MTN Nigeria, the country’s largest telecommunications operator, has sounded an alarm over the telecom sector’s deteriorating financial health, calling for immediate reforms to restore profitability.
During a recent tour of MTN’s facilities in Ibeju-Lekki, Lagos, Chief Executive Officer Karl Toriola stressed the urgent need to address escalating operational costs and tariff adjustments to sustain the sector.
Toriola, who oversees approximately 78 million subscribers, emphasized that the industry has been grappling with accumulating losses, with MTN surviving on its reserves.
“We must return the industry to profitability,” he declared, underlining the unsustainable nature of the current financial situation.
A primary driver of the losses, according to Toriola, is the rising cost of diesel, which powers MTN’s base transceiver stations. This, coupled with the recent devaluation of the naira and high inflation rates, has severely impacted the company’s financial standing.
Earlier this year, MTN reported a N519.1 billion loss in the first half of 2024, largely attributed to foreign exchange losses
Experts within the telecommunications industry echo Toriola’s concerns. Financial analyst Adebayo Oladipo stated, “The telecom industry is operating under immense cost pressures, and without tariff adjustments, it is difficult to see how operators can maintain both profitability and service quality.”
Oladipo noted that MTN’s operating model, relying on reserves, is not sustainable in the long term.
Earlier in 2024, telecom operators, including MTN and Airtel, called for the first tariff hike in 11 years to address these rising costs.
“The cost of maintaining infrastructure has skyrocketed, and yet tariffs remain largely unchanged. Without an adjustment, the sector is at risk of financial collapse,” said telecom industry consultant, Funmi Adewole.
MTN’s struggles reflect broader challenges in Nigeria’s telecom industry. Other operators, such as 9mobile and Globacom, have not faced the same public scrutiny, but they are similarly impacted by economic pressures, though they are not publicly listed and do not disclose financial results.
Beyond operational costs, MTN’s troubles extend to banking services. Toriola revealed that Nigerian banks owe the telecom operator N250 billion in unpaid Unstructured Supplementary Service Data (USSD) fees.
MTN is considering halting these banking services unless the debt is resolved and regulatory approval is granted for a tariff hike. “There should be no delusion; if the tariff doesn’t go up, we will shut down,” Toriola warned.
However, there is a glimmer of hope. Toriola expressed optimism that newly appointed Central Bank of Nigeria Governor Yemi Cardoso and the Nigerian Communications Commission’s Executive Vice Chairman Dr. Aminu Maida could intervene to resolve the sector’s financial crisis.
Telecom industry stakeholders are urging the Nigerian government and regulators to act swiftly.
“The telecom sector is a backbone of Nigeria’s economy, providing essential services and employment. Ignoring its financial woes could have far-reaching consequences for the country’s economic stability,” said economist Olufunso Balogun.
As MTN navigates these financial headwinds, the company’s future and that of Nigeria’s telecom industry will depend on decisive policy actions to address rising costs and improve profitability.