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MTN, Airtel Plan Energy Transition to Bolster Profit Margins

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The owners of MTN Nigeria Plc and Airtel Africa Plc, the two largest telecommunication firms in Africa’s most populous nation, are dexterous and proactive as they have embarked on an energy transition that will help bolster profit margin and deliver higher returns to shareholders.

Research firm Chapel Hill Denham in a note to client said the management of Airtel Africa has confirmed that discussion with tower companies is ongoing to move the source of energy for new towers to other sources such as solar and battery instead of diesel.

“There will be a 10%- 20% reduction in cost for future sites on the back of this, as hinted by management,” said analysts at Chapel Hill Denham.

In a separate report, the research firm said MTN Nigeria’s towers mitigated the impact of energy price pressure, as about 88% of its sites do not utilise diesel, which helped mitigate the impact of over 100 percent increase of diesel price in the third quarter.

Airtel Africa, the most captialised firm in Nigeria, saw Earnings before interest taxation, depreciation and amortisation, increased to 48.93 percent in September 2022 from 48.33 percent the previous year.

MTNN’s EBITDA Margin rose to 53.60 percent in the period under review from 52.60 percent the previous year.

The Ebitda margin, which is calculated as earnings before interest, tax, depreciation and amortization divided by total revenue, is a good indicator of a company’s financial health as it doesn’t consider the effect of unique decisions and tax laws when evaluating a company’s performance.

The higher the EDITDA margin the less a company’s operations eat away at its bottom line.

Analysts at Chapel Hill Denham have retained their Buy ratings on the stock of MTNN and Airtel with target prices of N300.99 and N1,800.18 respectively.

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