Despite the headwinds in the Nigerian economy, the country’s largest telecommunications company, MTN Nigeria, has seen its revenue increased by 22.4% to N2.5 trillion in the 2023 financial report.
Earnings before interest, tax, depreciation and amortisation (EBITDA) also grew by 12.3% to N1.2 trillion.
However, for the first time since MTN started its operations in Nigeria, the company recorded a loss after tax of N137 billion in 2023.
MTN Nigeria recorded profit after tax of N348.7 billion in 2022.
The loss in 2023 was due to net forex loss occasioned by the devaluation of Naira.
The telco stated that the profit after tax (PAT) adjusted for the net forex loss decreased by 14.3% to N344.5 billion while earnings per share (EPS) declined to negative N6.38 kobo (N16.56 kobo adjusted for the net forex loss, down 14.1%).
It added that the net loss for the year has resulted in a depletion of its retained earnings and shareholders’ fund to negative N208.0 billion and N40.8 billion, respectively.
In the 2023 results released on Friday, March 1, 2024, capital expenditure (capex) increased by 13.2% to N571.0 billion (up 24.5% to N449.3 billion, ex-leases) while free cash flow increased by 11.6% to N631.6 billion.
MTN said: “The significant devaluation of the naira in 2023 resulted in a materially higher net forex loss of N740.4 billion (2022 restated: N81.8 billion), reflected within net finance costs, which resulted in a reported loss after tax of N137.0 billion compared to a restated PAT of N348.7 billion in 2022. This has resulted in negative retained earnings and shareholders’ equity at the end of December 2023 of N208.0 billion and N40.8 billion, respectively. Adjusting for the net forex loss, PAT would have been N344.5 billion (down by 14.3%).”
On its medium-term guidance and outlook, the telco states: “In light of the ongoing volatility in key macroeconomic variables, particularly the naira exchange rate, we have suspended our medium-term guidance for EBITDA margins.
“We, however, remain committed to accelerating service revenue growth. We continue to see compelling growth opportunities in the market and remain focused on executing on initiatives that will restore earnings and cashflow growth over the medium term.”
MTN stated that in the light of the negative retained earnings, the board did not recommend a final dividend for FY 2023.
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Speaking on the financial results, MTN Nigeria CEO, Karl Toriola, admitted the challenging operating environment.
Toriola said: “2023 witnessed a very challenging operating environment characterised by rising inflation, currency devaluation and foreign exchange shortages, complicated by geopolitical disruptions and cash shortages in Q1 arising from a redesign of the naira.
“These factors created severe headwinds for our customers and our business during the year. The inflation rate increased throughout the year, reaching 28.9% in December 2023 – the highest reading in 18 years – with an average rate of 24.5%. This was further exacerbated by higher fuel prices, arising from the removal of the fuel subsidy in May 2023, with the average prices of diesel and petrol up by 66.4% and 257.1% in 2023 to N1,416.8/litre and N600/litre, respectively.
“In June 2023, the Central Bank of Nigeria (CBN) adopted a more liberal foreign exchange management system and reintroduced the ‘willing buyer, willing seller’ model. This has resulted in a 96.7% unfavourable movement in the exchange rate against the US dollar from N461.1/US$ in December 2022 to N907.1/US$ (Nigerian Autonomous Foreign Exchange Market (NAFEM) rate) in December 2023.
“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.”
To mitigate the effects of these headwinds on MTN operations, Toriola said the telco has continued to invest in its network infrastructure – with a disciplined focus on value-based capital allocation and efficiencies – to enhance capacity and expand coverage.
“This enabled us to meet the rising demand for data and, coupled with compelling and competitive propositions for our customers, accelerate the growth of our commercial operations,” he said.
Toriola stated that the firm anticipate a challenging 2024 “as we tackle the complexity and ongoing effects of high inflation and elevated forex volatility on our operations.”
He added: “Given the material uncertainty these present in the near term, we have suspended our medium-term guidance for EBITDA margins. We maintain the medium-term guidance for service revenue. In light of the negative retained earnings at the end of 2023, the Board of Directors has resolved not to declare a final dividend for 2023.
“Looking forward, we remain focused on sustaining our commercial momentum and accelerating our service revenue growth, improving the profitability of the business and strengthening the balance sheet. Since December 2023, we have progressed constructive discussions with IHS on changes to the existing tower lease contracts that could, if successful, result in improvements that help us mitigate macro risks, including currency.
“As we execute our strategy, we will continue to invest in the business and unlock efficiencies to drive operating leverage with a focus on re-establishing earnings growth as well as sustaining our strong free cash flow generation and returns.”
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