MTN Nigeria fails to live up to 2019 exploits as profit drops

MTN Nigeria Communications Plc, the largest telecommunications company on the NSE, posted a reduced profit of N144.24billion for 2020 9M (YoY), despite increased voice and data revenue.

The profit posted indicates a 3.34 per cent decline from the N149.22billion recorded in 2019 9M, failing to live up to its exploits last year.

The unprecedented Covid-19 disruptions revealed a lot about the telecommunication sector, with the lockdown-induced shift in the mode of operations for many businesses around the world.

The contribution from voice revenue and data revenue to the total service revenue significantly increased this year, while SMS revenue dipped.

According to the report, the telecom giant generated N241.6billion between January to September 2020 from Data alone, representing 24.7 per cent of its total service revenue in 2020 9M and 48.9 percent of what it generated in 2019 9M.

It generated a voice revenue of N558.7billion in the period under view, which is 62.3 per cent of its total service revenue in 2020 9M and 57.3 per cent of the recorded value in 2019 9M.

The double-digits (14 per cent) increase in revenue from N856.55billion generated in 2019 YoY was swallowed completely by its cost, with recorded YoY increase in Finance costs (by 20 per cent), Employee benefits (28 per cent), other operating expenses (26 per cent), and Direct network operating costs (26 per cent).

The uncertainty from the pandemic may have warranted decisions that induced some of these costs like the N1billion donation to CACOVID to cushion the impact of Covid-19 in Nigeria.

Several companies have capitalized on remote work as a cost-cutting strategy, with Amazon disclosing that it saved $1billion on travel during the lockdown.

Whether this decision was reached with safety risk in mind or merely as a cost reduction strategy still bodes well for companies like MTN Nigeria – it guarantees increased data and voice revenue.

The trend is projected to continue since internet-enabled channels allow for easier, faster and efficient communication – Facebook, WhatsApp, Twitter, Telegram, Zoom, amongst others.

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More individuals, even the aged, are starting to open up to and prefer communication via some of these new channels, as opposed to the old-fashioned short message sending SMS, which recorded a dip in revenue from N10.3billion to N8.3billion in 2020 9M.

MTN Nigeria’s ever-increasing costs are of serious concern this year. The rise in revenue can be classed as insignificant, since it bears no reflection on profit.