MTN Suffers Further Blows In Nigeria Upending Q3 Earnings

MTN Group, Africa’s largest telecoms operator, continues to feel the sting of economic instability in its key Nigerian market, driving down its third-quarter 2024 revenue by a sharp 18.5%. The Johannesburg-listed giant, once a beacon of steady growth in African telecommunications, is now navigating a precarious landscape shaped by severe currency devaluation and a plummeting voice revenue segment.

In its latest earnings report, MTN disclosed that group service revenue dropped to ZAR 127.4 B (USD 6.99 B) from ZAR 156.3 B in Q3 2023, marking a substantial year-on-year contraction. Nigeria, traditionally MTN’s largest revenue driver, reported an extraordinary 48.7% plunge in revenue for Q3 alone. The culprit? The steep devaluation of the naira, which closed the quarter at NGN 1,541 to the dollar, down from NGN 907 at the end of last year.

“The naira continued to depreciate, closing the period at N1,541/USD,” noted MTN Group President and CEO Ralph Mupita, explaining that while the currency was less volatile sequentially in Q3, the devaluation has had “a material impact on our reported results.”

The macroeconomic strain in Nigeria has reverberated through MTN’s financials. Just last quarter, MTN’s group service revenue saw a 20.8% year-on-year decline, largely due to a 52.9% slump in Nigerian revenue—a massive blow for a company with 288 million subscribers across 17 African markets. This dip had driven MTN to a USD 414.7 M loss in the first half of 2024, its first reported loss since it faced a billion-dollar fine from Nigerian regulators eight years ago.

The Nigerian market remains MTN’s Achilles’ heel, with currency depreciation and regulatory hurdles eroding what had long been a stronghold for the telecom giant.

The impact on MTN’s core telecommunications business is especially visible in voice services, which experienced a staggering 31.3% drop in revenue for Q3. Meanwhile, data revenue decreased by 15.3%, highlighting the broader challenges facing MTN as traditional services come under pressure from adverse economic conditions across the continent. Notably, MTN South Africa and Uganda bucked the trend with marginal revenue gains of 3.3% and 5%, respectively, as both countries benefited from more stable currencies.

Yet, amid these struggles, MTN’s fintech arm is showing signs of resilience, even providing a partial lifeline. Fintech revenue grew by 8.5% in Q3, with transaction volumes up 17.4%, reaching nearly 15 billion transactions. Mupita pointed to MTN’s strategic focus on advanced financial services, noting that the company achieved a 53.1% jump in advanced services revenue in Q3, with fintech now operating within a high EBITDA margin range of mid- to high-30%, despite the overall volatility.

MTN’s fintech growth aligns with the company’s strategic pivot as it looks to offset declines in traditional telecom services. Monthly active Mobile Money (MoMo) users increased by 5.7%, reaching 61.5 million, while data traffic surged 34.1%, reinforcing the potential of digital financial services to sustain MTN’s revenue base.

“Fintech transaction volumes continue to rise, supporting our growth thesis and underpinning MTN’s resilience,” Mupita said, pointing out that MTN’s strategy is to continue expanding digital and financial services across its markets.

While MTN’s South African market posted a modest 3.3% revenue increase in Q3, and MTN Uganda and Ghana posted growth rates of 20.1% and 31.9%, respectively, the overall business impact of Nigeria’s economic decline remains severe. Excluding the conflict-hit Sudanese market, MTN reported a 14% growth rate, aligning with its mid-teen growth targets. However, inflation, foreign exchange volatility, and regulatory pressures, especially in Nigeria, continue to weigh on the company’s long-term outlook.

Amid these financial strains, Mupita sees a silver lining. “Blended inflation across our footprint eased to an average 13.9%, compared to 17.1% in the same period of 2023,” he said, noting that reduced currency volatility in Q3 signalled a slight stabilisation across key markets. But whether these tentative improvements will be enough to counterbalance the ongoing pressures in Nigeria remains uncertain.

For MTN, the path forward will likely depend on its ability to further insulate the business from currency fluctuations and diversify revenue streams, leveraging its fintech momentum and broader digital services to combat macroeconomic headwinds.