Weaker currencies, higher inflation, increased costs and consumers who are more stretched, particularly in its three largest markets — Nigeria, SA and Ghana — are weighing heavily on MTN’s earnings.
Of these, Nigeria’s economy was the biggest drag on the group’s financial performance for the year to end-December 2023. That unit now makes up the largest chunk of the business of Africa’s largest mobile operator at a third of earnings.
MTN expects to report a 60%-80% fall in headline earnings per share (HEPS), which strip out the effects of one-off financial events, weighed down by nonoperational issues and a sharp devaluation in the naira.
The MTN Group was expected to report HEPS of 231c-462c, from 1,154c a year ago, it said on Friday.
MTN, worth more than R158bn, expects to report a “resilient underlying operational performance for [the 2023 financial year] in a challenging operating environment”.
“The financial result has, however, been negatively affected by the sharp devaluation in the naira against the US dollar affecting MTN Nigeria’s financials, despite the operating company’s solid underlying operational performance,” it said.
This mainly drove higher operating and net finance costs for MTN Nigeria, which are expected to affect the group’s full-year financial performance. The foreign exchange losses in MTN Nigeria’s financial results are estimated to be 593c in the group’s full-year results.
The group’s HEPS were negatively affected by nonoperational items of about 889c, including hyperinflation adjustments of 151c and foreign exchange losses of 715c, which includes naira depreciation.
Load-shedding
While most of the damage has come from Nigeria, the outlook for its next largest markets — SA and Ghana — is also not stellar.
In SA, MTN is fighting load-shedding, which has pushed up energy costs and living costs, increasing pressure on consumers.
In the third quarter, MTN said the macroeconomic environment in SA remained challenging. Total service revenue was up 2.6% year on year, but earnings before interest, tax, depreciation and amortisation (ebitda) fell 6.9% year on year.
In the 2023 medium-term budget policy statement, SA’s growth was projected at 0.8% for 2023. The National Treasury now projects growth of 0.6%.
The group’s business in Ghana managed to grow revenue by a third in the full year to end-December, despite the economic downturn weighing on consumers and regulations dragging down subscriber numbers.
MTN Ghana on Thursday reported that higher utility costs and a 38.5% depreciation of the Ghanaian cedi against the dollar contributed to the challenges. Against this backdrop, MTN’s third-largest operation managed to grow service revenue by 34.6% to 13.3-billion cedis. Profit after tax jumped 39.4% to just less than 4-billion cedis, driven mainly by growth in voice, mobile data and fintech services.
Final dividend
Inflation in Ghana rose to 23.5% year on year and 2% month on month in January from 23.2% year on year in December. “The intensification of [Ghana’s] consumer price pressures came at the same time as the central bank’s first policy rate cut in nearly three years,” said Jacques Nel of Oxford Economics Africa.
MTN Group expects to declare a dividend in line with guidance of a minimum final dividend of 330c per share for its 2023 financial year.
MTN Nigeria dipped into the red with a loss after tax of 137-billion naira for the year compared with a restated profit after tax of 348.7-billion naira in 2022. The effect of the sharp devaluation in the naira in the second half was seen mainly in higher operating costs, net finance costs and foreign exchange losses, MTN said.
Despite the effect of the forex devaluation, the Nigerian business sustained its resilient commercial and operational momentum, with user-base expansion across its connectivity business and platforms.
MTN is expected to report full-year results from its listed operations in Rwanda and Uganda in the coming two weeks, with the group’s own earnings due on March 25.
MTN shares, down 27% so far in 2024, closed 0.67% firmer on Friday at R84.06.
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