South Africa becomes MTN’s largest revenue market on naira slump

In the first half of 2024, South Africa emerged as MTN Group’s largest revenue market, surpassing Nigeria for the first time since MTN Nigeria’s 2019 listing on the stock exchange.

This shift occurred as the group reported a loss of 7.39 billion rands ($415.40 at 1$ = 17.79 rands) for the period, compared to a profit of 4.14 billion rands a year. This marked MTN Group’s first loss since 2016, primarily attributed to the devaluation of the naira, which has reduced the telco’s income from Nigeria.

During this period, MTN South Africa’s revenue grew to 26.19 billion rands ($1.47 billion) from 25.42 billion rands ($1.43 billion). In contrast, MTN Nigeria’s revenue declined to 20.67 billion rands ($1.16 billion) from 43.81 billion rands ($2.46 billion).

The telco’s total revenue across its operating market was 90.84 billion rands ($5.11 billion), a decline from 113.20 billion rands ($6.36 billion).

MTN Nigeria, traditionally the largest contributor to MTN Group’s revenue, was impacted by the further weakening of the naira against the dollar. This currency devaluation has had a major impact on the telco’s financial performance. The naira has experienced a steep decline since the Central Bank of Nigeria liberalised the foreign exchange market in June 2023.

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MTN reported that the naira averaged N1393/1$ in H1 from N481/1$ in H1 2023, closing the period at N1,505/1$ on June 30, 2024.

“Furthermore, the weakness of the naira and some of the other local currencies in our portfolio against the rand also negatively affected our reported results on translation,” it said.

“The further devaluation in the naira against the US dollar, the translation impact on reporting currency (rands) of the naira and the ongoing conflict in Sudan had the most significant impact on reported results,” said Ralph Mupita, Group President and chief executive officer of MTN.

However, Mupita expressed optimism about the company’s performance in other key markets. He highlighted MTN South Africa’s strong operational performance, which completed its network resilience plan during the period and made significant progress in key business areas, contributing to an overall acceleration in service revenue.

In the first half of 2024, MTN Nigeria posted a loss after tax of N519.1 billion, driven by record-high inflation and the naira’s devaluation. Despite this, the telco saw a 32.6 percent growth in service revenue to N1.5 trillion. It noted that it would have recorded a profit after tax of N102.3 billion if not forex losses.

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Karl Toriola, CEO of MTN Nigeria, explained, “The depreciation of the naira between the periods ended December 2023 and June 2024 also resulted in materially higher net forex losses of N887.7 billion (H1 2023 restated: N454.7 billion), arising from the revaluation of foreign currency – denominated obligations.”

GSMA, the global telecom industry body, has warned that Nigeria’s mobile industry’s financial performance has slowed in recent years, threatening its continued growth.

Mupita noted that MTN Nigeria’s capital expenditure declined in H1 2024 as the telco sought to reduce its dollar-denominated exposures (MTNN reduced its outstanding letters of credit (LC) from $416.6 million as of December 2023 to $100 million in H1 2024).

He highlighted that MTNN is making progress with key initiatives to navigate macroeconomic challenges, including accelerating its topline, optimising capex, and reducing its dollar-denominated obligations.

Mupita also mentioned that MTN Ghana and MTN Uganda reported strong results, while the Southern and East Africa region delivered a solid overall performance, with service revenue growth outpacing blended regional inflation.