Tag: MTN

Telecoms giant, MTN yesterday said its tax dispute in Nigeria held the potential to improve the country’s tax jurisprudence, strengthen her finance system, and ultimately improve confidence in the business community. “Hence, stakeholders are watching keenly,” the company said.

The telco recalled that on October 20, 2023, the Lagos State division of the Tax Appeal Tribunal ordered MTN Nigeria to pay the sum of $47,776,210 in taxes to the Federal Inland Revenue Services (FIRS).

The ruling was delivered by a five-man panel of the Tribunal led by A.B. Hamed in an appeal marked TAT/LZ/VAT/075.

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The matter began on September 4, 2018, when the then Attorney General of the Federation, Abubakar Malami unilaterally imposed $2 billion in back taxes on MTN Nigeria, resulting in a legal action by MTN Nigeria against the AGF. In 2020, the AGF referred the matter to the Federal Inland Revenue Service (FIRS) and Nigeria Customs, withdrawing the letter of demand for the aforementioned $2 billion issued in 2018.

A series of engagements between FIRS and MTN led to the amount being revised to $93.6 million, comprising $72.6 million as principal liabilities and $21 million for penalties and interest. MTN’s objection to this amount resulted in an upward review to $135.7 million, comprising a principal tax liability of $47.8 million, while interest and penalty amounted to $87.9 million.

Increasing appetite for data consumption by Nigeria’s telephone subscribers has boosted the revenue of MTN and Airtel over the last three months ending September 30.

According to the financial result released by the two operators for the third quarter (Q3), MTN posted N279.5 billion (38.9 per cent) while Airtel earned N123.7 billion ($157 million) from data subscriptions, representing a 29.3 per cent growth in data revenue for the company.

This translates to an average revenue N403.2 billion representing about 34 .1 per cent rise in the combined earnings of the two carriers during the period under review.

Chief Executive Officer (CEO) Airtel Africa, Segun Ogunsanya, said Airtel Nigeria saw a significant increase in data consumption during the period under review.

He said: “Airtel Nigeria’s data revenue grew by 29.3 per cent in constant currency, driven by data customer base growth of 17.4 per cent and data average revenue per user (ARPU) growth of 12.3 per cent.

 “Our continued 4G network rollout has resulted in nearly 100 per cent of all our sites delivering 4G services. Furthermore, 233 5G sites are now operational.‘’

For the Q2’24 period, 4G customers accounted for 51.1 per cent of our total data customer base and contributed to 85.3 per cent of total data usage. Q2’24 4G data usage per customer reached 11.7 GB per month, an increase of 41.3 per cent (from 8.3 GB per customer per month in Q2’23).”

The impact of foreign exchange (forex) and crises in the country also impacted on their operations.

Ogunsanya, who said though the firm recorded a strong growth during the period under review, also said: “As reported in July 2023, our results for the first quarter were significantly impacted by the changes to the FX market in Nigeria, introduced by the Central Bank. Whilst the changes are required for the long-term benefit of the Nigerian economy, the immediate impact of the Naira devaluation continues to weigh on our reported financial performance in the period. Our focus remains to enhance long-term value by continuing to drive sustained and efficient growth.”

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Other highlights of the report showed that Airtel Africa posted a half-year revenue of $2.62 billion, representing a year-on-year increase of 2.3per cent from the corresponding period last year. 

It is noted in the report that the revenue, when measured in a constant currency, increased by 19.7per cent. However, when measured in reported currency, which is the US Dollar, the revenue only grew by 2.3 per cent. 

For the quarter ending September 30, 2023 (Q2 2024), the reported currency revenue declined by 4.7 per cent, and the decline was attributed to the impact of the Nigerian naira devaluation in June 2023.

However, in constant currency, the group posted a year-on-year revenue increase of 19.0per cent during the quarter.

According to the half-year financial statement for the period ending September 30, 2023, the group experienced a $13 million pre-tax loss, marking a significant 103.8per cent decrease from the $330 million pre-tax profit reported during the same period last year. 

The $13 million loss after tax was mainly caused by a $471 million forex loss, which was recorded in the finance cost before tax, and a $317 million loss after tax due to the devaluation of the Nigerian naira in June 2023.

During the period, the group recorded a 9.7per cent year-on-year increase in total customers to 147.7 million from 134.7 million in the half-year ending September 30, 2022. 

The group recorded a 23.0per cent year-on-year increase in its data customer base, from 48.6 million in H1 2023 to 59.8 million in H1 2024. 

All reporting segments experienced double-digit constant currency revenue growth. Specifically, in the mobile services sector, revenue in Nigeria increased by 21.7per cent, in East Africa by 20.6per cent, and in Francophone Africa by 10.9per cent.

