If only I was a fly on the wall during MTN’s executive meetings, I’d be a witness to the formidable challenges confronting Group CEO Ralph Mupita and his team.
The capacity and expertise of MTN’s executives are being tested by forces beyond their control.
In Nigeria, the relentless depreciation of the currency is wreaking havoc on MTN’s operations.
The Nigerian government’s decision to devalue the naira and allow it to trade freely in the open market has decimated its value against the US dollar, erasing a staggering 97% of its worth.
This seismic shift has left MTN Nigeria grappling with operational nightmares, as its liabilities now outstrip assets by nearly 41 billion naira.
A recent report from News24 underscores the critical nature of MTN’s lease agreements for its tower infrastructure.
According to the report, these agreements, negotiated with American Tower Corporation (ATC) Nigeria and HIS Towers, are intricately tied to both the naira and the US dollar.
As a result, MTN is now exposed to the unpredictable fluctuations of the foreign exchange market, significantly impacting its financial performance through the end of 2023.
News24 reports that these lease agreements have resulted in a total liability of approximately R1 trillion naira, equivalent to just under $800 million, as of 2023.
This figure marks a notable increase from the restated 660 billion naira liability in the preceding year.
The consequences have been severe.
MTN Nigeria has registered a substantial loss of 367.4 billion naira, specifically due to the foreign exchange-tied portion of these agreements in 2023 alone.
MTN Nigeria CEO Karl Toriola’s candid admission that the future of the business hinges on the outcome of negotiations on these tower contracts underscores the gravity of the situation.
The deregulation of Nigeria’s market also involves the elimination of fuel subsidies that have long provided a buffer for consumers and businesses.
Consequently, fuel prices have surged by more than double, coinciding with the precipitous decline of the naira following currency reforms.
With the spectre of fuel price hikes looming large due to the removal of subsidies in the wake of market liberalisation, MTN Nigeria finds itself navigating treacherous waters.
Iran headache
Adding to Mupita’s headaches is the recent escalation of tensions between Iran and Israel.
As the owner of 49% of MTN Irancell, MTN is not immune to the geopolitical storm brewing in the region.
Tit-for-tat strikes between Israel and Iran further underscore the potential for MTN to be caught in the crossfire of geopolitical tensions.
This conflict introduces a myriad of challenges and uncertainties for companies operating in Iran, including MTN.
From operational disruptions to infrastructure damage, the risks are manifold. Market instability, currency fluctuations, and heightened security concerns only exacerbate MTN’s woes.
Mupita and his management team find themselves at the mercy of exogenous events beyond their control.
As I conclude my examination of MTN’s mounting challenges, it becomes evident that Mupita and his team are facing a perfect storm of economic and geopolitical pressures.
The depreciation of Nigeria’s currency, coupled with the removal of fuel subsidies, has placed immense strain on MTN’s operations in Nigeria.
The intricate ties of its lease agreements to foreign exchange markets only exacerbate the financial turmoil, as evidenced by significant losses incurred in 2023.
Moreover, the escalating tensions between Iran and Israel add another layer of complexity, with potential implications for MTN’s ventures in Iran.
The spectre of operational disruptions, infrastructure damage, and market instability looms large, underscoring the profound impact of geopolitical events on multinational corporations like MTN.
In light of these challenges, serious questions emerge: How can MTN navigate these turbulent times while safeguarding its interests?
What strategies can be employed to mitigate risks and ensure business continuity in the face of unpredictable economic and geopolitical shifts?
As Mupita and his management team grapple with these formidable obstacles, one thing remains certain: the path ahead demands resilience, foresight, and decisive action to steer MTN through the storm.
