MTN Nigeria expects slight margin drop after FX rate shift

MTN Nigeria expects its profit margin to dip by almost half a percentage point this year as its leased tower services feel the impact of weaker currency exchange rates, it said on Thursday.

The dollar conversion rate used by the Nigerian unit of South African telecoms group MTN weakened by 6.5% to 385 naira, it said, reflecting this month’s currency adjustment by the central bank to unify the country’s system of multiple exchange rates.

The change to reference rate, currently at 360-385 naira, will reduce the EBITDA margin in 2020 by approximately 0.4 percentage points under IFRS16 financial reporting rules, MTN Nigeria said.

The company leases the majority of its tower and network equipment sites from IHS Towers and said it has concluded a renegotiation of certain terms of its rental agreements, MTN Nigeria said in a statement.

MTN Nigeria sold its tower infrastructure in 2014 to focus on its core business.

The company said the slight drop in earnings will be offset over time by improved pricing, increased focus on rural connectivity and operational efficiencies.

Shares in MTN Nigeria rose 0.8% to 119 naira per share.

MTN Nigeria said the ongoing coronavirus pandemic has shown the importance of digital infrastructure and that its agreement with IHS and other tower firms will enable it enhance fibre networks and connect rural areas that are currently underserved. (Reuters)