MTN Nigeria Reports Massive N575bn Q1 Loss With Falling Data Users, Subscribers

MTN Nigeria (MTNN) woes have continued into the new year as the country’s largest Telco reported a massive N575.6 billion pre-tax loss in the first quarter (Q1) of 2024.

“The further depreciation of the naira in Q1 resulted in a materially higher net forex loss of N656.4 billion (Q1 2023 restated: N4.5 billion), arising from the revaluation of foreign currency denominated obligations. This led to a loss after tax of N392.7 billion compared to a restated PAT of N108.4 billion in Q1 2023. This has resulted in negative retained earnings and shareholders’ equity at the end of March 2024 of N599.2 billion and N434.7 billion, respectively,” MTN Nigeria CEO Karl Toriola said.

MoneyCentral had earlier forecast that MTNN will continue to book losses this year as it is mainly exposed to fluctuations in foreign exchange rates in respect of the US Dollar, being the significant foreign denominated currency. MTN Nigeria booked net foreign exchange loss of N656.36 billion in the first quarter of 2024 alone.

The Group also generated a loss before tax of N177.9 billion during the year ended 31 December 2023.

Industry-wide directive of the Nigerian Communications Commission (NCC) for a full barring of subscriber lines not linked to their National Identity Number (NIN) – the NIN-SIM directive impacted the development of MTN Nigeria’s user base across all of key business units (voice, data and fintech) in Q1 2024.

As a result, total subscribers declined by 2 million versus Q4 2023 due to the implementation of the NIN-SIM directive, while active data users declined by 78,000 versus Q4 2023.

What is MTN Nigeria doing to mitigate impact of FX volatility?

MTN Nigeria says it is focused on reducing the various exposures its business has to US$ volatility. One key area is the company’s outstanding letters of credit (LC) obligations, which contribute to the volatility in earnings through FX losses reported in the income statement.

These obligations were raised in support of MTNN’s capex requirements which are largely foreign currency denominated.

“We have utilised the improved liquidity in the FX market to reduce the balance of outstanding LC obligations to US$243.4 million as at 31 March 2024, from US$416.6 million as at 31 December 2023. This was funded through the use of restricted cash balances that are held in naira to support our LC obligations. As we optimise capex, we will be able to minimise the further build-up of these balances and will continue to deploy resources to reduce these US$ obligation exposures,” Toriola said.

MTN Nigeria is also considering strategic options to manage its tower lease contracts which could result in improvements that will help to mitigate macro risks impacting its business, including FX.

See major highlights from the ugly results below:

Total subscribers declined by 2 million versus Q4 2023 due to the implementation of the NIN-SIM directive, which affected the development of user base.

• Active data users declined by 78k versus Q4 2023.
• Active mobile money (MoMo PSB) wallets declined by 566k versus Q4 2023 due to the NIN requirement for Know Your Customer (KYC) validation.
• Service revenue increased by 32.0% to N747.3 billion.
• Earnings before interest, tax, depreciation and amortisation (EBITDA) declined by 1.9% to N297.0 billion.
• EBITDA margin decreased by 13.9 percentage points (pp) to 39.4%
• Loss after tax was N392.7 billion.
• Profit after tax (PAT) adjusted for the net forex loss declined by 57.8% to N47.1 billion.
• Earnings per share (EPS) declined to negative N18.63 kobo (N2.34 kobo adjusted for the net forex loss, down 55.6%).
• Net loss for the quarter resulted in a further increase in our accumulated losses and negative shareholders’ funds to N599.2 billion and N434.7 billion, respectively.
• Capital expenditure (capex) increased by 49.1% to N179.7 billion (up 84.4% to N78.1 billion, excluding leases).
• Positive free cash flow of N117.2billion (down 35.6% from N182.1 billion in Q1 2023).

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