…Total subscribers increased by 2.9% to 79.4 million
…Service revenue rose by 32.6% to N1.5 trillion
…EBITDA margins fell by 17.4 percentage points (pp) to 35.6%
…Profit after tax (PAT) adjusted for net forex losses was down by 56% to N102.3 billion
WED JULY 31 2024-theGBJournal|MTN Nigeria Communications Plc (MTNN) released its Q2-24 unaudited results Tuesday, reporting a loss per share of N6.08 (vs loss per share of N9.22 in Q2-23), bringing the H1-24 loss per share to N24.71 (vs loss per share of N4.09 in H1-23).
The loss was due to the higher net FX loss (+95.2% y/y) recorded in the period.
Service revenue grew by 33.1% y/y in Q2-24 (H1-24: +32.6% y/y) following a broad-based increase across MTNN’s value channels – Voice (+10.0% y/y), Data (+56.0 y/y), Digital (+107.9% y/y), Fintech (+22.2% y/y) and Others (+55.6% y/y).
According to management, voice revenue growth (+10.0% y/y | 40.1% of total revenue) was supported by increased usage of voice services, and a higher subscriber base.
Specifically, MTNN’s subscriber count increased by 2.9% in H1-24 to 79.40 million, with the addition of 2.3 million customers (Q2-24: net addition of 1.70 million) showing management’s efforts to retain customers affected by the Nigerian Communication Commission’s (NCC) directive on NIN-SIM linkage.
Likewise, growth in data revenue (+56.0% y/y | 48.4% of total revenue) was driven largely by increased usage and an expanded data subscriber count (+11.2% y/y in H1-24 to 45.60 million | net addition of 1.10 million in Q2-24).
Management highlighted that this was supported by a strong demand for data with total data traffic increasing by 42.6%, and data usage (GB per user) increasing to 10.6GB (+30.5% y/y).
Total expenses in the quarter grew by 92.0% y/y (H1-24: +82.2% y/y) owing to (i) naira depreciation, (ii) higher energy costs, and (iii) VAT payment on tower leases. Consequently, EBITDA margin declined by 20.90 ppts y/y to 31.9%.
Accordingly, H1-24 EBITDA margin fell by 17.44 ppts y/y to 35.6%. Stripping out the effects of currency weakness on operating performance, management noted that EBITDA margin in H1-24 would have printed 50.9%.
Net finance costs (+60.4% y/y) rose markedly during the quarter owing to a 48.6% y/y increase in finance costs. The higher finance cost balance was as a result of higher interest expense on leases (+28.6% y/y) and a jump in prepaid transactions costs (Q2-24: N26.07 billion | Q2-23: N927.00 million).
Meanwhile, net FX loss declined by 48.6% y/y in Q2-24 but increased by 95.2% y/y in H1-24 highlighting the substantial exchange loss incurred in Q1.
Consequently, pre-tax loss amounted to N175.60 billion (vs pre-tax loss of N282.35 billion in Q2-23), while loss after tax printed N126.36 billion (vs loss after tax of N194.02 billion in Q2-23) following a tax credit of N49.24 billion (Q2-23: N88.32 billion).
MTNN’s CEO, Karl Toriola admits the macroeconomic conditions in Nigeria have been challenging, while commenting on the performance. He cited the rising inflation and continued depreciation of the naira against the US dollar and other currencies as well as pressures on consumers and the cost of doing business in Nigeria.
Nigeria’s inflation rate raced to 34.2% in June, with an average rate of 32.8% in the first half of the year, while the naira closed June 2024 at N1,505/USS$ at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
”As we continue to navigate the ongoing macroeconomic headwinds affecting business, we are focused on initiatives to accelerate our earnings recovery profile, strengthen our balance sheet, and restore our net asset position faster,” he said while looking ahead.
Unsurprisingly, the impact of currency devaluation has continued to inhibit margin growth and drive losses.
Nonetheless, the reduction in outstanding LC obligations (H1-24: USD100.00 million | December 2023: USD416.60 million) is a net positive as this limits the telco’s exposure to future currency pressures.
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