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The African mobile operator attributed the fall to the difficult operating conditions in South Africa, as well as the devaluation of the naira in Nigeria
MTN’s latest financial results were released on Monday, showing a year-on-year fall in net profit by 83% to $221 million, despite a 6.8% uptick in total revenue to $11.7 billion.
In a presentation, CEO Ralph Mupita said that the troubling financial performance could largely be ascribed to two major factors: high inflation and the devaluation of the Nigerian naira, following the government’s decision to unpeg it from the US dollar last year.
While Mupita argued that the company remained well positioned for growth, he said that the macroeconomic factors holding back the Group were unlikely to abate in 2024.
“We are anticipating that the macro conditions in our trading environment will persist in 2024, with naira volatility and elevated inflation the key challenges we will need to navigate,” he said.
“We think inflation will remain relatively stubborn. But we have been encouraged by inflation, in particular in a market like Ghana, where it’s come down. But when we look at Nigeria, we think we are going to see inflation remain elevated [as it will] in some of our key markets.”
He explained that raising tariffs in line with inflation would be the natural solution to the inflation challenge, but implementing such increases could be a slow process requiring regulatory approval in some markets.
Similarly, the value of the Nigerian naira is expected to continue to fluctuate, making operational planning in Africa’s most populous country very difficult. Since the currency was unpegged from the US dollar last year, MTN has reportedly booked around $1.1 billion in foreign exchange losses.
“On exchange rates, the Nigerian naira has been volatile, the actual direction of its strengthening or weakening remains relatively uncertain at this particular point in time,” he explained. “We have to plan and operate in Nigeria with a couple of scenarios, having base case stress and short cases so that we can actually run our business within that scenario.”
Nigeria is one of MTN’s largest markets, generating roughly 34% of the Group’s total revenue.
In related news, this week MTN has announced that it is offloading its stakes in MTN Guinea-Bissau and MTN Guinea-Conakry to Telecel.
The value of the deal has not yet been revealed, with MTN noting that the move will allow them to focus more heavily on other key markets in the West and Central Africa region, such as Ghana, Cameroon, Nigeria, and Cote d’Ivoire.
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