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MTN revenue hit by Nigerian fuel subsidy cut

January 9, 2012 • Mobile and Telecoms, Top Stories

After the Nigerian government removed fuel subsidies, mobile-phone operator MTN Group posted their biggest two-day decline since January 2009. As fuel subsidies are cut, consumers face the tough choice of either buying airtime or fuel.

After the Nigerian government removed fuel subsidies, mobile-phone operator MTN Group posted their biggest two-day decline since January 2009

While the company has a market value of R248.9-billion, stocks in MTN dropped by 5.4%, ending the trading day on R132.06 per share.

“People will have to choose between buying phone airtime and paying for transportation as fuel prices climb”, said Khulekani Dlamini, Head of Research at Cape Town-based Afena Capital.

“Nigeria contributed R16.5 billion ($2 billion) to MTN’s total revenue of R56.5 billion in the first half through June, about a third of the group’s total revenue, when the nation generated earnings before tax, interest, depreciation and amortisation (Ebitda) of R10.48 billion, 42 percent of MTN’s total Ebitda,” wrote Leadership.

Nigerian president Goodluck Jonathan announced the removal of N1.2 trillion ($7.5 billion) in fuel subsidies on 1 January 2012.

“Ending the subsidy will more than double petrol prices on the official market, and prices of other goods will climb because of the higher transportation costs. Transportation affects everything,” Dlamini added.

The company’s revenue is also threatened by Iran’s nuclear programme, as sanctions put pressure on the Middle-Eastern nation. MTN’s Iranian unit – MTN Irancell – contributes about R5-billion in revenue, which is approximately 8% of total revenue and R2.1 billion in Ebitda.

Charlie Fripp – Acting online editor

Comments

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One Response to MTN revenue hit by Nigerian fuel subsidy cut

  1. Shilpa says:

    I look at this as an opportunity for MTN to look at different ways of growth in the Nigerian market. Telecom is a means for connecting people together irrespective of the distances. This gives an opportunity for more companies to introduce work from home policies and use products introduced by MTN to get connected for teleconferences and other important meetings. This should in turn increase MTN revenues and future growth possibilities. I agree there is a tactical impact leading to revenue loss but we need to look at the bigger picture. Just my two cents.

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