MTN’s market cap soars N388bn as investors eye tariff hike

MTN Nigeria Communications PLC (MTN Nigeria), the nation’s largest mobile network operator, saw its market capitalisation soar by N388.42 billion after news surfaced that the Nigerian Communications Commission (NCC) is considering an upward review of telecom tariffs 10 years after telcos began lobbying.

MTN Nigeria, with 80.38 million subscribers, closed trading with a market cap of N3.69 trillion on Friday. By Monday, this rose to N3.74 trillion, reaching N4.07 trillion on Tuesday. Its share price followed suit, climbing from N175.50 to N178 and N194. Trading volume fluctuated, rising from 2.55 million to 3.32 million before falling to 1.58 million.

“After that update about a potential price increase, investors have swung to action immediately,” tweeted Rufybaba, an investment manager.

However, Airtel Africa Plc, with 54.45 million subscribers, experienced no movement in its stock price over the same period, staying flat at N2,156.90 per share with a market cap of N8.11 trillion. It is important to note that the telco is in the middle of a share buyback program.

Sector Challenges

The telecom sector has struggled with foreign exchange fluctuations and a harsh operating environment. Both telcos have reported losses due to FX volatility. In 2023, MTNN and Airtel recorded a combined N1.29 trillion in FX losses.

For the nine months ending October 2024, MTN Nigeria reported a N514.93 billion loss despite a 33.7 percent growth in service revenue to N2.37 trillion. It declared negative earnings per share (EPS) of N24.51 kobo in the period. Airtel’s revenue for the same period fell 46.9 percent to $755 million.

Karl Toriola, CEO of MTN Nigeria, described the sector as being in crisis. “Investments will not continue to come. No one will put in a dollar and continue to get 66 cents… We are in a big crisis,” he said.

Read also: MTNN raises N72.18bn from CP issuance as offer sees 144% subscription

MTN and Airtel have cut back on network infrastructure investments due to mounting operational costs and FX exposure. Between January and September 2024, MTN’s core capital expenditure (capex) dropped 27.79 percent to N217.64 billion, while Airtel’s capex fell by 36.59 percent to $149 million. This decline has left Nigerians grappling with unreliable networks.

To adjust, telcos have advocated for increased tariff prices, especially as their average revenue per user (ARPU) continues to fall. The ARPU of telecom companies declined by 40.87 percent to $1.85 in the quarter ending September 2024, compared to $3.12 in the same period in 2023. MTN’s ARPU dropped from $3.24 to $2.09, while Airtel’s fell from $3 to $1.60.

“There should be no delusion; if the tariff doesn’t go up, we will shut down,” Toriola of MTNN emphasised.

Following months of lobbying, Bosun Tijani, the minister of Communications, Innovation and Digital Economy, has finally acknowledged the need for price adjustments, stating, “We think there may be a need for that” in a December 20 interview on Arise TV.

A report by TechCabal suggests that the NCC is likely to approve new tariffs for calls, SMS, and internet bundles, with changes expected to take effect in January 2025. While the exact figures remain unclear, a 2022 proposal by telcos requested a 40 percent hike.

“This is a critical moment for the industry,” Gbenga Adebayo, chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), emphasized the importance of a review. “It will be a very good development, and by this, the Government has been able to rescue the sector from imminent collapse. It is the best for the progress of the industry and our digital economy,”

Despite this, the NCC is reportedly cautious about the financial burden on Nigerians, who are already dealing with record-high inflation of 34.6 percent as of November.

Adebayo noted that while operators are aware of the financial stress Nigerians are facing, a price review is imperative for improved network quality. “We fully understand and appreciate the financial stress that Nigerians are experiencing today. Prices will need to rise, but action needs to be measured through sustainable conversations and partnerships with the government. It is time to address this head-on,” he added.