MTN Nigeria’s Very Huge Loss Damaged Balance Sheet
MTN Nigeria Communications Plc posted a huge loss as a result of its large foreign currency exposure, details from its audited financial statement submitted to regulators showed.
The telecom company’s pre-tax loss settled at about N178 billion due to a significant increase in foreign exchange loss injury sustained in 2023. In 2022, MTN Nigeria’s pretax profit closed at about N519 billion.
According to its audited financial statement, MTN Nigeria lost more than N740 billion to negative exchange rate movement in the year. This came in addition to a significant increase in net finance costs.
Moderated tax provision reduced the company’s loss after tax to N137 billion from about N349 billion profit in 2022.
In a statement released by the company, total subscribers increased by 5.3% to 79.7 million. It grew active data users by 12.7% to 44.6 million. Also, active mobile money (MoMo PSB) wallets increased by 163.2% to 5.3 million in the period.
MTN Nigeria’s service revenue increased by 22.4% to N2.5 trillion while earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 12.3% to N1.2 trillion.
It said EBITDA margin decreased by 4.5 percentage points to 48.7% as the company delivered a loss after tax was N137.0 billion due to net forex loss.
Even without FX loss, the company’s profit after tax adjustment would have decreased by 14.3% to N344.5 billion in 2023.
Its earnings per share (EPS) declined to negative N6.38 kobo, details from the financial statement revealed.
The company said net loss for the year has resulted in a depletion of retained earnings and shareholders’ funds to negative N208.0 billion and N40.8 billion, respectively.
In light of the negative retained earnings, MTN Nigeria said the board did not recommend a final dividend for 2023.
Speaking about the result, MTN Nigeria CEO Karl Toriola said, “Navigating a challenging operating environment “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”.
In December 2023, MTN released an announcement relating to an industry-wide directive issued by the Nigerian Communications Commission (NCC) to operators in the country.
NCC directed operators to implement full network barring on all subscriber lines for which subscribers have not submitted their National Identity Numbers (NINs) and those whose NINs are unverified.
“To mitigate the effects of these headwinds on our operations, we continued to invest in our 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.
“Creating shared value in our communities notwithstanding the elevated volatility in our operating environment in 2023, we maintained our pledge to create shared value in Nigeria, which is a key priority of our Ambition 2025 strategy.
“From an environmental perspective, we progressed our commitment and work towards achieving net-zero emissions by 2040 through the utilisation of the most up-to-date and efficient technologies.
“We also formed service partnerships to increase energy and cost efficiencies, as well as to lower carbon emissions. We reduced our cumulative scope 1 and 2 emissions by 21% in 2023 compared to the baseline value determined in 2021.
“In building sustainable societies, we expanded internet access to Nigerians by increasing our broadband coverage by 1.9pp to 89.8% as at December 2023. Female representation in our workforce increased to 38.3% by December 2023, marking pleasing progress towards our 2030 goal of 50%.
“Additionally, we committed N1.7 billion to our corporate social investment programmes through the MTN Nigeria Foundation, which is focused on youth development and national priority projects.
“As part of our commitment to supporting national priority projects, MTN Nigeria Foundation signed a memorandum of agreement and collaboration with the Private Sector Health Alliance to boost healthcare at the grassroots level through revitalising 52 primary healthcare centres nationwide.
“We achieved a significant milestone with the commencement of the rehabilitation of the 110-kilometre Enugu-Onitsha Expressway under the Road Infrastructure Tax Credit (RITC) scheme.
“We are pleased with the progress, having reached 17% completion. This is a crucial step towards improving the transportation infrastructure in the region, and it helped to improve the ease of commuting, particularly during the festive season. More broadly, we believe the project will have a transformative impact on the lives of Nigerians and the country’s economy once completed. The tax credit arising from this investment will enable us to offset future tax liabilities.
“As part of our five-year deal to support the Nigerian Football Federation as the official communications partner, we actively supported the Super Eagles’ participation in the 2023 African Cup of Nations competition.
“To demonstrate our unwavering commitment to transparency and accountability, we have resolved to be early adopters of the IFRS S1 and S2 standards for sustainability disclosure, which will be incorporated into our 2023 sustainability report.
“We are excited to lead the way in adopting higher levels of reporting and setting an example for other corporates to follow. Sustaining our solid commercial momentum We maintained strong commercial momentum in our connectivity business and platforms, supported by the growth in the user base.
“We added over 4 million subscribers in 2023, bringing our total base to 79.7 million. We also increased our data subscribers by over 5 million to 44.6 million, which helped to drive total data traffic growth of 44.9%. Naira Suffers Big, CBN Goes Ballistic Against FX Whales
“This reflected the sustained growth in demand for data, supported by our compelling propositions to customers and the consistent investment in the quality and coverage of our network. The additional 2600MHz spectrum we acquired in September 2023 also helped us to deploy additional capacity to our network more efficiently.
“The priority in our fintech business was to build robust structures that support the acceleration of wallet adoption and the growth of our merchant ecosystem. This has positioned us to capture significant opportunities in our market and deepen financial inclusion in Nigeria”, MTN Nigeria chief said. #MTN Nigeria’s Very Huge Loss Damaged Balance Sheet Harvard Business School Launches Tony Elumelu Foundation Case Study
