MTN FINANCIAL PERFROMANCE: Half Year 2024
SUMMARY OF FINANCIAL PERFORMANCE
- MTN Rwanda Plc reported a substantial decline in profit after tax by 307.1%, resulting in a loss of Rwf 10.5 billion for the first half of 2024
- The Company's EBITDA dropped by 29% to Rwf 39 billion.
- The implementation of the Mobile Termination Rate (MTR) policy significantly impacted voice revenues
MEASURES AND OUTLOOK
MTN reported in its communiqué that in response to this significant profit decline, they are in the process of implementing several measures to stabilize its financial position. We quote some of these measures here.
- Regulatory Engagement: The company is engaging with RURA to review the zero-rating of local MTRs with the goal of reintroducing termination rates to cover the cost of production.
- Cost Control on ONA Traffic: MTN Rwanda is introducing measures to curb One Network Area (ONA) costs for permanent roamers in South Sudan and Uganda.
- Pricing Transformation: The company is implementing pricing transformation measures to optimize pricing and maintain effective voice and data rates above inflation.
- Voice Solutions: MTN Rwanda is introducing new voice solutions aimed at increasing the number of users and their usage.
- Cost Efficiency: The company is driving expense efficiencies and adopting a disciplined approach to capital allocation to further optimize its cost base.
- Financial Reporting Standards: Ensuring the correct application of updated International Financial Reporting Standards (IFRS) to improve financial reporting accuracy.
CASE 1: SUCCESSFUL NEGOTIATION
If the negotiations are successful, MTN Rwanda could experience the following positive outcomes:
- Stabilization of Voice Revenues: With the reinstatement or favourable adjustment of MTRs, MTN Rwanda might see a stabilization or even an increase in its voice revenue segment, which had previously suffered a significant decline.
- Improved Financial Outlook: The potential recovery of lost revenues, coupled with a reduction in operational costs, would enhance MTN Rwanda's overall financial outlook for the second half of 2024. This improvement may help the company realign with its earlier growth projections, potentially reversing the recent decline in profitability.
- EBITDA Margin: If the company successfully negotiates reductions in One Network Area (ONA) costs for traffic with South Sudan and Uganda, operational costs could decrease. This will likely lead to an improvement in EBITDA margins, allowing MTN Rwanda to retain more of its revenue as profit.
CASE 2: UNSUCCESSFUL NEGOTIATION
MTN Rwanda is likely to continue facing a significant decline in voice revenues, which could result in prolonged financial losses. If these revenue declines and cost pressures persist, the company might see its Rwf10.5 billion loss from the first half of 2024 extend into the second half, potentially leading to a larger annual loss. This ongoing financial deterioration, without a successful regulatory resolution, could erode investor confidence, causing a decline in MTN Rwanda's stock price and making it more challenging for the company to raise capital if needed. Additionally, the company might need to take on additional debt to maintain operations and cover losses if these financial pressures continue.
CONCLUSION
The second half of 2024 will be crucial in defining the company's ability to navigate these challenges and get back on track.