MTN has taken a financial hit of nearly R6bn in its biggest market, Nigeria, as the weak naira ate into the company’s bottom line in the six months to end-June, but painted an upbeat picture for the rest of the financial year.
The company on Wednesday reported a 519.1-billion naira (R5.7bn) loss after tax for the six months ended June, compared with a restated 85.6-billion naira loss a year ago. Ebitda was down 11% at 547.7-billion naira.
Most of those losses are linked to the company’s US dollar obligations, such as leases priced in dollars and financing costs. The devaluation of the naira and currency volatility in the first half have significantly increased these costs.
Given the depreciation of the local currency, MTN is working to reduce its exposure to the dollar that is driven in part by debt issued in foreign currency.
The loss is despite the group’s total subscribers having increased 2.9% to 79.4-million, while active data users rose 11.1% to 45.6-million, it said in a statement on Wednesday. Active mobile money wallets increased 73.9% to 5.5-million. Service revenue was 32.6% higher at 1.5-trillion naira.
CEO Karl Toriola said the macroeconomic conditions in Nigeria had been challenging, due to rising inflation and continued depreciation of the naira against the dollar and other currencies. The Nigerian currency closed June at 1,505 naira to the dollar compared with 907/$ at end-December.
The depreciation of the naira caused materially higher net forex losses of 887.7-billion naira arising from the revaluation of foreign currency-denominated obligations.
These headwinds put pressure on consumers and the cost of doing business in Nigeria, he said.
Toriola said the group had made progress on initiatives to accelerate revenue growth, improve margins and strengthen the balance sheet.
It remains engaged with authorities on tariff increases to manage the effects of the challenging operating conditions. It is also committed to driving margin recovery, optimising capex, reducing its exposure to the dollar and reviewing its tower lease contracts.
“We are encouraged by the improving liquidity in the forex market in the period that enabled us to reduce our exposure to foreign currency-denominated obligations,” Toriola said.
“Additionally, the Central Bank of Nigeria increased monetary policy rate [eight percentage points] to 26.75% in the first half of the year to control inflation, resulting in higher funding but reduced volatility. To ease the burden on consumers, the federal government has announced some interventions, including upward review of the minimum wage.”
The MTN Group, which started operating in SA in 1994, has 18 operations, 17 of which are in Africa. The group’s biggest subsidiary by subscriber numbers is MTN Nigeria.
Toriola projected an upbeat outlook for the business, saying the management team was committed to navigating economic challenges and “regulatory dynamics” in Nigeria.
“As we look ahead to the second half of the year, MTN Nigeria remains focused on navigating the challenging economic landscape in Nigeria and seizing growth opportunities. We are committed to implementing strategic initiatives to enhance our performance and strengthen our position in the market.”
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