and
data revenue growth of 34.9%. Active
mobile money (MoMo PSB) wallets grew by 1.1 million in H1 to 3.1 million.
Currently, its total number of registered MoMo PSB wallets is now over 22
million, powered by 227,000 MoMo agents,
and 38,000 merchants in its ecosystem.
MoMo service still requires more adoption. Nonetheless, its
data customers saw a 11.5% increase to 41 million and a 52.2% increase in Ayoba
subscribers to 7.2 million.
Outlook
The group looks to prioritise three things: its network,
MoMo PSB, and the acceleration of 4G, 5G and rural coverage to expand their
network base. It stressed that the outlook for the full year 2023 will depend
on the impacts of the levels of the exchange rate and the new VAT on tower
leases effective September 2023. “The extent of these factors remains the key
nearer-term risk to our medium-term guidance,” the report read.