MTN Nigeria Communications Plc reported a 165.9 percent increase in profit after tax to ₦355.5 billion for the first quarter ended March 31, 2026, but underlying performance shows rising capital expenditure and cost pressures that could weigh on future earnings.
Service revenue rose by 41.8 percent to ₦1.49 trillion, driven by strong growth in data, fintech and voice segments.
This supported earnings expansion with EBITDA climbing 68.1 percent to ₦828.3 billion and margin improving to 55.3 percent.
However, cost trends point to increasing operational pressure aas total expenses rose by 18.5 percent, driven by higher network operating costs, commissions, employee expenses and energy-related costs.
While revenue growth outpaced costs in the quarter, sustaining this gap remains a key challenge in a high-inflation environment.
Depreciation and amortisation increased by 30.6 percent due to the impact of aggressive network expansion and higher right-of-use assets.
This trend highlights the long-term cost implications of continued infrastructure investment.
Capital expenditure remains a major concern as capex excluding leases surged by 92.8 percent to ₦390.3 billion, pushing capex intensity to 26 percent.
The sharp increase reflects accelerated investment in network capacity to support rising data demand, but also signals growing cash commitments that could pressure free cash flow if not matched by sustained revenue growth.
Although free cash flow increased by 55.6 percent to ₦326.5 billion, the pace of capex expansion suggests tighter liquidity conditions ahead if investment levels remain elevated.
Energy cost exposure also remains a risk. The company noted that diesel price assumptions could impact full-year EBITDA margin by up to 2 percentage points, underlining vulnerability to Nigeria’s volatile energy market.
Despite the strong profit growth, the quality of earnings was influenced by lower net finance costs, which declined by 38.7 percent following the repayment of foreign currency loans.
This reduced FX risk and boosted bottom-line performance, but represents a non-recurring support factor rather than a core operational improvement.
Further pressure stems from regulatory developments. The temporary suspension of the Xtratime service due to new digital lending rules highlights evolving compliance risks that could affect revenue streams, particularly within fintech.
While MTN Nigeria continues to benefit from strong demand fundamentals, including rising data usage and increasing digital adoption, the Q1 2026 results indicate a growing imbalance between earnings growth and underlying cost and investment pressures.
The company’s ability to sustain profitability will depend on maintaining revenue momentum, managing cost escalation and optimizing capital allocation in an environment defined by inflation, energy volatility and regulatory shifts.
