July 31, 2024/Cordros Report

MTN Nigeria Communications Plc (MTNN) released its Q2-24 unaudited results yesterday (30 July), reporting a loss per share of NGN6.08 (vs loss per share of NGN9.22 in Q2-23), bringing the H1-24 loss per share to NGN24.71 (vs loss per share of NGN4.09 in H1-23). The loss was due to the higher net FX loss (+95.2% y/y) recorded in the period.
 
Service revenue grew by 33.1% y/y in Q2-24 (H1-24: +32.6% y/y) following a broad-based increase across MTNN’s value channels – Voice (+10.0% y/y), Data (+56.0 y/y), Digital (+107.9% y/y), Fintech (+22.2% y/y) and Others (+55.6% y/y).
 
According to management, voice revenue growth (+10.0% y/y | 40.1% of total revenue) was supported by increased usage of voice services, and a higher subscriber base. Specifically, MTNN’s subscriber count increased by 2.9% in H1-24 to 79.40 million, with the addition of 2.3 million customers (Q2-24: net addition of 1.70 million) showing management’s efforts to retain customers affected by the Nigerian Communication Commission’s (NCC) directive on NIN-SIM linkage.
 
Likewise, growth in data revenue (+56.0% y/y | 48.4% of total revenue) was driven largely by increased usage and an expanded data subscriber count (+11.2% y/y in H1-24 to 45.60 million | net addition of 1.10 million in Q2-24). Management highlighted that this was supported by a strong demand for data with total data traffic increasing by 42.6%, and data usage (GB per user) increasing to 10.6GB (+30.5% y/y).
 
Total expenses in the quarter grew by 92.0% y/y (H1-24: +82.2% y/y) owing to (i) naira depreciation, (ii) higher energy costs, and (iii) VAT payment on tower leases. Consequently, EBITDA margin declined by 20.90 ppts y/y to 31.9%. Accordingly, H1-24 EBITDA margin fell by 17.44 ppts y/y to 35.6%. Stripping out the effects of currency weakness on operating performance, management noted that EBITDA margin in H1-24 would have printed 50.9%.
 
Net finance costs (+60.4% y/y) rose markedly during the quarter owing to a 48.6% y/y increase in finance costs. The higher finance cost balance was as a result of higher interest expense on leases (+28.6% y/y) and a jump in prepaid transactions costs (Q2-24: NGN26.07 billion | Q2-23: NGN927.00 million). Meanwhile, net FX loss declined by 48.6% y/y in Q2-24 but increased by 95.2% y/y in H1-24 highlighting the substantial exchange loss incurred in Q1.
 
Consequently, pre-tax loss amounted to NGN175.60 billion (vs pre-tax loss of NGN282.35 billion in Q2-23), while loss after tax printed NGN126.36 billion (vs loss after tax of NGN194.02 billion in Q2-23) following a tax credit of NGN49.24 billion (Q2-23: NGN88.32 billion).
 
Management call this afternoon at 3.00 pm Nigerian time. Click here to register.
 
Comment: Unsurprisingly, the impact of currency devaluation has continued to inhibit margin growth and drive losses. Nonetheless, we cite the reduction in outstanding LC obligations (H1-24: USD100.00 million | December 2023: USD416.60 million) as a net positive as this limits the telco’s exposure to future currency pressures. Looking ahead, we remain positive on MTNN’s operational performance but we maintain our stance on subdued earnings till at least 2025FY. Our estimates are under review.