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MTN Nigeria tightens belt and seeks tariff increases

By , Africa editor
Nigeria , 30 Apr 2024
(L-R) Karl Toriola, MTN Nigeria CEO and Ralph Mupita, MTN Group CEO, in Nigeria recently.
(L-R) Karl Toriola, MTN Nigeria CEO and Ralph Mupita, MTN Group CEO, in Nigeria recently.

As the Nigerian economy's volatility persists, MTN Nigeria and its peers from the Association of Licensed Telecoms Operators of Nigeria have been attempting to secure controlled tariff increases from the country’s communications authority.

MTN says this is one aspect of its multifaceted effort in addressing its negative capital position.

The telecom provider published its performance for the first quarter of the year, stating that its current financial aims are to accelerate revenue growth, repair margins, and rebuild reserves to strengthen its balance sheet position.

MTN Nigeria CEO Karl Toriola commented: “We are deeply engaged with the authorities, through our industry body, on tariff increases to manage the effects of the challenging operating conditions. Importantly, appropriate tariff increases will be necessary to support continued investment and the long-term sustainability of the industry. This will support our commercial interventions in our work to accelerate topline growth.”

In addition, the country’s biggest mobile operator is also focusing on driving margin recovery, with Toriola saying: “We will focus on initiatives to accelerate revenue growth and improve operational efficiency, with a disciplined focus on our expense efficiency programme and value-based capex allocation.”

According to Toriola, MTN is also seeking to optimise capex.

He explained: “Given the consistent and extensive investment we have made in our network over the past few years, including the acquisition of additional spectrum, we have built up the flexibility to optimise our capex deployment. In this regard, we plan to reduce capex (excluding leases) for FY 2024 and aim for a capex intensity in the upper single digits.

“We will optimise latent capacity and implement radio planning strategies in order to minimise any potential impacts and disruptions to our network quality.”

Furthermore, Toriola said MTN is seeking to reduce US dollar exposure and will also review its tower lease contracts.

Strong headwinds

He added that MTN managed to sidestep many of the obstacles it faced in the quarter, including inflation.

To curb inflation, he said, the Central Bank of Nigeria increased the Monetary Policy Rate (MPR) by four percentage points to 22.75%, which has driven up funding costs.

“These factors have caused significant difficulties for businesses operating in Nigeria, including MTN Nigeria, putting additional pressure on consumers, the cost of doing business and further foreign exchange losses,” said Toriola.

He continued: “During the quarter, we also continued to manage the effects on our business of the industry-wide directive of the Nigerian Communications Commission (NCC) for a full barring of subscriber lines not linked to their National Identity Number (NIN) – the NIN-SIM directive.

“This impacted the development of our user base across all of our key business units (voice, data and fintech) in Q1 2024. We implemented the directive on subscribers who did not submit their NIN and those with more than five lines linked to an unverified NIN. However, to provide more time for the subscribers with less than five lines linked to an unverified NIN to complete the necessary verification exercise, the NCC has extended the 15 April deadline to 31 July 2024.”

Nonetheless, Toriola said despite these challenges, MTN remains committed to serving its customers and accelerating the growth of its commercial operations “with a disciplined focus on value-based capital allocation and expense efficiencies”.

As a result, he said: “We delivered service revenue growth of 32.0%, which is higher than the average inflation in Q1, demonstrating the underlying strength of our business model.

“However, this was insufficient to offset the negative impact of the macroeconomic factors mentioned above, which resulted in a large decrease in the EBITDA margin and a significant further net loss after tax. It is imperative that the industry be granted sizeable, regulated tariff increases to ensure the future sustainability of the sector.”

According to Toriola, MTN sustained solid commercial momentum despite pressures on earnings.

He explained: “We maintained solid commercial momentum in our connectivity business and platforms despite the NCC's directive. Although we had to fully bar 8.6 million subscribers in line with the directive, we minimised the net effect of the barred subscribers, and our total number of subscribers only decreased by two million in Q1, closing with a total of 77.7 million subscribers.”

Active data subscribers declined marginally by approximately 78 000 to 44.5 million, he added.

Notwithstanding these headwinds, MTN recorded increased activity within the base, with voice traffic rising by 5.1% and data traffic by 40.6%. 

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