TheCable

Revenue from data services powered an increase of 21.6 percent in group turnover of MTN Nigeria Plc to hit the N2 trillion mark it projected for the 2022 full year. At N764 billion, data services revenue grew by 48 percent in the year — more than twice the increase in total revenue.

The company’s audited financial report for the full year ended December 2022 shows that data services have led revenue growth for the third straight year, advancing from 31 percent of turnover in 2021 to 38 percent in 2022.

Taking advantage of the increased dependence on data for operations generally as shaped by the coronavirus pandemic, the communications company grew data services earnings steadily from N163 billion in the first quarter (Q1) to N185 billion in the second (Q2) and from N201 billion in the third quarter (Q3) to N215 billion in the final quarter (Q4).

That provided the driving force that equally kept the company’s revenue accelerating from N471 billion in Q1 to N479 billion in Q2 and from N506 billion in Q3 to peak at N556 billion in the closing quarter of the year.

In five years to 2022, MTN Nigeria’s group revenue has doubled from N1 trillion in 2018 with the strongest growth achieved in 2021 and 2022 at 22.9 percent and 21.6 percent respectively.

Unlike in the preceding year however, rising costs pressured margins and the ability to extract profit from the naira of revenue weakened in 2022. Net profit margin slipped from 18.1 percent to 17.8 percent over the period.

Loss of margin caused a sharp slowdown in after-tax profit growth for the company from 45.5 percent in 2021 to 20.2 percent increase to close at N359 billion in 2022. While the company grew profit twice ahead of revenue in 2021, the pattern changed to that of profit slightly trailing revenue growth in 2022.

The main undermining factor is cost of funds that grew by 33 percent to N213 billion in the year, representing additional N53 billion in finance expenses paid out to lenders. Finance cost consumed 29 percent of operating profit in the year, rising from 27.4 percent in the prior financial year.

Increased cost of finance follows rapid expansion of balance sheet debts against sustained increases in interest rates through the financial year. The company’s interest-bearing debts rose from N493 billion in 2021 to N690 billion at the end of 2022, excluding total lease liabilities in excess of N727 billion.

Pressure from the side of cost also came from inflation-driven cost of starter packs, handsets and accessories — that jumped three and half times to over N21 billion at the end of the year.

Driven by rising prices as well, other expenses also pressured earnings at an increase of 43.7 percent to the region of N105 billion.

The cost increases were diluted by relative slowdowns in two major cost elements of the company. Direct network operating cost, the biggest cost line of the company, slowed down at 18 percent increase relative to the stronger growth in sales revenue.

Also, interconnect cost, the second biggest cost line of the company, grew by 14.6 percent to N146 billion, well below the increase in turnover.

Cost savings from the moderated cost units enabled the company to push up operating profit a clear 25 percent to N733 billion. The upsurge in cost of finance lowered pre-tax profit growth margin to 22 percent to N534 billion at the end of the year.

MTN Nigeria paid an interim cash dividend of N5.60 per share at the end of half year operations and a final cash dividend of N10 per share has been recommended for the 2022 operations.