MTN Nigeria has said that it utilized the improved liquidity in the FX market to reduce the balance of outstanding letters of credit (LC) obligations to $243.4 million as of 31st March 2024, from $416.6 million as at December 2023.
This was contained in the company’s notice to the Nigerian Exchange Limited on the outcome of its Extraordinary General Meeting (EGM) held to articulate the company’s plan to address the group’s negative asset position as reported in the audited financial statement for the period ending 31 December 2023.
The MTNN noted that the reduction was funded using restricted cash balances held in Naira to support that LC obligations.
It stated that as CAPEX is optimized, these balances will be minimized and the company will continue to deploy resources to reduce these US$ obligation exposures.
MTN Nigeria said it is focused on reducing the various exposures the business has to US$ volatility.
- “One key area is the company’s outstanding letters of credit obligations, which contribute to the volatility in its earnings through FX losses reported in the company’s income statement.
- These obligations were incurred in support of capex requirements which are largely foreign currency denominated,” the company said.
Tariff increments
It noted that the company is engaging with the authorities through the industry body on tariff increase to manage the effects of the challenging operating conditions.
According to the company, importantly, appropriate tariff increases will be necessary to support continued investment and the long-term sustainability of the industry, adding that this will support commercial interventions to accelerate topline growth.
The company said that with consistent and extensive investment in MTN Nigeria’s network over the past few years, including the acquisition of additional spectrum, there is flexibility to optimize capex deployment.
- “In this regard, CAPEX will be reduced (excluding leases) for FY 2024and aim for an intensity in the upper single digits. The company will optimize latent capacity and implement radio planning strategies to minimize potential impacts and disruptions to MTN’s networks quality.
- This will ensure that the company continues to provide its customers with reliable connectivity and support its growth ambitions,” it noted.
Tower lease contracts
MTN Nigeria said it is considering strategic options to manage its tower lease contracts, noting that as previously reported, constructive discussions are on with key tower service providers regarding changing to the existing lease contract.
- “If successful, these negotiations could result in improvements that will help the company to mitigate macro risks impacting its business, including FX.
- This would supplement the aforementioned initiatives to accelerate the recovery profile of the company’s earnings and restore its net asset position.
- If the discussion does not yield the desired outcomes, the business will continue to drive the operational and commercial strategies outlined.
- MTN Nigeria believes the strategies will enable the company to improve its profitability and trade out of the negative net asset position overtime,” the company noted among other things.
