MTN, Airtel repay $1.2bn loan to ease FX burden

MTN Nigeria Communications Plc and Airtel Africa have aggressively cut their foreign debt, repaying $1.2 billion in 2024 to ease foreign exchange burden as they chart a path back to profitability.

Following the naira’s steep depreciation in 2023, both telcos suffered $1.56 billion in foreign exchange losses.

The Central Bank of Nigeria (CBN)’s unification of the country’s foreign exchange market in June 2023 triggered a sharp devaluation of the naira to 471/$ from 1043.09/$ by December 28, 2023, and 1512.3/$ by March 7, 2025.

MTN Nigeria declared its first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange in 2023. Airtel Africa, which had 50.9 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi.

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To mitigate further FX-induced losses, MTN and Airtel have aggressively cut FX liabilities. MTN Nigeria slashed its outstanding letters of credit (LC) dollar obligations from $416.6 million as of 31 December 2023 to $20.8 million by the end of 2024.

Airtel Africa, on its part, repaid $739 million in foreign currency debt over the last year, reducing its foreign currency debt exposure. Both companies believe that reducing their foreign currency obligations is key to strengthening their financial positions.

At the end of 2023, Olusegun Ogunsanya, the then-chief executive officer of Airtel Africa, stated, “We will continue to focus on reducing our exposure to currency volatility.

“Although this reduction resulted in realised foreign exchange losses, it has substantially strengthened our financial position and lowered the financial risks associated with the depreciation of the naira and its related finance costs,” MTN said in its 2024 results.

However, the debt reduction came at a cost, significantly impacting MTN’s financials. Despite reporting a record revenue of N3.36 trillion for 2024, it recorded a N400.44 billion loss after tax due to forex losses arising from the revaluation of foreign currency-denominated obligations.

It noted that it would have reported a profit after tax of N247.3 billion if not for the net forex loss.

Airtel Africa, on the other hand, recorded a 5.78 percent revenue decline to $3.64 billion from $3.86 billion in the nine months ending December 2024. However, its profit after tax grew 12,300 percent to $248 million from $2 million.

Both companies are shifting towards local debt as their appetite for FX debt wanes. Airtel Africa now holds 92 percent of its debt, excluding lease liabilities, in local currency, up from 79 percent a year ago.

Sunil Taldar, chief executive officer of Airtel Africa, noted, “Our capital structure remains robust with just 8 percent of OpCo debt in foreign currency — a substantial improvement over the last year.”

MTN has also restructured its loan portfolio, with 72 percent now in naira and 28 percent in dollars, compared to 56 percent naira and 44 percent dollars in 2023. Its total net debt dropped 29 percent to N591 billion by the end of 2024.

To finance operations locally, it raised N190 billion under its N250 billion Commercial Paper Issuance Programme.

On an investors’ call, Modupe Kadri, MTN Nigeria’s chief financial officer (CFO), noted that as of December 2023, the telco had an overall foreign exchange exposure of $1 billion, but it was reduced to about $300 million by the end of 2024.

Renegotiation of tower lease contracts

Beyond debt restructuring, telcos renegotiated tower lease contracts with infrastructure companies such as IHS, INT Towers Limited, and ATC Nigeria to curb FX and energy-related costs.

MTN’s renegotiation with IHS alone resulted in N113.8 billion in operational savings. Telcos are also increasingly adopting local solutions to minimise FX exposures and improve margins.

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“We will focus on cost savings through our expenditure resiliency programme and implement localisation initiatives to further reduce foreign exchange exposure and operating expenditure and to improve financial resilience.

“We believe these efforts will help us maintain our competitive edge and drive additional growth in service revenues, support margin recovery, and restore our capital position,” said Karl Toriola, chief executive officer of MTN, during the telco’s investors’ call.

With the recent regulatory approval for a 50 percent increase in telecom tariffs, experts believe that this, combined with ongoing FX debt reduction efforts, will set the sector on a path to profitability.