The Nigerian telecommunications industry is facing a perfect storm of economic challenges, as evidenced by the staggering losses reported by two of the country’s leading telecom giants, MTN and Airtel.
MTN Nigeria Communications Plc has declared a gut-wrenching loss after tax of N519.1 billion for the first half of 2024, despite a 32.6% growth in service revenue to N1.5 trillion. This colossal loss comes as Nigeria’s operating environment continues to be ravaged by record-high inflation and the naira’s devaluation.
According to MTN’s CEO, Karl Toriola, “The macroeconomic conditions in Nigeria have been challenging during the period.” The telecom firm noted that it would have recorded a profit after tax of N102.3 billion if not for the crippling forex losses.
The depreciation of the naira between December 2023 and June 2024 resulted in a massive N887.7 billion in net forex losses for MTN, arising from the revaluation of its foreign currency-denominated obligations. This underscores the severe impact of the naira’s devaluation on the company’s financial performance.
Airtel Africa, another major player in the Nigerian telecoms market, has also felt the sting of the country’s economic turbulence. In its financial report for the period ended June 2024, the firm reported a 16.1% decline in reported revenue to $1.16 billion in the second quarter of 2024.
Airtel attributed this decline to the naira devaluation, as well as a substantial increase in fuel prices across its markets. The lower contribution of Nigeria to the group’s overall performance after the naira devaluation also contributed to a decline in EBITDA margins, which fell from 49.5% in Q1’24 to 45.3%.
The impact of the naira’s depreciation was also felt in Airtel’s profit after tax, which was impacted by $80 million of exceptional derivative and foreign exchange losses (net of tax), arising from the further weakening of the Nigerian currency during the quarter.
Despite the challenges, both MTN and Airtel have reported some bright spots in their operations. MTN managed to limit the decline in its customer base to just 280,000, resulting in a 2.9% year-on-year increase to 79.4 million subscribers. The company attributed this outcome to various initiatives deployed to retain affected customers and reduce churn.
Airtel, on the other hand, reported a 14.9% growth in mobile money subscribers, reflecting its continued investment in distribution to support increased financial inclusion across its markets. The firm also saw a 13.4% increase in data customers to 64.4 million, with data usage per customer rising by 25.1% to 6.2 GBs, and smartphone penetration increasing by 4.7% to reach 41.7%.
These pockets of growth, however, have been overshadowed by the overwhelming challenges facing the Nigerian telecommunications industry as a whole.
The losses reported by MTN and Airtel serve as a stark reminder of the harsh realities that multinational corporations operating in Nigeria must contend with. The combination of record-high inflation, currency devaluation, and rising fuel prices has created an extremely difficult environment for businesses to thrive.
As the Nigerian government struggles with these macroeconomic issues, the telecom industry will be closely watched to see how it navigates the turbulent waters ahead. The ability of companies like MTN and Airtel to weather this storm and emerge stronger will be a crucial test of their resilience and adaptability in the face of unprecedented challenges.
