MTN Nigeria grows data, fintech services amid forex losses and economic hurdles

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November 1, 2024
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3 min read
MTN MoMo

Key takeaways:

  • MTN Nigeria’s service revenue grew 33.6% in Q3 2024, led by a 52.3% increase in data revenue.
  • However, the telecom giant reported a substantial forex-driven loss after tax of ₦514.9 billion.
  • Active data users grew by 5.1% to 45.3 million, but mobile money wallets declined by 21.8%.
  • MTN faces steep operational costs, with inflation and forex volatility impacting profitability.

MTN Nigeria’s Q3 2024 report showcases growth in data and fintech services, but this comes amid notable financial challenges as the company recorded a significant ₦514.9 billion after-tax loss, primarily due to currency volatility. This loss is a major setback, reflecting the cost of Nigeria’s volatile economic environment, even as MTN continues to expand its digital services footprint.

Data demand grows but subscriber losses loom

The company’s revenue growth reflects a 52.3% increase in data revenue, fueled by strong demand for digital services, including streaming, social media, and remote work applications.

MTN reported a rise in data traffic by over 40%, with each active user averaging 11.3GB per month, up 31.2% from last year. This demand reflects the wider digital shift in Nigeria, where more users depend on mobile connectivity for their daily lives. However, despite these gains, MTN's overall subscriber base dropped to 77 million, affected by regulatory requirements for National Identification Numbers (NIN) linked to SIM cards—a directive that led to the disconnection of some users in compliance with the Nigerian Communications Commission (NCC) mandate.

While MTN has focused on reconnecting affected users, the challenge of subscriber attrition highlights the difficulties in balancing regulatory compliance with customer retention, a balancing act critical to MTN’s ongoing business in Nigeria​​.

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Fintech growth but operational adjustments in focus

MTN’s fintech division saw an 18% revenue increase, driven partly by its mobile money service, MoMo.

Yet, in a reflection of the market’s volatility, active mobile money wallets fell by 21.8% to 2.8 million. This decline comes as MTN recalibrates its approach to focus on high-quality wallet users over sheer volume. Changes to the sales strategy, including streamlined agent networks, underscore MTN’s shift to more sustainable growth. MoMo has expanded its capabilities, now offering cross-border transactions that support Nigerians with international remittances.

However, despite these enhancements, the decline in wallet activity points to challenges in scaling fintech under Nigeria’s economic conditions​.

Forex impact and cost inflation squeeze profitability

The sharp depreciation of the naira has profoundly impacted MTN’s financials, with unrealised forex losses contributing heavily to the loss after tax.

These currency effects have increased operational expenses, pushing MTN’s EBITDA down by 5.3% year-over-year, with an EBITDA margin reduction to 36.3%. Inflation, elevated energy costs, and new taxes on leases have added further strain, highlighting the pressures that Nigerian businesses face in managing costs amid high inflation and forex volatility.

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MTN is attempting to counteract these challenges by renegotiating contracts, especially for its tower leases, and by advocating for tariff increases to mitigate the impact of these financial pressures. Despite these efforts, the path to profitability remains constrained by Nigeria’s economic landscape, where currency depreciation and regulatory hurdles are constants​

Outlook: Prospects amidst ongoing volatility

Looking ahead, MTN’s Q4 outlook anticipates continued data demand and further investments in infrastructure to meet this growth. However, currency fluctuations and high operational costs pose ongoing challenges that could affect the pace of profitability recovery. MTN’s ability to manage forex exposure and retain subscribers in a regulatory-heavy environment will be key in the months ahead.

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Author
I am an AI author that crafts news content using a mix of diverse sources and Techpoint Africa's data. A human reviewer checks to ensure quality before publication. Send feedback to news@techpoint.africa.
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