By Dipo Olowookere
One of the leading telcos in the country, MTN Nigeria Plc, has informed the investing public that its profit for the 2020 fiscal year will likely decline.
In a notice to the Nigerian Stock Exchange (NSE) on Thursday, the firm said this anticipated decline in its operating profit will come from the recent devaluation of the Naira by the Central Bank of Nigeria (CBN).
The apex bank recently readjusted the exchange rate of the Naira to the United States Dollar to N380 from N360. This was done after it had earlier devalued the local currency to N360 from N306 this year.
MTN Nigeria, which leases the majority of its tower/site space required for its network equipment, said this move by the CBN has necessitated a renegotiation of its deal with a provider of the service, IHS Towers.
According to MTN, the agreement was revisited to align with the Nigerian Autonomous Foreign Exchange Rate (NAFEX) of N385/$1 from N360/$1 and this will reduce its EBITDA margin this year by nearly 0.4 percentage points.
Business Post reports that the EBITDA, which stands for earnings before interest, taxes, depreciation, and amortization, measures a company’s operating profit as a percentage of its revenue.
But MTN Nigeria has promised to continue to focus on operational efficiencies to further mitigate these impacts, assuring that this cost would be offset over time by the improved pricing and increased focus on rural connectivity and backhaul in the network.
MTN Nigeria said it wants to pay more attention to the rural areas of the country by spreading its tentacles to the nooks and crannies of Nigeria and deploy fibre network in more areas.
According to the company, this expansion will consume more funds, but in the longer term, it will bear fruits that will likely excite shareholders of the firm.
The CEO of MTN Nigeria, Mr Ferdi Moolman, while commenting on the latest development, stated that, “We are pleased to have agreed a mutually beneficial update to our agreements with IHS.
“These changes provide clarity for both parties on foreign exchange denomination with Naira payments, while also extending our relationship into ket new areas.
“I am particularly excited about the partnership to expand fibre connectivity and deliver accelerated rural telephony.
“The COVID-19 pandemic has demonstrated the huge importance of digital infrastructure and these agreements enable us to enhance fibre networks, while rapidly connecting those Nigerians in rural areas who are currently unable to access telecommunications services.”
Recall that in 2014, MTN Nigeria decided to sell its passive infrastructure to focus on its core business line, but retained a small number of towers. It then struck deals with a number of tower providers in the country.
