Airtel Africa, MTN Nigeria Grapple With Currency Shocks Despite Gains

The dual impact of currency devaluation and macroeconomic instability continues to weigh heavily on Airtel Africa and MTN Nigeria, overshadowing strides in operational performance and market penetration.

While both firms are forecasted to recover earnings in 2025, lingering challenges in Nigeria’s economic environment highlight significant risks to their valuation and growth prospects.

Airtel Africa reported a modest 6.1 per cent year-on-year increase in its subscriber base to 156.64 million, bolstered by expanded network coverage and deeper mobile money adoption.

However, the devaluation of Nigeria’s naira sharply eroded revenue from its largest market, leading to a projected 25.7 per cent decline in Nigerian revenue for 2025.

Growth in East Africa (+8.9%) and Francophone Africa (+8.6%) partially offsets this slump, fueled by steady subscriber increases and stable average revenue per user (ARPU).

The company’s revenue for 2025 is expected to rise by just 2.0 per cent, reflecting the broader pressure of currency depreciation despite strong operational metrics in constant currency terms.

Mobile money services remain a bright spot, with projected 38.9 per cent growth driven by subscriber growth to 42.96 million.

However, EBITDA margins are forecasted to drop by 435 basis points due to escalating operating costs in Nigeria. Against this background, analysts at Cordros Capital have adjusted Airtel Africa’s valuation slightly, with a year-end target price of N2,396.55 per share (previously N2,398.52), reflecting an 11.1 per cent upside potential.

While return metrics, including ROE and ROA, are expected to recover to 6.5 per cent and 1.5 per cent, respectively, free cash flow (FCF) margins are projected to decline to 7.6 per cent as operational expenses surge.

MTN Nigeria’s Q3’24 results marked a return to profitability, driven by cost savings from renegotiated tower leases and a 29.2 per cent projected revenue growth for 2024.

Data services are anticipated to contribute the lion’s share of this growth (+35.5%), supported by rising ARPU (+25%) and sustained investments in network enhancements.