Nicola Mawson
MTN started the week off on a very solid footing, with its shares surging almost 11% on Tuesday on the back of good news that it can now increase its tariffs in Nigeria after a long-standing battle with the regulator there about pricing.
Its share price righted itself somewhat yesterday, losing -1.07% to R96.25 by 3.17pm.
MTN and other operators in Nigeria need to increase prices to combat rising inflation and the devaluation of the local currency against the dollar.
The company, Africa’s largest mobile network operator, has 77 million subscribers in Nigeria. However, in the unit’s third quarter results statement, it noted that inflation has remained elevated because of rising energy prices and the depreciation of Nigeria’s currency, the naira.
Inflation averaged 32.8% in the nine months to September compared to an average of 24.5% in 2023. As a result, MTN stated, the country’s central bank increased the lending rate by 8.5 percentage points to 27.25% during the period.
“The higher inflation and interest rates weighed on consumers’ spending power and impacted business activity,” said Nigeria CEO Karl Toriola in the statement, issued on October 30 last year and the latest available results print.
At the same time, it noted that earnings before interest, tax, depreciation, and amortisation, remained under severe pressure, most due to the naira’s lower value. The currency has lost about 62% against the dollar year-on-year.
MTN added at the time that it remained “deeply engaged with the authorities through relevant industry bodies to address tariff increases,” which it said were important to “mitigate the impacts of macro volatility and support the industry’s long-term sustainability”.
Peter Takaendesa, the head of equity at Mergence Investment Managers, said the share price gained on talks that the telecoms industry may finally be allowed, by the government of Nigeria, to increase prices. “They need this to recover cost inflation and Nigeria naira devaluation impact,” he said.
Takaendesa added that the Nigerian telecoms industry needs at least a 30% price increase on their basket of services to just cover current inflation. “The ideal tariff adjustment is more than a 60% increase to also cover elevated inflation of the past few years, but the reality is that the telecoms regulator will limit any price increases to balance industry sustainability and consumer affordability,” he said.
Nigerian telecoms operators may have to do several smaller price adjustments over time as has been seen in Egypt and a couple of other African countries that have experienced currency devaluations, said Takaendesa.
Mike Gresty, a fund manager at Anchor Capital, said that there were a few factors influencing MTN’s share price. He explained that these included the Naira strengthening against the dollar in December.
Gresty added that news that the Nigerian regulator has agreed to allow the mobile operators to raise tariffs has been a “longstanding challenge that has hung over MTN”.
“The amount has not been announced yet, but this is certainly a positive development,” he said.
Gresty also said that “MTN and telcos generally are quite under-owned by South African fund managers so a shift like this, which implies we could be seeing earnings projections being revised upwards, may be driving buyers into the sector and MTN in particular”.
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