MTN revenue hit by Nigerian fuel subsidy cut

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.

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