A man passes an MTN board in Lagos, Nigeria. MTN’s Nigerian business accounts for about a third of the group’s total profit. Picture: AFP PHOTO/PIUS UTOMI EKPEI
A man passes an MTN board in Lagos, Nigeria. MTN’s Nigerian business accounts for about a third of the group’s total profit. Picture: AFP PHOTO/PIUS UTOMI EKPEI

Shares in MTN rose nearly 2% on Monday, adding more than R2bn to its market value after Africa’s largest network operator reported an almost one-third jump in quarterly pretax profit at its business in Nigeria.

Nigeria is MTN’s most profitable market, accounting for one-third of its annual profit, but has also been one of the most problematic after clashes with authorities over taxes and regulatory breaches. 

MTN, which also operates in several other African countries such as Ghana and Liberia, said its Nigerian business reported a 31.1% jump to 290.1-billion naira (R12bn) in profit before tax while its subscriber base grew 10.5% to 64.3-million In reaction, shares in the company, which have yet to fully recover from the highs notched up in 2015, rose 1.99% to R75.17, giving the operator a market capitalisation of R142bn.

“The Nigerian business has now recovered from the regulatory setbacks, fines and disruptions to see strong earnings — from voice and data — and subscriber growth,” said Shaun Murison, an analyst at IG Markets. 

The business has faced run-ins with regulators over the past five years. In 2016, MTN agreed to pay $1.7bn to settle a fine over unregistered SIM card users, two years before being embroiled in a dispute with the Central Bank of Nigeria over the repatriation of funds. MTN settled the case with a $53m payment In January, Nigeria’s attorney-general withdrew a $2bn tax demand against MTN Nigeria, which had been accused of not having fully paid its taxes.   

MTN, which had become the poster child of SA’s postapartheid commercial success until the regulatory setbacks wreaked havoc on its balance sheet, said active data subscribers jumped 34.9% to 25.2-million while revenue from voice calls grew 8.4%.

But the outlook in Nigeria might be clouded by the effect of coronavirus, which has isolated China, one of the biggest consumers of commodities, disrupted global trade and hit prices of commodities such as crude oil, Nigeria’s export mainstay.“The shares have given up gains as the market remains concerned about the potential impact of the coronavirus,” said Peter Takaendesa, portfolio manager at Mergence Investment Managers.

As the viral outbreak spreads to more countries outside China, the price of oil has dropped as global demand weakens further. Nigeria is Africa’s biggest oil producer and a drop in the prices will weigh on the West African economy. “A weaker economy will reflect on future earnings from MTN as Nigeria remains the group’s largest pool of subscribers for the group,” Murison said.  

In the quarter to end-December, the company also probably benefited from the exit of Etisalat from the Nigerian telecom market, as well as improved US dollar liquidity in the country, Takaendesa said.

MTN is acquiring a full banking licence in Nigeria, a move that will allow it to offer a broader and deeper range of financial services in a country where 60%, or just more than 115-million people, do not have bank accounts.  

The company is due to issue a group-wide earnings report next week. It has already flagged as much as a 75% jump in annual headline earnings per share, a widely watched measure of profit that excludes one-off, non-trading items.  

With Karl Gernetzky


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