WorldStage Newsonline– MTN Nigeria Communications Plc (MTN Nigeria) has announced its unaudited results for the nine months ended 30 September 2023 with profit before tax (PBT) decreased by 42.0% to N232.5 billion (up 8.6% to N465.3 billion, adjusted for the foreign exchange (forex) loss)
Highlights of the result include; Mobile subscribers increased by 4.8% to 77.6 million
– Added 2 million subscribers in 9M 2023; Active data users increased by 13.3% to 43.1 million – Added 3.6 million active users in 9M 2023; Active mobile money (MoMo PSB) wallets increased by 53.1% to 3.6 million -Added 1.6 million active MoMo PSB users in 9M 2023; Service revenue increased by 21.4% to N1.8 trillion; Earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 16.3%
to N907.9 billion; EBITDA margin decreased by 2.4 percentage points (pp) to 51.2%; Earnings per share (EPS) decreased by 45.2% to N7.06 kobo (up 5.2% to N14.50 kobo adjusted for the forex loss); Capital expenditure (capex) increased by 6.9% to N405.0 billion (up 19.7% to N301.4 billion, excluding the right-of-use (RoU) assets)
Unless otherwise stated, financial and non-financial information is year-on-year (YoY, 9M 2022 versus 9M 2023).
MTN Nigeria CEO, Karl Toriola in his comments on the result said, “The operating conditions in the first nine months of 2023 remained tough. This was in line with expectations following the removal of the fuel subsidy, the currency devaluation due to the liberalisation of foreign exchange (forex) management and the impact of the 2023 Finance Act. In the near term, consumer spending power has been diminished by the upward pressure on overall inflation. This was exacerbated by ongoing volatility in the global macroeconomic and geopolitical environment.
“As a result, the inflation rate in Nigeria rose to 26.7% in September 2023, representing the ninth consecutive month-on-month increase in 2023, with a YTD average of 23.3%.
“In the MTN Nigeria Communications Plc efforts to curb this trajectory, the Central Bank of Nigeria (CBN) maintained its monetary policy tightening, increasing the monetary policy rate by 2.25pp to 18.75%. This is supported by the Government’s reform programmes aimed at creating an environment that enables businesses to thrive.
“Furthermore, the liberalisation of the forex management in June 2023 resulted in a 68.5% upward movement in the exchange rate from N461/$1 in December 2022 to N777/US$ at the end of September, resulting in higher cost of doing business.
“As we navigate the challenging operating conditions, we continue to invest in our business to strengthen our commercial operations and focus on expense efficiencies to support earnings and cash flow generation. As part of our proactive initiatives to curb the impacts of the macro volatility on our business, we have re-allocated the leases for towerco services of approximately 2.5k network sites due to expire in 2024 and 2025, for which IHS Nigeria Limited (IHS) currently provides tower services.
“After a transparent and competitive tender process, ATC Nigeria Wireless Infrastructure Solutions Limited (ATC) was selected as the preferred tower company to provide tower services to those sites. This is expected to unlock significant network cost efficiencies on the affected sites. We have an additional ~12k sites within the broader IHS portfolio, expiring variously between 2025 and 2029, with the majority expiring in 2029. MTN Nigeria will continue to engage with our tower company partners to explore ways to optimise network costs in line with our expense efficiency programme aimed at improving operating margins.
“For the 2025 portfolio of towers, we will commence our review on that portfolio imminently.
“Following the successful conclusion, in May 2023, of a lease agreement for 900MHz and 1800MHz spectrum from NTEL for a 2-year period, we are pleased to have acquired an additional 10MHz frequency division duplex (FDD) in the 2.6GHz spectrum in September 2023.
“These investments enable us to expand the coverage and capacity of our network more efficiently to meet the rising demand for data and improve the quality of our offerings and customer experience.
“As part of our work to build sustainable societies, we expanded broadband penetration by 1.7pp to 89.6% through ongoing investments in our network and deepened the penetration of our fintech services in line with ambition 2025 strategy to drive digital and financial inclusion.
“We advanced our corporate social investment programme with the commencement of the rehabilitation of the Enugu-Onitsha Expressway under the Federal Government’s Road Infrastructure Tax Credit (RITC) scheme. We are excited about the impact the project will have on the lives of Nigerians once completed. The tax credit arising from this investment will enable us to offset future tax liabilities.
In addition, we enrich lives through the MTN Nigeria Foundation’s activities. The Foundation committed over N830 million to its corporate social investment programmes during the period, furthering our work to build sustainable societies.
Solid commercial and financial momentum
“Our mobile subscriber base reached a new high with the addition of approximately 2 million in the nine months to 77.6 million. This was supported by our churn management initiatives and interventions to ramp up gross connections.
“The investments to enhance the quality and coverage of our network continued to yield positive results, an expansion of our user base and higher data usage. We added 3.6 million active data users in the nine months. Our total data traffic rose by 46.3%, and data usage (GB per user) grew by 29.1%.
“Our fintech business continued to gain traction, recovering from the slowdown in H1. Active wallets rose by 1.6 million to 3.6 million, with over 293k MoMo agents and 197k merchants demonstrating the underlying momentum in the ecosystem. We are committed to ramping up commercial activities to stimulate increased engagement and activity to expand our fintech ecosystem. Our work is ongoing to broaden consumer education and awareness initiatives and provide more advanced services across our fintech verticals to accelerate the growth of active wallets and the merchant ecosystem.
“The progress we made driving our commercial operations underpinned the solid growth in service revenue in line with our medium-term guidance. Our service revenue rose by 21.4%, led by double-digit growth in voice, data and digital services.
“The increase in service revenue supported the 16.3% growth in EBITDA while the EBITDA margin was down by 2.4pp to 51.2%. Our EBITDA margin came under pressure as the impact on operating expenses of the forex harmonisation kicked in in Q3, heightened by the rising inflation. This is due to the nature of our tower contracts, which require us to make quarterly payments at the beginning of each quarter while the applicable exchange rate is adjusted based on the reference rate at the end of the preceding quarter for some of the contracts and the average rate in that quarter for others.
“The significant movement in the exchange rate since the liberalisation of the forex market resulted in higher forex loss with a knock-on effect on net finance costs, up 174.4%.
“Consequently, PBT declined by 42.0%. However, our free cash flow remained strong with a 25.2% increase YoY.
“We remain focused on executing our commercial strategy, unlocking efficiencies, and driving operating leverage to support growth in earnings, cash flow, and returns over the medium term. However, the scale of the impact on the business of rising inflation and currency devaluation necessitates an increase in regulated tariffs. We are engaging with the authorities through the relevant regulatory bodies to achieve this objective.
“Finally, we have received the judgment issued by the Tax Appeal Tribunal sitting in Lagos. The judgment pertains to the VAT assessment for the periods covering 2007 and 2010 – 2017, as issued by the Federal Inland Revenue Service (FIRS) to the Company. The Company will issue a separate and comprehensive statement articulating its position on the matter.”
