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 telecommunications sector was projected by analysts to post stellar profits due to the increased usage of data during the pandemic-induced lockdown, MTN faltered going by its 2020 9M results.
The profit posted indicates a 3.34% decline from the N149.22billion recorded in 2019 9M, failing to live up to its exploits last year.
A glance at the top-line, however, has placated furrowed brows and created optimism for a strong finish to 2020.
Generating a revenue of N975.76billion is always going to steal the headlines but the big question is how, despite this, did it fail to positively impact profit?
Voice, data revenues and impact of lockdown
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.
Many organizations adopted a remote-work format, with meetings held virtually and deals concluded in the same fashion – a major boost to telecommunication giants like MTN Nigeria.
The contribution from voice revenue and data revenue to the total service revenue significantly increased this year, while SMS revenue dipped.
MTN Nigeria generated N241.6billion between January to September 2020 from Data alone. This is 24.7% of its total service revenue in 2020 9M and 48.9% of what it generated in 2019 9M.
It generated a voice revenue of N558.7billion in the period under view, which is 62.3% of its total service revenue in 2020 9M and 57.3% of the recorded value in 2019 9M.
Now, this is where it gets interesting. Remote work may have begun out of need, but not anymore. Companies and establishments have seen the benefits and are more open to the concept.
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.
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.
Increasing costs gulps impressive revenue
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.
The double-digits (14%) 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%), Employee benefits (28%), Other operating expenses (26%), and Direct network operating costs (26%).
Need for improvement
This is clearly not the way to go for any company hoping to record improvements to the bottom line annually.
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.
Still, this is clearly an area where marked improvement is not just necessary but paramount if MTN Nigeria entertains any hope of reaping the fruits from the growth in data by year-end and beyond.
MTN is everywhere you go in Nigeria. Virtually every Nigerian you meet from Ikeja, Lagos to Kafanchan, Kaduna has at least 1 active MTN sim card – some have 2 or more.
Such is the size and spread of the telecom giant in Nigeria and it is well-positioned to maximize the impact of the increased data and voice revenue on its profit as the year advances to a close.