ABUJA - MTN Nigeria is restructuring its tower agreements in response to the challenging economic environment characterized by volatile foreign exchange rates and rising energy costs. At the company's Capital Markets Day event, CEO Karl Toriola emphasized the need for periodic reviews of tower contracts to ensure operational efficiency and value creation tailored to specific site requirements.
The telecommunications giant is adopting a strategic approach to cost management and energy efficiency, which includes the recent awarding of increased site management responsibilities to American Tower (NYSE:AMT) Corporation (ATC) and the upcoming renewal of contracts for 1,500 sites. The company's focus on green energy adoption and sustainability is part of a broader initiative to bolster broadband penetration and technology deployment across Nigeria.
CFO Modupe Kadri underscored the importance of energy efficiency and independent power projects within MTN's expense efficiency program. The outcome of a competitive bidding process has resulted in ATC expanding its portfolio from managing 2,300 sites (13% of MTN's sites) to 4,700 sites (26%), by acquiring contracts set to expire between 2024 and 2025 from IHS, which currently manages 14,600 sites or 80% of MTN's total sites. This shift will reduce IHS’s control to approximately 12,100 sites or 66% of the total.
Renegotiating tower contracts is crucial for MTN Nigeria as it navigates through the pressures of forex fluctuations and escalating energy expenses. Toriola also provided updates on the company's 'Ambition 2025' strategy, expressing confidence in Nigeria’s digital economy prospects amid ongoing economic reforms. These reforms are intended to promote financial inclusion and enhance stakeholder engagement with macroeconomic changes. Toriola highlighted the vital role that private sector investments play in tapping into growth opportunities within a supportive business climate.
InvestingPro Insights
Drawing from real-time data provided by InvestingPro, MTN Nigeria (MTNJ) showcases strong financial health with a high earnings quality where free cash flow exceeds net income. This strength is further reflected in its accelerating revenue growth and high return on invested capital. InvestingPro Tips also highlight MTNJ's strong earnings, which should allow the management to continue dividend payments, and its consistently increasing earnings per share.
On the other hand, American Tower Corporation (AMT) has also demonstrated financial resilience by raising its dividend for 12 consecutive years. However, it's worth noting that 3 analysts have revised their earnings downwards for the upcoming period.
In terms of InvestingPro Data for AMT, as of Q3 2023, the company had a market cap of 92.18B USD and a P/E ratio of 129.03. Its revenue stood at 11062.5M USD, with a growth rate of 5.85%. The gross profit margin was 70.58%.
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