MTN proposes hike in call tariff to mitigate ‘challenging operating conditions’

MTN Nigeria says plans are underway to increase call tariff to manage the effect of the ‘challenging operating conditions’ in Nigeria.

MTN made this known on Friday in a statement detailing the outcome of its extraordinary general meeting.

The telecommunications company said a major issue discussed at the meeting was the need to address its negative net asset position.

The development follows the huge loss of N740.4 billion experienced in 2023 due to the foreign exchange (FX) market liberalisation in June last year, and a pre-tax loss of N575.69 billion in the first quarter (Q1) of 2024.

To address the loss, MTN said some initiatives have been put in place to “accelerate revenue growth development, restore profitability and rebuild reserves to strengthen business resilience and boost shareholder returns”.

These interventions, according to the firm, include regulated tariff hike.

“Engagement with the authorities, through the industry body, on tariff increase to manage the effects of the challenging operating conditions,” MTN said.

“Importantly, appropriate tariff increases will be necessary to support continued investment and the long-term sustainability of the industry. This will support commercial interventions to accelerate topline growth.”

‘REDUCE FX EXPOSURE, REVIEW TOWER LEASE CONTRACTS’

MTN said it will boost revenue growth and improve operational efficiency by driving margin recovery.

“MTN Nigeria is focused on reducing the various exposures the business has to US$ volatility,” the telco said.

“One key area is the company’s outstanding letters of credit (LC) obligations, which contribute to the volatility in its earnings through FX losses reported in the company’s income statement.

“These obligations were incurred in support of capex requirements which are largely foreign currency denominated.

“In this regard, the company has utilised the improved liquidity in the FX market to reduce the balance of outstanding LC obligations to US$243.4 million as at 31 March 2024, from US$416,6 million as at 31 December 2023. 

“This was funded using restricted cash balances held in Naira to support LC obligations. As CAPEX is optimised, these balances will be minimised and the company will continue to deploy resources to reduce these US$ obligation exposures.”

Another initiative put in place by the company is to review tower lease contracts with key towerco service providers regarding changes to the existing tower lease contracts. 

“If successful, these negotiations could result in improvements that will help the company to mitigate macro risks impacting its business, including FX,” MTN Nigeria added. 

The telco said it believes these aforementioned initiatives will go a long way to accelerate the recovery profile of the company’s earnings and restore its net asset position faster.

On March 25, Ralph Mupita, MTN Group’s chief executive officer (CEO), said the company is in talks with the Nigerian Communications Commission (NCC) to increase tariffs due to FX impact.