MTN swings to H1 loss as Nigeria currency devaluation hits earnings

Pan-African telecom operator MTN Group reported a half-year loss as the sharp devaluation of the Nigerian naira and ongoing conflict in Sudan negatively impacted its earnings.

The company reported a loss before tax of R9 billion (US$508 million) in the six-month period ended June 30, 2024, compared with a restated profit before tax of R8.3 billion ($464 million) a year earlier.

Nigeria is MTN's biggest market and so the naira slump had a significant impact on the group's service revenue, which dropped by 20.8% year-on-year (YoY) to R85.3 billion ($48 billion). Had currency remained constant, service revenue would have increased by 12.1%.

"The sharp devaluation of the naira over the period had the most significant impact on reported results," said MTN Group President and CEO Ralph Mupita.

Nigerian authorities devalued the naira twice in less than a year, as part of government measures to try to stabilize the currency, which has for years been pegged at an artificially high level against the US dollar.

MTN's service revenue in South Africa grew by 3.3% YoY to R21.1 billion ($1.18 billion) while Nigeria's service revenue decreased by 52.9% YoY to R20.5 billion ($1.15 billion).

Mupita said that although the commercial momentum and strategy execution were solid during the six-month period, macro headwinds impacted the results.

"The ongoing conflict in Sudan reduced our ability to operate in the country, with fuel shortages, power outages and disruptions to network availability. However, due to network topology, MTN Sudan was able to recover the network availability at the end of May 2024. MTN maintained its efforts to ensure the safety of our people as well as infrastructure as far as possible," the group explained in its results statement.

The group reported a headline loss of R2.56 ($0.14) per share for the six months, compared to restated headline earnings of R2.60 ($0.15) per share a year earlier.

Earnings before interest, taxes, depreciation and amortization (EBITDA) decreased by 41.2% (before once-off items) and the group decided not to declare an interim dividend.

Mupita, however, still believes the company showed good progress in key initiatives including acceleration of revenue, optimization of capex and the reduction of its US dollar-denominated obligations.

The CEO said the group anticipates paying a minimum ordinary final dividend of R3.30 ($0.19) per share at the end of the financial year.

Muted subscriber growth, data users increase

MTN's overall subscriber base faced some headwinds during the half due to subscriber registration regulations in Ghana and Nigeria, the decline in subscribers in Sudan amid the ongoing conflict, and its exit from Afghanistan in February.

By the end of June 2024, MTN had 288 million subscribers across 18 markets, up 0.8% YoY.

MTN has 150.2 million active data subscribers, up 9.2% YoY, which lifted data traffic on MTN's network by 35.7% to 9,054 petabytes. Active mobile money users increased 9.1% to 66 million across the group.

Group data service revenue increased by 17.2% in the six months; fintech service revenue climbed by 7.3%; while voice revenue decreased by 33.7%.

Operational updates

MTN Nigeria recently concluded the renegotiation of its tower contracts with IHS and ATC.

MTN Nigeria, ATC Nigeria and IHS Nigeria reached a mutual agreement regarding approximately 2,500 sites that were awarded to ATC from the IHS portfolio in September 2023. The parties have agreed to a revised allocation of sites in terms of which ATC will provide tower services for up to 2,100 sites, while IHS will manage 1,400 sites. This includes 1,000 new MTN sites to be rolled out over the next few years, to be allocated between the two tower operators.

MTN said the revised contracts will support earnings and cashflow development in the business as part of the initiatives to resolve the negative equity position of MTN Nigeria.

The group said that discussions around tariff increases for voice and data are continuing with the authorities in Nigeria.

MTN Group President and CEO Ralph Mupita. (Source: MTN Group)

The group also confirmed the sale of its operation in Guinea-Bissau to Telecel Group, following the receipt of all regulatory approvals, as part of a process to simplify the portfolio and reduce risk.

"MTN has taken steps to ensure a seamless transfer of ownership, which the Group believes is in the best interests of MTN Guinea-Bissau, its stakeholders and the sector in Guinea-Bissau at large," MTN said.

In May 2023, MTN Group said it was considering selling its operations in Guinea-Conakry, Guinea-Bissau and Liberia after receiving an offer from Axian Telecom.

However, that deal did not materialize and during its full-year results announcement in March 2024, it said 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 $1 for each of the companies.

Today, Mupita told journalists on a media call that both the Guinea businesses are in net liability positions and Telecel will pick up those net liabilities as they take over. He said the group is still moving forward with plans to sell the Guinea-Conakry operation.

Guinea-Conakry has proved to be a tricky market, and in January 2024, MTN's offices in Almamyah and Coleah were sealed by the local post and telecommunications regulator over a licensing payment issue.

In February 2024, MTN concluded the sale of its Afghanistan business to Beirut-based M1 New Ventures for $35 million.

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

Mupita said MTN will continue with the execution of its Ambition 2025 strategy to drive growth and unlock value for all stakeholders over the medium term.

"The near-term macro backdrop continues to be challenging across our markets; GDP, inflation and currencies are expected to improve into 2025 across key markets," the CEO added.

The operator reduced its ownership stakes as part of localization deals in Ghana and Uganda and plans to sell further stakes in Ghana, Cameroon, Côte d'Ivoire and Nigeria, according to Mupita.

MTN Zakhele Futhi scheme to be extended

MTN Group also announced the intention to extend its Broad-Based Black Economic Empowerment (B-BBEE) scheme, MTN Zakhele Futhi, by up to three years, subject to shareholder approvals.

In November 2016, MTN implemented the MTN Zakhele Futhi special purpose vehicle (SPV) as part of a commitment to drive transformation in South Africa, enabling qualifying Black investors to invest in and hold shares in MTN.

The scheme was due to mature in November 2024, but MTN is proposing an extension of the scheduled maturity date to November 2027.

Mupita said the MTN Group and MTN Zakhele Futhi boards considered the impacts from the sharp devaluation of the naira, amongst other matters, which had negatively impacted the valuation of the group and would impact the unwinding of MTN Zakhele Futhi at this time.

He also said MTN Group and MTN South Africa's level 1 B-BBEE contributor status remains important to the group and is also a consideration to keep MTN Zakhele Futhi going for three more years.

— Paula Gilbert, Editor, Connecting Africa