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MTN, Africa’s biggest mobile company by subscribers, has warned that it expects annual profits to plunge by as much as 90 per cent following the sharp devaluation of the Nigerian naira.
Earnings per share are likely to have fallen between 70 and 90 per cent last year, the Johannesburg-listed company said in a profit warning on Friday.
“The financial result has . . . been negatively affected by the sharp devaluation in the naira against the US dollar impacting MTN Nigeria’s financials, despite the operating company’s solid underlying operational performance,” the company said.
The naira has plunged 70 per cent against the US dollar since June, increasing operating and finance costs as well as foreign exchange losses for MTN’s Nigeria business, which has about 79mn customers and accounts for about a third of MTN’s earnings.
“The currency situation is unlikely to improve in Nigeria, so we are on a structural downward slope,” added Zwelakhe Mzwakhe Mnguni, CIO of the Johannesburg-based Benguela Global Fund Managers.
MTN Nigeria said in a separate filing with the Nigerian Stock Exchange on Friday that it recorded a N133.8bn ($83mn) net loss in 2023, despite a 22 per cent jump in revenue from the previous year.
The removal of Nigeria’s years-long currency peg, which was aimed at allowing the naira to trade freely, had driven up operating costs for the company, said Karl Toriola, chief executive of MTN Nigeria.
“This development contributed meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs in relation to our tower leases,” he said.
MTN Nigeria’s tower leases are indexed to the dollar, leading to an estimated 45-50 per cent foreign currency exposure in operating expenses, the company added.
MTN has been in conflict over governance with US-listed IHS Towers, Africa’s biggest independent tower operator, which leases almost all of its 16,000 towers in Nigeria to the company. MTN owns 26 per cent of IHS and has sought voting rights to reflect its stake.
MTN Nigeria announced last September it would switch to American Tower Corporation from IHS Towers for leases of 2,500 towers across the country on contracts set to lapse this year and in 2025. MTN said at the time the deal would allow it to save costs and diversify its towers portfolio.
Sam Darwish, chief executive and chair of IHS, recently told the Financial Times that there were strong incentives to end the dispute, including the currency devaluations. “The Nigerian economic situation demands that we realign our economic interests” and find a “pragmatic and practical” solution, Darwish said.
The wider MTN group’s full-year results will be announced on March 25. While its Nigerian unit was hit, the telecoms company reported a 45 per cent increase in data traffic, and a 49 per cent jump in mobile money transactions. MTN shares were down 3 per cent in early afternoon trading.
Additional reporting by Joseph Cotterill in London
