MTN takes another hit from Nigeria

MTN continues to take a hit from the sharp devaluation of the Naira in Nigeria – its largest market.

“The macro environment in the first quarter of 2024 remained challenging with ongoing high inflation as well as local currency devaluations in some of our key markets,” said MTN CEO Ralph Mupita in an update for the quarter that ended on 31 March 2024.

“Although still elevated, we are encouraged by the abating trend in the blended rate of inflation across our footprint, which reduced to 13.7% in Q1 2024, compared to 18.5% in Q1 2023 and 15.4% in Q4 2023.”

“In Nigeria, we saw strong underlying commercial momentum in the business, despite the financial impacts of the sharp devaluation of the naira and continued elevated inflation during the period.”

Although service revenue in Nigeria increased by 31.8% in constant currency terms from Q1 2023, it dropped from R21 billion to R10.2 billion in the current reporting period when considering the Naira’s devaluation.

This was primarily responsible for the drop in overall service revenue to R42.9 billion (Q1 2023: R52.8 billion)

Mupita also noted that the group’s operations in Africa were severely impacted by cable cuts that resulted in downtime, especially in West Africa.

MTN SA’s performance was resilient in a challenging operating environment., with economic growth estimated at under 1% by the IMF.

That said, inflation shows signs of abating, averaging 5.4% in Q1 2024 (Q1 2023: 7.0%).

The severity of load shedding also declined, with 83 days of load shedding during the quarter, compared to 90 days in Q1 2023. Moreover, the group’s investment in resilience also led to significant improvements in its network availability.

MTN SA saw service revenue growth of 3.0% to R10.4 billion, with all its key business segments seeing growth from 2023.

The group also increased its South African customer numbers by 3.3% YoY to 37.1 million.

Outlook

“Our trading environment is anticipated to remain challenging in the near term, with inflation remaining elevated in some of our key markets, local currencies are under pressure, and the civil war in Sudan is expected to continue,” said Mupita.

“The medium to longer-term structural growth opportunities for data adoption and financial inclusion remain strong, and as such, we will continue to be guided by our capital allocation framework, manage near-term risks and remain focused on executing our strategic priorities to deliver on our medium-term guidance.”

Expected macro headwinds, driven by heightened inflation, 15-year interest rates and ongoing geopolitical volatility, are also predicted to impact MTN SA’s service revenue and cost development.

“Several initiatives are underway and are being executed to navigate the prevailing conditions. These include price-ups in prepaid plans and other portfolios, as well as revision of data bundle portfolios (including FWA) in Q2 to improve effective pricing,” said the group.

“The investment into the device market to support MTN SA’s revenue acceleration initiatives is anticipated to continue in Q2 before abating in H2. This will continue to weigh on EBITDA margin in the short term.”

Read: Rand flexes as investors bet on ‘friendly’ election results