Telecommunication giants MTN and Airtel in Nigeria are focusing on naira-based strategies to recover from substantial foreign exchange losses totaling $1.56 billion in 2023. The sharp depreciation of the naira against the dollar triggered these losses, despite strong revenue performance from both companies.
In response, MTN and Airtel have taken decisive steps to minimize their exposure to foreign currency risks. By June 2024, they reduced their foreign loans from $966.6 million in December 2023 to $100 million. They have also renegotiated contracts and bulk-paid for FX-denominated inputs to stabilize their financial positions.
The Central Bank of Nigeria’s decision to unify the country’s foreign exchange market in June 2023 caused the naira to devalue significantly, falling from N471/$ to N1574.20/$ by August 2024. This drastic change resulted in MTN Nigeria Communications Plc reporting its first loss after tax of N137 billion since its 2019 listing and incurring FX losses of N740 billion.
Similarly, Airtel Africa, with 50.9 million subscribers in Nigeria, faced a loss after tax of $89 million for the fiscal year ending March 2024, mainly due to FX challenges in Nigeria and Malawi. The company lost $1.26 billion to derivative and FX exposures, with $770 million linked to the naira’s devaluation.
Gbenga Adebayo, chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), noted that the FX losses are a widespread issue affecting the telecom industry. The Global System for Mobile Communications (GSMA) highlighted that the mobile industry’s financial performance is insufficient to support its capital-intensive nature, primarily due to high operating costs and increasing diesel prices.
Both MTN and Airtel have emphasized the need to mitigate FX exposures in their financial reports. In H1 2024, MTN reduced its outstanding letters of credit from $416.6 million to $100 million, significantly cutting future forex losses. CEO Karl Toriola stated, “We have made significant progress in reducing outstanding letters of credit US$ obligations.”
Airtel Africa also repaid $550 million in senior notes maturing in May 2024, using cash reserves at the HoldCo to lower its foreign currency debt. CEO Sunil Taldar affirmed, “We remain committed to further reducing foreign currency exposure across the Group.”
Despite these efforts, the telecom industry is advocating for a tariff increase. ALTON recently warned that the current price control mechanism threatens the industry’s sustainability and investor confidence.
By implementing these strategies, MTN and Airtel aim to stabilize their financial positions and restore profitability amidst challenging economic conditions.
