MTN Nigeria Communications Plc has announced a N137 billion loss in its audited result and accounts for the period ended December 31, 2023, from N348.73 billion profit declared in 2022, attributable to the naira devaluation policy of the Central Bank of Nigeria (CBN).
The telecommunication company on the Nigerian Exchange Limited (NGX) declared N177.89billion loss before tax in 2023 from N518.82billion profit in 2022 as the net loss for the year has resulted in a depletion of our retained earnings and shareholders’ fund to negative N208.0 billion and N40.8 billion, respectively.
Its capital expenditure (capex) increased by 13.2 per cent to N571.0 billion (up 24.5 per cent to N449.3 billion, ex-lease).
The group declared N2.47 trillion in revenue in 2023, representing an increase of 23 per cent from N2.01 trillion reported in 2022.
The company explained that the demand for its services has remained resilient despite the overall challenging operating conditions.
“Service revenue was up by 22.4 per cent, in line with our medium-term growth guidance, with pleasing growth acceleration in Q4 (up 25 per cent). Data was the main driver, with voice growth remaining solid. Our mobile subscribers increased by 5.3 per cent to 79.7 million, underpinned by increased gross connections and churn management initiatives.
“Our Voice revenue increased by 9.7 per cent, benefitting from the mobile subscriber base growth and increased usage on the back of our customer value management initiatives and revamped voice propositions. However, growth in Q4 was 7.1 per cent from a high base in the prior year.
“We recorded pleasing growth of 39.8 per cent (up 48.7 per cent in Q4) in data revenue supported by a revamp of our data bundle offerings – particularly in Q4 – as well as the significant investment in our network coverage and capacity. Our 4G network now covers 81.5 per cent of the population, up from 79.1 per cent in December 2022, and 5G at 11.3 per cent.
“On the back of these initiatives, smartphone penetration rose to 55.6 per cent (up 3.1pp YoY), underpinning data usage (GB per user) growth of 29.1 per cent to 8.6GB. As a result, we recorded a 44.9% growth in data traffic, with the 4G network accounting for 81.8 per cent of the total traffic (up 0.6pp YoY) and 5G at 5.2 per cent.
“We expanded home broadband penetration to support the growing use cases for digital adoption, leveraging our 5G fixed wireless access devices, mobile broadband solutions, and fibre-to-the-home connectivity. We added over 800k subscribers in 2023, bringing our home broadband subscribers to over 2 million. Our infrastructural strength, technology mix and partnerships position us to capture a significant share of market opportunities.
“Fintech revenue increased by 2.4%, led by Xtratime (our airtime lending product), which rose by two per cent. However, despite the challenges from the NIN requirement for KYC introduced in Q4 by the CBN, we added 3.3 million active wallets in the year to 5.3 million. This helped to drive MoMo PSB revenue, which rose by 8.1 per cent.”
The CEO of MTN Nigeria, Karl Toriola in a statement explained that “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 29.9 per cent in December 2023 – the highest reading in 18 years – with an average rate of 24.5 per cent. 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 66.4per cent and 257.1per cent 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 per cent 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 contributes meaningfully to the upward pressure on the cost of doing business in Nigeria, and for MTN Nigeria in particular, significantly increased the costs of our tower leases.
“In December 2023, we released an announcement relating to an industry-wide directive issued by the Nigerian Communications Commission (NCC) to operators in the country. This 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.”
On the impacts of naira devaluation and restatement of results, the company said, “On 14 June 2023, the Central Bank of Nigeria announced changes in the Nigerian forex operations, which required the immediate collapse of all segments of the market into the investor and exporter (I&E) window and reintroduced the ‘willing buyer, willing seller’ model to improve forex liquidity. This led to a 96.7 per cent movement in the exchange rate since the announcement of N907/US$ (NAFEM rate) at the end of December 2023 as the market seeks an equilibrium level. The significant movement in the exchange rate impacted our operations – mainly our operating expenses and net finance costs.
“MTN Nigeria’s operations are exposed to foreign currency volatility on its operating and capital expenditure. The most significant of these exposures relate to tower lease costs, which comprised the bulk of the 45-50% foreign currency exposure in our operating expenses in 2023.
“The majority of the lease costs are indexed to the US dollar but are invoiced and paid in naira. Our tower lease costs are recognised in line with IFRS 16 and IAS 21, which has had several impacts on our financial performance.
“The nature of payment for tower contracts requires quarterly payments at the beginning of each quarter using the applicable exchange rate based on the reference rate at the end of the preceding quarter for some of the contracts and the average rate in the same preceding quarter for others. The impact of the devaluation on operating expenses arose mainly from N79.8 billion and N8.8 billion increases in lease rental costs and information technology-related costs, respectively. This resulted in a reduction of the EBITDA margin by 3.6pp.
“Historically, only realised exchange differences on US dollar-indexed leases were accounted for and included in the “net finance costs” line in the income statement. After the significant devaluation of the naira in June 2023, a review of the relevant lease agreements concluded that the US dollar-indexed portion of the lease liability should be remeasured to the N/US$ spot exchange rate at the end of each reporting period, in line with IAS 21 and IFRS 16.
“Consequently, on the revised treatment, 2022 net forex losses in “net finance costs” were restated higher by N25.6 billion to N81.8 billion, reducing 2022 PAT from N358.9 billion to N348.7 billion. The restatement resulted in a cumulative reduction of N73.1 billion in retained earnings at the end of December 2022.
“In FY 2023, we recorded a forex gain of N93.8 billion (58.3per cent unrealised) from the revaluation of our financial assets and a forex loss of N834.3 billion (82.8 per cent unrealised) from the revaluation of our financial liabilities. This led to the reported net foreign exchange loss of N740.4 billion in 2023, bringing our “net finance costs” to N951.5 billion, up 341.9 per cent. This resulted in the reported loss after tax of N137.0 billion and a depletion of our retained earnings and shareholders’ funds to negative N208.0 billion and N40.8 billion, respectively. Excluding the net forex loss, “net finance costs” increased by 58.1 per cent to N211.1 billion due to higher borrowing costs and interest rates.”
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