MTN plans price hikes in some African markets as inflation soars; but unlikely to do so in Ghana
MTN Group Ltd. is planning price increases in certain markets, as Africa’s largest wireless carrier battles with inflationary pressures on the continent.
The telecom company, which operates across 19 countries including South Africa, Nigeria and Ghana, said Thursday in a trading update, it will continue to talk to regulators over the proposed price increases. Inflation across MTN’s footprint averaged 18.5% during the first quarter, compared with 11.5% a year earlier, it said.
“Within this environment of elevated inflation, implementing selective price increases across the portfolio remains a critical priority,” MTN Chief Executive Officer Ralph Mupita said in the statement.
Russia’s war in Ukraine and the impact of debt accumulated during the Covid-19 pandemic on the region’s currencies has fueled inflation in Africa. In MTN’s home market of South Africa, a worsening series of power cuts has also contributed to price pressures, stunting economic growth and spending in the country. In Ghana, where inflation was over 50% earlier in the year, interest rate increases are making it more difficult for consumers to afford credit.
But despite the high inflation rate recorded in the country earlier this year, inflation in Ghana has been a downward trend falling by as much as 1,120bps (11.2%) from 52.4% to the current 41.2% as at end-April 2023.
MTN Ghana in 2022 also recorded strong returns on its operations in the country posting net profit of some GHS 745m ($68.3m).
MTN’s 1.3% domestic 1Q service revenue growth suffered from power shortages as highlighted by the company earlier, yet could improve later in 2023 following price rises in April and actions to improve its electricity supply. Possible exits from three West African operations (2.6% of 2022 revenue and 1.8% of Ebitda) make sense, fitting with the simplification strategy and potentially bringing in cash, which can be used to boost shareholder returns.
MTN revenue rose 15% from a year earlier to 53 billion rand ($2.8 billion) in the first quarter, the company said.
Capital expenditure for the year will remain at 37.4 billion rand, despite the potential impact of local exchange rates weakening against the dollar and accelerated work in South Africa to improve its network resilience in response to the power cuts.
“We anticipate that trading conditions across markets will remain challenging for the remainder of 2023,” said Mupita.
MTN said it was evaluating an exit from Guinea-Bissau, Guinea-Conakry and Liberia in West Africa over the medium term. The group has received an offer for its equity interests in those three units from Axian Telecom, which is being evaluated, it said, confirming an earlier Bloomberg report.
