MTN grows revenue, but naira slump pulls profit down

Pan-African telecoms operator MTN Group has reported a major drop in full-year profit as a sharp devaluation in the Nigerian naira pushed down the results of its biggest operation of Nigeria.

Reported headline earnings per share (HEPS) – a key profit measure in South Africa – dropped by 72.3% to R3.15 (US$0.16) per share for the year ended December 31, 2023, MTN said on Monday.

The South Africa-headquartered operator still saw group service revenue grow by 6.9% to R210 billion (US$11 billion).

However, the massive devaluation of the naira during 2023 had a heavy impact on the results for both MTN Nigeria and MTN Group profits while elevated inflation continued to impact several key markets.

Even so, the group regarded its underlying operating performance for 2023 as "resilient" in the face of "tough macro headwinds" and the board declared a total dividend of R3.30 (US$0.17) per share.

On a positive front, MTN made some good strategic progress in the development of its fintech and fiber businesses.

In February 2024 MTN finalized an agreement for payment network processor Mastercard to invest up to US$200 million for a minority stake in MTN Group's fintech business at a valuation of US$5.2 billion.

"We are excited about this partnership, particularly the commercial agreements, which we expect to support the accelerated growth of our fintech business," said MTN Group President and CEO Ralph Mupita.

"In 2023, we also advanced our work to structurally separate the fiber business, Bayobab, with engagements to secure regulatory clearances in key markets being the main priority," he added.

In November 2023, Bayobab and Africa50 partnered to develop Project East2West, a terrestrial fiber optic cable network to help bridge Africa's connectivity gap by improving broadband access for the continent's landlocked countries in particular.

Subscribers tick up

Despite the financial headwinds, MTN Group grew its customer base by 2% during the year to 294.8 million subscribers across its markets in Africa and the Middle East.

Half of MTN Group's users are active data subscribers and about a quarter are using Mobile Money (MoMo) services.

Active data subscribers grew by more than 9% year-on-year (YoY) to 150 million and active MoMo users grew by 5% YoY to 72.5 million.

During 2023, data traffic on MTN's networks (excluding joint ventures) grew by more than a third, with usage up to an average of more than 6GB per user per month. To sustain this growth, as well as network coverage and quality, MTN deployed capital expenditure (excluding leases) of R41 billion ($2.16 billion) in the year.

The volume of fintech transactions also increased by around a third to 17.6 billion, with the value of transactions across the fintech platform up at US$272 billion, driven by growth of advanced services in payments, banktech and remittance solutions.

Ralph Mupita, MTN Group president and CEO. (Source: MTN Group).

In South Africa, where the business faced power challenges, subsidiary MTN South Africa deployed R10 billion (US$526 million) of capex to drive network capacity expansion and power resilience. By the end of the year, network availability across the entire network reached around 95%.

"For the sites where we had completed our resilience investment, we recorded network availability of more than 98%," Mupita said.

Opco exit plans

The group said that it had signed a sale and purchase agreement with Telecel Group for the disposal of MTN Guinea-Bissau and Guinea-Conakry "for a consideration of US$1 for each of the companies." The two West African operations have been classified as held for sale as of December 31, 2023.

Back in May 2023, MTN said it was in discussions with Axian Group over the sale of its opcos in Guinea-Bissau, Guinea-Conakry and Liberia.

However, it seems Telecel stepped in with a binding offer for MTN Guinea-Bissau and MTN Guinea-Conakry in October 2023.

Mupita also confirmed on Monday that all the conditions necessary for the sale of its MTN Afghanistan business had now been met. The US$35 million sale to Beirut-based M1 New Ventures has been on the cards since mid 2022.

Since August 2020, MTN has slowly been making an exit out of the Middle East.

MTN already sold its Yemen business in November 2021 and was forced to abandon its operation in Syria in August 2021.

MTN's only Middle Eastern operation left is in Iran, where it owns 49% of MTN Irancell as part of a joint venture.

Outlook for 2024

Looking ahead, Mupita said the group is working toward restoring Nigeria's profitability and this could include working with the regulators to bring in tariff increases and restructuring tower contracts to bring down network expenses.

He also said it will focus on improving the Group's balance sheet and reducing debt exposures while driving expense and capital efficiencies.

"We are anticipating that the macro conditions in our trading environment will persist in 2024, with naira volatility and elevated inflation the key challenges we will need to navigate," the CEO said.

MTN plans to invest R35-39 billion (US$1.84 billion to US$2.05 billion) in 2024 to position the company to capture the structural demand for data and fintech services across Africa, he added.

*Top image source: MTN Group.

— Paula Gilbert, Editor, Connecting Africa