MTN Nigeria profits dip but it adds millions of subscribers
Covid-19 also had an effect on MTN Nigeria, which contributes about a third of MTN’s earnings
Africa’s largest telecoms provider, MTN, says its Nigerian operation saw a slight dip in profits during its nine months to end-September, partly due to its aggressive rollout of 4G coverage in the continent’s most populous country.
MTN Nigeria said it was seeing the full effects on rental costs related to its 4G rollout, while Covid-19 also resulted in volatility in its revenue streams, boosting data use, but hitting voice traffic.
Profit after tax fell 3.3% to 144.2-billion naira (R6.2bn) to end-September, when capital expenditure rose 26.1% to 194.2-billion naira.
The aggressive 4G site rollout, which commenced in the fourth quarter of 2019, resulted in the full effect of increased lease rentals coming through in 2020, MTN Nigeria said. This, together with the effects of a 23.9% adjustment to the official exchange rate, further increased rental costs.
IG Markets senior analyst Shaun Murison said that despite the decline in margins during the period, the group has posted a record number of subscribers — more than 10-million — for the first nine months of the year “which is encouraging”. He noted that further subscriber growth in the fourth quarter is expected to be aided by a further rollout of infrastructure in rural communities.
Murison said: “Growth for the business continues to be realised in data, the speed of which is only exceeded by digital, albeit off a substantially smaller base. As is the industry trend, voice revenue growth is anaemic at present, but still accounts for more than double the revenue of data for the group.”
Coronavirus-related costs also put pressure on margins. Total revenue rose 13.9% to 975-billion naira, with voice revenue rising 4.2% to to 645.5-billion naira, and data revenue 57% to 241-billion naira.
MTN Nigeria said it began to see a normalisation of voice traffic in its third quarter, or the three months ended September 30, as pandemic-related restrictions eased.
Mobile subscribers increased 21.8% to 75-million, during the nine months, while data users rose 37.7% to 30.7-million.
Nigeria contributes about a third of MTN’s earnings, and looks set to grow in importance as the group pursues a strategy shift that includes focusing more on the continent. The group announced in August that it will be exiting the Middle East, with its first divestment that of its 75% stake in MTN Syria.
MTN’s share price of came under pressure on Wednesday, closing 4.27% weaker at R54.98, though Murison said, “It is hard to ascertain whether the Nigerian results have had a meaningful impact on today’s broad-based, risk-off environment.”
Sector peers Telkom and Vodacom also shaved off some value for the day, down 5.32% and 2.35%, respectively.
Update: October 28 2020
This article has been updated with comment and financial information throughout.
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