Wednesday, January 22, 2025

MTN Shares Surge After Nigeria Raises Telecoms Tariffs by 50%

MTN Nigeria Communications Plc’s shares jumped after the Nigerian government raised telecommunications tariffs by 50% to offset the impact of the collapse in the naira and surging inflation.

The stock surged the maximum 10% to 256.30 naira at close in Lagos, the commercial capital. Rival Airtel Africa Plc was unchanged at 2,156.90 naira.

The Nigerian Communications Commission announced the tariff hike late Monday to “support the ability of operators to continue investing in infrastructure and innovation,” according to a statement.

The tariff increase — the first in more than a decade — was half of what companies such as MTN had asked for to weather harsh economic conditions, including a 41% depreciation in the naira against the dollar last year and inflation running near a three-decade high.

Even so, MTN Nigeria Chief Executive Officer Karl Toriola said the adjustment was “an important step toward addressing the impact of the prevailing economic challenges on the company and industry. “It will enable us to maintain the critical investments required to deliver reliable, high-quality services,” he said in a filing to the Nigerian Exchange Group.

The increase will also help telecommunications companies in Africa’s most-populous nation return to profitability, Bismarck Rewane, CEO at consultancy Financial Derivatives Co., said. “Giving them the 50% tariff increase is a boost. We are going to see an increase in base stations, an increase in 5G deployment, an increase in capex,” he said by phone.

While the tariff hike is short of what the companies had asked for, Avior Capital Markets Ltd. analyst Mike Steere said it “far exceeds” the 10% to 20% price rise it had factored into its full-year earnings model for MTN in 2025. The increase should eventually support medium-term revenue growth of over 30%, he said.

Higher prices are also likely to have an inflationary impact in the short—term, Rewane said.

“It increases costs, which will pass through to the consumer,” he said. “But you will see that the telcos will have to invest more in capex and the quality of service will become a key issue. If quality of service improves, you will see productivity will improve. That may offset part of the inflationary impact.”

By Nduka Orjinmo and Emele Onu, Bloomberg

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