MTN shares drop 44% in a year as naira weighs on earnings
Market punishes mobile network operator for Nigerian subsidiary’s multibillion-rand losses
01 August 2024 - 19:37
byJacob Webster
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MTN’s share price has fallen 44% in the past year as markets reflect MTN Nigeria’s poor financial results. Competitors that are less exposed to the West African economy have not felt the same pain, with Vodacom sliding 14% over the period.
Since peaking at about R260 in 2014, MTN’s share price has fallen 70%, cutting nearly R350bn off the company’s market value. Recent months have seen this decline accelerate, with the share hitting R72.92 on July 18 — its lowest level in more than three years.
The main culprit is MTN’s subsidiary in Nigeria, where it has the largest customer base and where roughly one-third of its earnings are derived.
The subsidiary’s financial results for the half year to end-June, which were released this week, showed a solid operational performance, with active data users increasing 11.1% and total subscribers up 2.9%. These numbers were, however, overshadowed by poor financial results. It reported a loss after tax of 519-billion naira (R5.7bn) for the period, compared with a restated loss of 85.6-billion naira last year. Earnings before interest, taxes, depreciation and amortisation (ebitda) fell 11% from the previous year.
MTN Nigeria CEO Karl Toriola said the macroeconomic conditions in that country had been challenging due to rising inflation and continued depreciation of the naira against the dollar and other currencies.
The naira has been on a downward spiral since the country implemented a currency regime overhaul in June 2016, opting for a floating exchange rate after being fixed for more than a year. Unpegged from the dollar, the overvalued naira plummeted overnight.
The government’s aim has since been to make official exchange rates reflect the naira’s true market value. In June 2023, the naira dropped 32% against the dollar in one day after a sweeping overhaul of foreign exchange market restrictions. It was devalued again in January 2024, plummeting 34% against the dollar in one day.
MTN’s share price closed 2.21% weaker at R77.36 on Thursday.
Support our award-winning journalism. The Premium package (digital only) is R30 for the first month and thereafter you pay R129 p/m now ad-free for all subscribers.
MTN shares drop 44% in a year as naira weighs on earnings
Market punishes mobile network operator for Nigerian subsidiary’s multibillion-rand losses
MTN’s share price has fallen 44% in the past year as markets reflect MTN Nigeria’s poor financial results. Competitors that are less exposed to the West African economy have not felt the same pain, with Vodacom sliding 14% over the period.
Since peaking at about R260 in 2014, MTN’s share price has fallen 70%, cutting nearly R350bn off the company’s market value. Recent months have seen this decline accelerate, with the share hitting R72.92 on July 18 — its lowest level in more than three years.
The main culprit is MTN’s subsidiary in Nigeria, where it has the largest customer base and where roughly one-third of its earnings are derived.
The subsidiary’s financial results for the half year to end-June, which were released this week, showed a solid operational performance, with active data users increasing 11.1% and total subscribers up 2.9%. These numbers were, however, overshadowed by poor financial results. It reported a loss after tax of 519-billion naira (R5.7bn) for the period, compared with a restated loss of 85.6-billion naira last year. Earnings before interest, taxes, depreciation and amortisation (ebitda) fell 11% from the previous year.
MTN Nigeria CEO Karl Toriola said the macroeconomic conditions in that country had been challenging due to rising inflation and continued depreciation of the naira against the dollar and other currencies.
The naira has been on a downward spiral since the country implemented a currency regime overhaul in June 2016, opting for a floating exchange rate after being fixed for more than a year. Unpegged from the dollar, the overvalued naira plummeted overnight.
The government’s aim has since been to make official exchange rates reflect the naira’s true market value. In June 2023, the naira dropped 32% against the dollar in one day after a sweeping overhaul of foreign exchange market restrictions. It was devalued again in January 2024, plummeting 34% against the dollar in one day.
MTN’s share price closed 2.21% weaker at R77.36 on Thursday.
websterj@businesslive.co.za
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