Rising diesel costs are putting pressure on MTN Nigeria’s profitability, with the telecommunications company revealing that about 95% of its network in the country is powered by diesel generators.

The disclosure was made by Ralph Mupita, MTN Group President and CEO on Monday during the presentation of the company’s interim results for the six months ended June 30, 2026.

Mupita says higher global oil prices during the period translated into increased diesel costs for the Nigerian operation, where dependence on generators remains extensive.

“Our network in Nigeria is like 95% on diesel generators, 5% on the grid,” Mupita says adding that energy costs, largely driven by diesel, now account for more than 30% of MTN Nigeria’s operating expenditure.

“Just over 30% of opex within Nigeria is energy prices, and that’s substantially diesel,” he says.

Diesel costs to hit coming quarters

The impact of higher diesel prices, according to Mupita, is not limited to the quarter in which the increase occurs because of the way MTN Nigeria’s energy contracts are structured. The cost recognised in a quarter is based on the average diesel price from the previous quarter. This means the effect of fuel-price movements can carry into subsequent reporting periods.

“And the way our contracts work, the cost in the quarter is the prior quarter’s average diesel price,” he explained. As a result, the higher diesel prices experienced during the second quarter are expected to affect MTN Nigeria’s third-quarter operating costs.

“What we experienced in Q2 of this year will come into Q3, and then Q3 will come into Q4,” Mupita says.

The cost pressure comes as MTN continues to invest heavily in its Nigerian network to meet growing demand for connectivity.

Data demand drives network investment

Mupita said demand for MTN’s services remains structurally strong in Nigeria, particularly as customers consume increasing amounts of mobile data.

He disclosed that the company recorded 2.7 million net customer additions in the first quarter, while average data consumption per customer reached 14.8GB.

The increase in data usage is pushing the company to continue investing in network capacity.

Mupita said MTN’s capital intensity in Nigeria exceeded 20% during the period as the company pursued growth in its mobile network and expanded its home connectivity strategy.

The operator is targeting the home broadband market through a combination of fixed wireless access and fibre, areas it believes offer significant growth opportunities in Nigeria.

The challenge for the company is that expanding network infrastructure also increases the amount of equipment that needs to be powered, making energy efficiency increasingly important to the economics of network expansion.

Nigeria remains a key growth market

Despite the pressure from energy costs, MTN maintained that Nigeria continues to offer strong growth opportunities.

Mupita described demand in the Nigerian market as robust, pointing to continued customer additions and rising data consumption.

He also noted that the naira remained relatively stable during the period, while liquidity at the prevailing exchange rate was not creating significant difficulties for the company. Inflation also moderated during the period.

However, higher diesel prices remain a major cost concern. Mupita says the impact of energy prices means MTN expects its Nigerian operation to remain within its medium-term guidance but towards the lower end of its EBITDA margin range.

“We are confident that the medium-term guidance framework we gave around Nigeria will maintain on service revenue, on the EBITDA margin will still be in range, but because of the high energy prices, we see ourselves at the lower end of the range,” he says.

The lower end of that range is around 53% EBITDA margin, according to the MTN CEO.

Airtime advance adds another pressure

Energy costs are not the only factor affecting MTN Nigeria’s financial performance.

The company also faced a significant revenue impact after Nigeria’s competition authorities directed it to suspend its airtime advance service in April.

Mupita said MTN responded by reducing its airtime advance base to about a quarter of its first-quarter run rate.

The suspension affected revenue generated during April, May and June, contributing to the weaker service revenue performance reported for the quarter.

However, MTN subsequently received communication from the competition authorities allowing the company to move towards restoring airtime advance through four vendors.

Mupita expects this to support the recovery of the business during the second half of the year, although he cautioned that the restoration would not immediately return the operation to its previous level because of the need for the new vendors to build experience and optimise their operations.

AI emerges as cost-cutting tool

Against the backdrop of rising energy expenses, MTN is also looking at technology, including artificial intelligence, to improve operational efficiency.

Ferdi Moolman, MTN CEO, South Africa says the group’s cost-efficiency programme is increasingly focused on structural changes to how the business operates rather than simply cutting expenses.

He cited the use of AI to improve power consumption at network sites in South Africa as an example.

“We did some proof of concept (POC) in the Western Cape, used AI to help us get more efficiency out of power consumption, which was very successful,” he says.

MTN plans to expand the initiative across the country. Moolman says the company still has significant room to extract efficiencies, with the broader cost initiative expected to take two to three years because of its structural nature.

For MTN in Nigeria, however, the scale of diesel dependence means energy costs will remain a major factor in determining how much of its strong data and subscriber growth translates into profitability.

Technology Times Reporter
oladapo.rilwan@technologytimes.ng