Africa's largest telecoms operator, MTN Group, has issued a stark warning to investors, anticipating a substantial decrease of 140% to 150% in its headline earnings per share for its half-year results. This was communicated in a notice signed by the Company’s Secretary, Uto Ukpanah, highlighting that macroeconomic factors and operational challenges are the primary drivers of this negative outlook.

Key among the macroeconomic factors is the significant devaluation of the Nigerian naira against the U.S. dollar. This devaluation has led to substantially higher operating and net finance costs for MTN Nigeria, the group's largest market. The company estimates that the naira's impact on Nigerian operating expenses will reduce the group’s half-year results by 90 cents, a notable increase from a 4% impact in the previous year. Furthermore, foreign exchange losses stemming from MTN Nigeria's financial results are projected to reduce Group H1 ’24 results by an additional 389 cents, up from 123 cents in 2023.

Beyond the naira's challenges, the ongoing conflict in Sudan has resulted in significant losses at MTN's unit there. The company also faces negative impacts from foreign currency translations, particularly due to the fall in value of most local currencies when results are reported in the South African rand. These translation effects are expected to reduce the half-year results by approximately 310 cents, with MTN Nigeria accounting for 283 cents, Ghana for 15 cents, and South Sudan for 12 cents.

Despite these headwinds, MTN Group provided assurances to investors regarding its underlying performance in other key African markets. The company expects resilient results from MTN Ghana and MTN Uganda for H1 ’24, alongside encouraging progress in essential areas of MTN SA's business. Progress in cash upstreaming from markets like Nigeria has also been a positive development, supporting the holding company’s leverage. Additionally, MTN's fintech platform has maintained robust revenue growth trends and expanded its ecosystem. The first-half report is scheduled for release on August 19.

In a strategic move to mitigate some of these macro risks, MTN's Nigerian business has successfully renegotiated its tower lease agreements with IHS Nigeria. These renegotiated terms include extending existing contracts until the end of 2032, providing crucial support for MTN Nigeria's margin recovery and aiding in the resolution of its negative equity position. The agreements also incorporate discounts and incentives over the life of the contracts, directly addressing some of the financial pressures.

Further enhancing its infrastructure strategy, MTN Nigeria and IHS Nigeria reached a mutual agreement with American Tower Corporation (ATC) concerning approximately 2,500 sites initially awarded to ATC from IHS’ portfolio. Under the revised arrangement, ATC will provide tower services at up to about 2,100 sites, while IHS will manage up to approximately 1,400 sites, a figure that includes 1,000 new sites to be shared by both tower companies.

The renegotiated lease terms significantly reduce the US dollar-indexed component of the leases, linking them to a discounted US consumer price index, thereby making the leases majority naira-linked. This crucial change also sets a cap for the naira consumer price index escalator component and eliminates technology-based pricing, allowing payments for new upgrades to be based on actual tower space and power utilization. An energy cost component indexed to the cost of providing diesel power has also been incorporated into the agreements, reflecting a comprehensive approach to managing operational expenses in a volatile economic environment.