Overall, the group’s mobile services revenue grew by 18.3per cent, with voice revenue increasing by 11.5per cent, data revenue by 28.1per cent, and other revenues by 19.0per cent.

Additionally, mobile money revenue saw a significant growth of 30.9per cent in constant currency, driven by a 34.9per cent increase in East Africa and an 18.7per cent increase in Francophone Africa.

Also, the Chief Executive Officer of MTN, Karl Toriola, said the increase in data usage was supported by the revamp of MTN data bundle offerings, an increase in the penetration of smartphones, and investments in its network to expand coverage and capacity and enhance customer experience.

 “Our 4G network now covers 80.5 per cent of the population, up from 79.1 per cent in December 2022. Data usage (GB per user) grew by 29.1 per cent to 8.6GB, and the number of smartphones on our network increased by 7.6 per cent, bringing smartphone penetration to 53.4 per cent, up. Consequently, we recorded a 46.3 per cent growth in data traffic, with the 4G network accounting for 83.7 per cent of the total traffic,” Toriola stated.

Toriola, in a trading update accompanying the statement, said: “The full impact of Naira devaluation and VAT on lease costs, exacerbated by ongoing inflationary pressures, is expected to crystalise in Q4. We, therefore, expect our EBITDA margin for FY 2023 to be in the range of 47-49 per cent. Capital intensity for FY 2023 is expected to be slightly above our medium-term target level of 18 per cent.”

MTN Nigeria Communications Plc on Monday, October 30, said it has appealed the decision of the Tax Appeal Tribunal (TAT) over the payment of $47.8million fine to the Federal Inland Revenue Service (FIRS).

Recall that TAT, sitting in Lagos had last week ordered the telco to pay $47.8 million in overdue taxes.

TAT claimed the amount is for unpaid taxes between 2007 and 2017.

A five-person tribunal rendered its decision in response to an appeal filed by MTN Nigeria against the FIRS’ request for payment of the unpaid tax.

Reacting to the decision, Chief Corporate Services and Sustainability Officer at MTN Nigeria, Tobechukwu Okigbo, said: “We are appealing. This is a significant reduction from the amount the AG had demanded undergirding MTN’s insistence that we did nothing wrong;

“Tax disputes are normal. The process of resolving these disputes, when and if they arise, is very important and MTNN is just following that process;

“It is important to note that MTN’s argument has always been that we will follow established processes in this and any other tax dispute. Our robust challenge of the AG’s demand at the time was premised on tax issues being outside his remit;

“Disputes like this and how they are resolved helps build and strengthen the system, which makes it imperative for broader push for fiscal policy reforms which will improve affordability for consumers and incentivize investments by operators.”

Meanwhile, MTN Nigeria has released results for the quarter ended September 30, updating the markets of the TAT’s decision to uphold a principal VAT liability of $47.8 million.

The telco recognized additional unrealized forex losses on outstanding matured trade obligations and increased net finance costs for the six months through June after incorrectly measuring them before, it said in a statement on Monday.

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That means MTN Group’s earnings per share for the first half were also restated and are now 13per cent lower than the Johannesburg-based company reported previously.

In a note to the Nigerian Exchange Limited and the investing public, the carrier said it received the decision of the TAT sitting in Lagos, adding that the decision pertains to the VAT assessment for the periods covering 2007 and 2010 – 2017, as issued by the FIRS to the company.

Company Secretary, Uto Ukpanah, in a statement, recalled that in 2018, the Attorney-General of the Federation and Minister of Justice (AGF) demanded approximately $2 billion in tax arrears from the company. In 2020, the AGF withdrew from the case and transferred the Form A-related transactions valued at $1.3 billion to the FIRS and the balance to the Nigerian Customs Service (NCS) to resolve the contentious issues.

After a series of engagements, the FIRS issued an initial assessment of $93.6 million comprising $72.6million as principal liability and $21 million for penalties and interest on the principal amount. Following an objection by MTN Nigeria and further engagements, the FIRS issued a revised total assessment of $135.7 million, representing a principal tax liability of $47.8 million and interest and penalty of $87.9 million.

He said: “To clarify the interpretation of the VAT Act’s provisions concerning the tax treatment of the transactions that led to the aforementioned assessments, MTN Nigeria filed an appeal at the TAT. The transactions in question primarily involve the alleged VAT payable on offshore training services provided to employees of the company, transponder services provided by a non-resident company, and software licensing and upgrades.

“On 20 October 2023, the TAT upheld the principal liability of $47.8 million and set aside the interest and penalty charges of $87.9 million. Having reviewed this outcome and considering input from our tax and legal consultants, MTN Nigeria has resolved to appeal the decision of TAT; we remain committed to meeting our tax obligations.”