MTNN sees its profit margin dropping by nearly half a percentage point in 2020 as its tower services, which it leased from another company, reel from exchange rate shocks, Reuters said Thursday.
The Nigerian subsidiary of Johannesburg-based MTN Group said the conversion rate it used for its operations fell 6.5% to N385, after the modification of retail foreign exchange rate by the Central Bank of Nigeria in an attempt to harmonise the country’s multiple exchange rates system.
The shift to reference rate, currently at N360-385, will scale Earnings Before Income Tax, Depreciation and Amortisation by roughly 0.4% according to the IFRS16 financial reporting rules, MTNN stated.
It leases most parts of its tower and network gadget sites from telecom infrastructure provider, IHS Towers, and said in a statement it has completed the renegotiation of some terms of the leasehold.
In 2014, the company sold its tower asset to concentrate on its core business.
The slightly weaker earnings will be reversed with the passage of time by deeper rural connectivity, better pricing as well as operational efficiencies.
It affirmed the coronavirus outbreak has revealed the importance of digital infrastructure and that its deal with IHS alongside other tower companies will position it for improvement of fibre networks and connection of rural areas that currently lack telecom services access.