Investors in MTN Nigeria Communications Plc (MTNN) have seen higher returns this year compared to shareholders of other premium stocks on the Nigerian Exchange (NGX), as expectations for tariff adjustments strengthen investor confidence.
Data shows that MTNN’s stock price surged by 31.1% within the first two months of 2024, significantly outperforming the broader market’s 4.76% gain over the same period. This strong performance reflects renewed optimism in the telecom giant, which continues to dominate Nigeria’s telecommunications market.
In a research report titled “MTNN Turns the Tide in H2’24”, Divine Olumese, a research analyst at Vetiva, recommended investors to buy MTNN shares, setting a target price (TP) of ₦318.6. On the contrary, analysts at United Capital issued a sell rating, projecting a target price of ₦250.1, representing a 5.3% downside from its February 28 market price of ₦264.2.
As of February 2024, MTNN closed at ₦264.20 per share, nearing its 52-week high of ₦267.8, and well above its 52-week low of ₦169. The company’s shares outstanding stand at 20.995 billion units.
Earlier this year, MTN Nigeria secured approval from the Nigerian Communications Commission (NCC) to renew its 800MHz Spectrum Band (Channel 1) license for an additional 10 years, effective January 1, 2025, to December 31, 2034. Furthermore, the extension of Channel 2’s license, previously expiring in 2030, was also approved for an additional four years, aligning both licenses to expire simultaneously in 2034 for smoother renewal processes.
The NCC also approved a 50% tariff adjustment for telecom operations, aimed at enabling operators like MTN to sustain investments amid Nigeria’s challenging economic landscape.
Karl Toriola, CEO of MTN Nigeria, welcomed the development, stating; “This tariff adjustment is a critical step to address the ongoing economic pressures on our industry. It will help us maintain the essential investments required to ensure reliable and high-quality service delivery to Nigerians. Our commitment to supporting Nigeria’s digital transformation and inclusive growth remains steadfast.“
Despite its strong stock performance, MTNN posted its second consecutive full-year loss in 2024. Earnings Before Interest, Tax, Depreciation, and Amortization (EBITDA) margins declined by 9.6 percentage points to 39.1%, while loss after tax (LAT) stood at ₦400.4 billion, compared to a profit of ₦114.5 billion in the fourth quarter of 2024.
Even though Profit After Tax (PAT) adjusted for forex losses decreased 35.2% to ₦247.3 billion, service revenue grew 35.9% to ₦3.3 trillion, and EBITDA rose 9.2% to ₦1.3 trillion. Subscriber base also expanded by 1.6% to 80.9 million, with active data users growing 7% to 47.7 million.
Forex losses from revaluations of foreign currency obligations heavily impacted earnings, resulting in negative retained earnings of ₦607.5 billion (up from ₦208 billion in December 2023), although this was an improvement from ₦727.2 billion negative reported in June 2024. Shareholders’ equity remained negative at ₦458 billion, albeit better than ₦577.7 billion in June 2024.
Capital expenditure (excluding leases) fell slightly by 1.3% to ₦443.5 billion, while free cash flow stood at ₦388.2 billion, down 3.7% year-on-year. Consequently, due to negative retained earnings, MTN’s board did not recommend a dividend payout for FY 2024.
Analysts at Coronation Research, commenting on MTNN’s earnings on March 10, highlighted concerns over the persistent losses, “MTNN’s second straight annual loss reflects the challenging macroeconomic environment, and while not encouraging on the surface, recent developments—including the USSD resolution, localized lease liabilities, debt restructuring, and tariff adjustments—could position the company for a turnaround.”
They added that a stabilized exchange rate, moderated inflation, and regulatory support present compelling growth opportunities for MTN in 2025.
MTNN’s management also reaffirmed their commitment to restoring a positive net asset position and pursuing sustainable growth and operational resilience, emphasizing focus on cost management and long-term value creation amid Nigeria’s economic challenges.
Toriola concluded that “despite headwinds like inflation and currency volatility, we remain committed to our strategy and to delivering value to all stakeholders, we are encouraged by the authorities’ approval of tariff adjustments, vital for the sustainability of our industry and critical to addressing our capital position.”
