MTN increases network investments – but not in Nigeria

MTN increased its capital expenditure (capex) in all its operating regions except for Nigeria, which is its biggest revenue driver.

Simply put, capex is the money a company spends on long-term assets like buildings, equipment, or vehicles. It’s an investment in the company’s future, allowing it to grow or maintain its operations.

In particular, capex is essential to a telecommunications company as it ensures upgrading and maintaining its network infrastructure.

Therefore, cutting capex will provide short-term financial relief but can significantly impact a telecom company’s long-term competitiveness and revenue growth.

MTN released its results for the 2023 financial year this week, which revealed that the company significantly decreased its capital expenditure by 7% in Nigeria – its largest operating region.

Nigeria saw the lowest growth in all of MTN’s major regions. Its revenue fell by 4% compared to the previous year.

In contrast, the West and Central Africa (WECA) and South and East Africa (SEA) regions saw the greatest increase in revenue, growing by 18% and 19%, respectively.

In addition, the WECA region saw a 33% increase in capex from 2022, the highest investment of any region MTN operates in, with R21.1 billion in capex, including lease expenses.

The main beneficiaries of these capital expansions were Ghana, the Ivory Coast, and Cameroon.

This comes as MTN has experienced significant headaches in Nigeria over the past few years with currency-related problems, heaping up major forex losses following the naira float implemented last year.

In June 2023, Nigeria implemented a Naira free float whereby the Central Bank of Nigeria (CBN) no longer directly controls the currency’s exchange rate. Now, the value of the naira is determined by supply and demand in the foreign exchange market.

While this will likely have long-term benefits for the country, many companies that operate in the region – like MTN – are feeling the pain, as government-regulated and multinational corporate transactions still have to be done at an official exchange rate.

MTN has been one of these companies, taking massive forex losses due to its Nigerian operations.

During the 2023 financial year, the naira devalued from ₦461 to ₦907 against the US dollar.

This led to foreign exchange losses of ₦740 billion (R20.98 billion) being recognised in MTN Nigeria – almost as much as the company’s net profit in 2022.

These losses include ₦367 billion (R10.61 billion) unrealised forex losses on leases.

This period, therefore, saw MTN shifting its investments into the areas that experienced the most growth.