Forex: MTN, Airtel shed profits

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The devaluation of the Naira has negatively impacted the operations of two telecommunications companies, MTN Nigeria and Airtel Africa Plc, as shown in their financial results for the period ended September 30, 2023, which were filed with the Nigerian Exchange Limited on Monday.

While MTN Nigeria said that the devaluation of the Naira, inflationary pressure and Value Added Tax on lease costs will impact its final dividend for the year 2023, Airtel Africa announced an interim dividend but a loss after tax of $13 million.

Chief Executive Officer, MTN, Karl Toriola, in a trading update accompanying the statement, said, “The full impact of naira devaluation and VAT on lease costs, exacerbated by ongoing inflationary pressures, is expected to crystalise in Q4. We, therefore, expect our EBITDA margin for FY 2023 to be in the range of 47-49 per cent. Capital intensity for FY 2023 is expected to be slightly above our medium-term target level of 18 per cent.

“The aforementioned factors will impact the FY 2023 final dividend, in line with our policy. We will update our medium-term guidance on margins and service revenue with the release of FY 2023 results in Q1 2024. As we continue to navigate and manage the near-term impacts on our business of the volatility in our trading environment, we remain committed to executing our Ambition 2025 strategy to sustain the growth, profitability, and cash flow of the business for the benefit of all our stakeholders.”

He added, “The operating conditions in the first nine months of 2023 remained tough. This was in line with expectations following the removal of the fuel subsidy, the currency devaluation due to the liberalisation of foreign exchange (forex) management and the impact of the 2023 Finance Act. In the near term, consumer spending power has been diminished by the upward pressure on overall inflation. This was exacerbated by ongoing volatility in the global macroeconomic and geopolitical environment.”

MTN had reported a 21.8 per cent growth in its revenue from N1.45 trillion in September 2022 to N1.77 trillion at the end of the same period in 2023.

Its net finance cost rose by 174.4 per cent to N375.95 billion, Profit before tax decreased by 42 per cent to N232.46bn, Earnings per share decreased by 45.2 per cent to N7.06 kobo while profit after tax declined by 45.2 per cent to N147.36 billion.

On the challenges with forex, MTN Nigeria said the forex loss recognised for the nine months to September 2023 was 77 per cent higher than the amount reported on June 30, 2023, financial statements where the trade lines were measured after offsetting the naira-denominated cash cover that was provided to the banks.

Following further analysis and review, the telecoms companies recognised additional unrealised forex loss on outstanding matured trade obligations as of September 30 2023 of N87.5 billion. Similarly, the net finance costs for 30 June 2023 would have increased by N73.9 billion to approximately N295.1 billion.

Meanwhile, the board of directors of Airtel Africa Plc had proposed an interim dividend of 2.38 cents per share for the half-year period ended September 30, despite recording a loss after tax of $13 million driven largely by a foreign exchange loss of $471 million in finance cost. The Board said the proposed interim dividend of 2.38 cents per share marked an increase of 9 per cent, in line with its progressive dividend policy.

In its Q1, 2023 report, the telecom company suffered a loss after tax of $151 million, driven largely by a foreign exchange loss of $471 million recorded in finance cost before tax and $317 million after tax, because of the devaluation of the Nigerian naira in the month of June 2023. This impact has been classified as a non-operating exceptional item.

At the end of the period under review, Airtel Africa’s revenue currency grew by 19.7 per cent to $2.62 billion whilst reported currency revenue growth was impacted by Nigeria’s currency devaluation, all segments delivered double-digit revenue growth.

The Group’s mobile services revenue grew by 18.3 per cent driven by voice revenue growth of 11.5 per cent and data revenue growth of 28.1 per cent. Mobile money revenue grew by 30.9 per cent. EBITDA increased by 21.2 per cent and 3.7 per cent in reported currency to $1.30bn, with an EBITDA margin of 49.6 per cent, reflecting a 70bps margin improvement over the prior period despite inflationary cost pressures and foreign exchange headwinds.

Loss after tax was $13 million driven largely by a foreign exchange loss of $471m recorded in finance cost before tax and $317 million after tax because of the devaluation of the Nigerian naira in June 2023. Again, this impact has been classified as an exceptional item.

Commenting on the results, Group chief executive officer, Olusegun Ogunsanya, said, “I am pleased to report a strong operating performance for the Group despite foreign exchange headwinds in many of our markets and specifically in Nigeria.

“The resilient growth in voice, data and mobile money usage levels reflects the inherent demand for these essential services across our footprint, and our six-pillar ‘win-with’ strategy continues to ensure we capture this growth opportunity by expanding our customer base and providing the platform to enable increased usage across the network.

“This strong momentum is supported by continued cost efficiencies which enabled further EBITDA margin expansion.

“As reported in July 2023, our results for the first quarter were significantly impacted by the changes to the FX market in Nigeria, introduced by the Central Bank. Whilst the changes are required for the long-term benefit of the Nigerian economy, the immediate impact of the naira devaluation continues to weigh on our reported financial performance in the period. Our focus remains to enhance long-term value by continuing to drive sustained and efficient growth.”

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