After Major Hit by FX loss, MTN, Airtel Make Important Decision on Foreign Debt

• With the repayment of $1.2 billion in 2024, MTN Nigeria and Airtel Africa have significantly reduced their foreign debt
• this is an attempt to lower the cost of foreign exchange while they try to return to a profit again
• Both MTN Nigeria and Airtel Africa were affected by the forex loss due to the devaluation of the local currency

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

In an effort to reduce the cost of foreign exchange while they work to return to profit, MTN Nigeria Communications Plc and Airtel Africa have made substantial cuts to their foreign debt, paying back $1.2 billion in 2024.

After the naira depreciated sharply in 2023, both telcos lost $1.56 billion in foreign exchange.

The unification of the Nigerian foreign exchange market by the Central Bank of Nigeria (CBN) in June 2023 caused the naira to depreciate sharply, from 1043.09/$ by December 28, 2023, to 471/$ by March 7, 2025.

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Following its 2019 IPO on the Nigerian Stock Exchange, MTN Nigeria reported its first post-tax loss of N137 billion in 2023. Due mostly to foreign exchange headwinds in Malawi and Nigeria, Airtel Africa, which as of March 2024 had 50.9 million subscribers in Nigeria, recorded an after-tax loss of $89 million for the full year that ended in March 2024.

At the end of 2023, Olusegun Ogunsanya, the then-chief executive officer of Airtel Africa, stated,

“We will continue to focus on reducing our exposure to currency volatility.

MTN said in its 2024 results,

“Although this reduction resulted in realised foreign exchange losses, it has substantially strengthened our financial position and lowered the financial risks associated with the depreciation of the naira and its related finance costs.”

But there was a price for the debt reduction, and it had a big effect on MTN's finances. N400.44 billion was lost after taxes as a result of FX losses brought on by the revaluation of foreign currency-denominated liabilities, even though it reported record income of N3.36 trillion for 2024.

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It stated that if not for the net forex loss, it would have declared a profit after tax of N247.3 billion.

In contrast, Airtel Africa's revenue for the nine months ending December 2024 dropped 5.78 percent to $3.64 billion from $3.86 billion. Nevertheless, its post-tax profit increased by 12,300 percent, from $2 million to $248 million.

As their desire for foreign exchange debt declines, both businesses are turning to local debt. With lease liabilities excluded, Airtel Africa currently has 92 percent of its debt in local currency, up from 79 percent a year ago.

Sunil Taldar, chief executive officer of Airtel Africa, noted, “Our capital structure remains robust with just 8 percent of OpCo debt in foreign currency — a substantial improvement over the last year.”

Additionally, MTN has restructured its loan portfolio, which now consists of 72% naira and 28% dollars, down from 56% naira and 44% dollars in 2023. By the end of 2024, its total net debt had decreased by 29% to N591 billion.

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Through its N250 billion Commercial Paper Issuance Program, it raised N190 billion to fund activities locally.

MTN Nigeria's chief financial officer (CFO), Modupe Kadri, stated during an investor call that the company's total foreign exchange exposure was $1 billion in December 2023 but had decreased to roughly $300 million by the end of 2024.

Renegotiation of tower lease contracts

Telcos renegotiated tower lease agreements with infrastructure firms like IHS, INT Towers Limited, and ATC Nigeria in addition to debt restructuring to reduce FX and energy-related expenses.

Just the renegotiation between MTN and IHS saved N113.8 billion in operating costs. In an effort to reduce foreign exchange risks and boost profits, telcos are also embracing local solutions more and more.

“We will focus on cost savings through our expenditure resiliency programme and implement localisation initiatives to further reduce foreign exchange exposure and operating expenditure and to improve financial resilience.

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“We believe these efforts will help us maintain our competitive edge and drive additional growth in service revenues, support margin recovery, and restore our capital position,” said Karl Toriola, chief executive officer of MTN, during the telco’s investors’ call.

MTN Nigeria recovers N32 billion in USSD debt

Legit.ng reported that MTN Nigeria says it recovered N32 billion from Nigerian banks as part of the N74 billion outstanding debt owed to telcos for USSD service charges.

The telecom firm revealed that about N42 billion remained outstanding, showing ongoing tensions in the dispute between banks and telecom firms.

The debt recovery comes amid interventions by the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) in December last year.

Source: Legit.ng