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MTN Nigeria Grapples with Economic Hurdles as Fintech Revenue Climbs Amid Subscriber Decline

Amid Nigeria’s fluctuating economic landscape, MTN Nigeria’s financial performance for the first nine months of 2024 reflects a juxtaposition of growth in fintech services against a backdrop of fiscal headwinds and regulatory challenges. The telecom giant, which remains one of Nigeria’s two largest telecom operators alongside Airtel Nigeria, saw subscriber figures dip slightly due to the protracted National Identification Number (NIN)-Subscriber Identity Module (SIM) registration mandate—a regulatory hurdle affecting the entire telecom sector. However, MTN’s recent moves toward bolstering its fintech services signal an intent to shift focus amidst these pressures.

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Subscriber Base Contracts but Market Dominance Persists

MTN’s subscriber count decreased by 0.9% to 77 million, a drop linked directly to regulatory constraints on NIN-SIM registration compliance. The mandate, initially rolled out to enhance security and curb fraud, has proven a double-edged sword for telecom companies; while aimed at streamlining identity management, it has disrupted user acquisition efforts, primarily in low-income and rural areas where compliance costs can be prohibitive.

Despite this setback, MTN’s entrenched market position remains largely unaffected. Alongside Airtel Nigeria, MTN holds a significant share of the market, benefiting from a strong brand reputation, extensive infrastructure, and continuous investment in network quality. However, maintaining this stronghold amid a shrinking subscriber base presents a strategic challenge, particularly as the sector faces economic pressures from multiple directions.

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Revenue and Fintech Growth Amidst Net Loss

MTN’s financial results reveal a stark divergence between its robust revenue performance and its net income, with the company posting a substantial net loss of ₦514.9 billion—an abrupt decline from a profit of ₦14.9 billion recorded during the same period last year. The loss can be attributed to macroeconomic factors such as the depreciation of the naira, inflationary pressures, and increased energy costs. However, MTN’s core service revenue rose by 33.6%, with fintech revenue showing a promising 18% increase. These gains underline the company’s pivot towards digital and fintech solutions, a strategic direction that is anticipated to form the backbone of MTN’s growth trajectory moving forward.

The success in fintech is primarily driven by MTN’s commitment to deepening its mobile money footprint in Nigeria, where the demand for digital financial services continues to rise. Through the MoMo Payment Service Bank (PSB), MTN has extended financial inclusion to previously underserved populations, allowing millions to access basic banking services via mobile wallets. The company’s focus on refining wallet quality led to a 21.8% drop in active mobile money wallets but represents a longer-term investment in sustainable growth within this segment. This focus aligns with MTN’s acquisition of the remaining minority stake in MoMo PSB, solidifying its control and enabling a streamlined strategy that supports both financial inclusion and profitability.

Operational Challenges and Strategic Responses

MTN Nigeria’s EBITDA experienced a decline of 5.3%, settling at ₦860.2 billion. The downturn in EBITDA stems from a confluence of macroeconomic challenges, including the weakened naira, rising inflation, and escalating energy costs, all of which impact operational margins significantly. The depreciation of the naira has also increased foreign exchange losses, exacerbating the pressure on MTN’s financials. To combat these rising costs, MTN renegotiated some of its tower lease contracts with IHS Towers, incorporating provisions for diesel costs—a critical resource for powering telecom infrastructure in regions where electricity reliability is a concern.

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MTN has further mitigated energy expenses by securing regulatory approval to generate up to 15.94 megawatts (MW) of electricity across power plants in Lagos, a move that not only reduces dependence on diesel but also positions MTN as a proactive corporate player in Nigeria’s energy landscape. This measure is expected to yield operational cost savings and demonstrates MTN’s adaptability to Nigeria’s unique business environment, where energy constraints remain a perennial challenge.

Navigating the Future: Tariff Adjustments on the Horizon

Looking ahead, MTN’s strategy will likely involve a reevaluation of its pricing structure. CEO Karl Toriola has hinted at discussions with regulators on potential tariff adjustments, a move aimed at offsetting the rising costs that are squeezing margins. The delicate balance between affordability for consumers and profitability for operators is a core issue facing the telecom sector, particularly as inflation erodes consumer purchasing power. Higher tariffs could provide MTN with the needed buffer to stabilize its financial performance, though such adjustments carry the risk of further subscriber attrition in price-sensitive segments.

MTN’s focus on refining its value proposition and expanding digital services, especially through the MoMo PSB platform, indicates a forward-looking approach to growth. The recent addition of an inbound remittance feature to MoMo is expected to drive new user engagement and solidify MTN’s positioning as a leader in Nigeria’s fintech landscape.

A Resilient Giant in a Volatile Market

MTN Nigeria’s first nine months of 2024 underscore both the resilience and adaptability of Africa’s largest telecom operator. While subscriber growth may be on pause due to regulatory challenges, the company’s robust fintech revenue and strategic adjustments in cost management illustrate an ability to navigate Nigeria’s complex economic landscape. As MTN continues to enhance its digital offerings and negotiate with regulators on tariff increases, the company’s outlook will hinge on its capacity to balance immediate financial pressures with long-term growth strategies in the telecom and fintech sectors.

For MTN Nigeria, success in the coming quarters will likely depend on a combination of prudent cost management, innovative digital expansion, and regulatory support. With a clear emphasis on quality over quantity in its fintech services and proactive steps to mitigate operational challenges, MTN remains well-positioned to weather economic fluctuations while setting the stage for sustained growth.

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TAGiAfrica™ is a Web3 Magazine that is documenting the African journey in the crypto and blockchain industry for over a decade. We are the Pan-African magazine that covers business, technology, Blockchain, Crypto and Innovation.We are the essential resource for anyone who wants to stay up-to-date on the latest trends in Africa. The magazine is also a valuable resource for businesses that are looking to expand into Africa and committed to promoting African entrepreneurship and innovation.

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