Stiff competition, increasing consumer awareness and rapid smartphone penetration have forced mobile network operators (MNOs) to constantly crash data tariffs and give massive discounts to their customers to maintain or increase their market share.
With the number of active data users increasing and data revenues accelerating year on year, data has been clearly identified as the future of telecoms, and service providers in Nigeria are investing massively in data service infrastructure and fiercely competing for the most favourable prices to draw in customers and continuously ramp up revenues.
Compared to other African countries, Nigeria has the cheapest data prices available for telecoms subscribers, with the four major operators – MTN, Airtel, Globacom and 9mobile – offering internet data for as low as N50 for 25MB (megabytes) of data for daily plans and all-day social network bundles.
MTN Nigeria saw its active data subscribers increase by 6.5 percent to 25.2 million in 2019.
“As a result, the ratio of active data users to total mobile subscribers increased by 7.1 percentage points to 39.2 percent in 2019 with strong potential for future growth,” MTN said in a statement accompanying its 2019 annual results.
“We have seen rapid acceleration in data revenue growth. We added 5.3 million new smartphones to our network, bringing smartphone penetration to 41.8 percent of our base, while data traffic rose by 85.8 percent. Our interventions in the year helped to drive a 42.4 percent increase in data revenue for the year.
Data contributed 18.8 percent to service revenue, up 3.9 percentage points from 14.9 percent in 2018,” MTN said.
Apart from regular monthly, weekly and daily data plans, service providers are aggressively launching new bonus promotions and campaigns that further crash prices and offer more value for less, like the MTN double data promo, Airtel home broadband promo and Airtel Mega plans, Glo Oga Sim, 9mobile more blaze and 9x offer that gives nine times more for the value of original data plan.
“The reality is that we operate in an environment where there is constant pressure to reduce tariffs. To remain competitive, we have to give heavy discounts in the interest of customers,” a source at MTN Nigeria told BusinessDay.
A near saturation of the voice market, the use of dual SIM cards by most subscribers, increased pressure on consumer spending and the unstable naira have seriously impacted on the revenue profile of telecoms companies in Nigeria.
Also, the Nigerian Communications Commission’s directive has made it even more important for Telcos to entice customers with reduced data price offerings. The NCC has mandated that there should be no automatic renewal of a plan without the customer’s consent, no automatic migration of subscriber’s data service to the Pay-As-You-Go account upon depletion of the data bundle account except with the express consent and authorisation of subscriber via SMS, and all unused data allowance should be rolled over upon subscription of a new plan.
BusinessDay investigation shows that MTN, Nigeria’s largest mobile network operator, offers cheaper data prices in Nigeria than in South Africa where the company originated, and Ghana where it also operates as a leading player.
1GB of data on MTN in Ghana with a validity period of 30 days costs 20 Cedis (N1,342), and 149 Rand (N3,532) in South Africa, while MTN charges its Nigerian customers only N1,000 for 1.5GB of data with the same validity period.
Airtel has priced its 2GB data at N1,200 for 30 days for its Nigerian subscribers. However, in Ghana, 2GB of Airtel Tigo data costs 30 Cedis (N2,013) for the same 30-day period.
“The global affordability target is that 1GB of data should cost no more than 2 percent of national income, and today we can get 1GB of data for $1.50 which is 2 percent of the new minimum wage, so that’s good news. But we need to address if this has come at the expense of reliability,” Omobola Johnson, former chairperson for the Alliance for Affordable Internet, said.
Industry watchers say the reduced cost in Nigeria is a result of the huge mobile subscriber numbers of over 173 million and deepening smartphone penetration levels.
In terms of investment in internet service provision, 9mobile which was bought by Teleology Holdings Limited says it plans to double the 9mobile network with new 3G/4G specific cell sites as well as several thousands of kilometres of fibre optic cable across the country and also drive a special programme of rural internet coverage, focusing on 4G with broadband access planned for all of Nigeria’s 774 local government areas.
The company last week revealed that part of the $230 million loan facility got from the Africa Finance Corporation (AFC) in August 2019 will be used to expand its fourth generation, long-term evolution (4G LTE) network.
MTN used N200 billion short-term syndicated loan from 12 Nigerian banks for expansion and improvement of data services where it sees a major part of its revenue growth coming from in the future.
“Our revenue base is still largely dominated by voice which contributes about two-thirds of our total revenue, but what we are beginning to see is that people are not making calls as much as they used to, and are more interested in data-based applications, so, as we transition into this movement, we need to invest in our network,” Kunle Awobodu, MTN’s chief financial officer at the time, told BusinessDay.
Nigeria suspended its plans to enforce the price floor plan due to an uproar from subscribers protesting this action which may have hiked data prices in 2017. As a result, bigger operators with massive infrastructure investment in broadband cable and spectrum ownership had the competitive advantage to charge very minimal prices for their data offerings.
Price floor is one of the regulatory safeguards normally put in place by the telecommunications regulator to check anti-competitive practices, particularly by the dominant operators. It is therefore a minimum price on a good, commodity, service, etc as stipulated by government or the regulator.
Without a price floor, the dominant operators can engage in predatory pricing to squeeze other operators which could create industry monopoly.
NCC said it planned to enforce price floor for data services in the country to address market distortions, unhealthy price wars and value erosion that could threaten the concern of the service providers.
“Consequently, there is a gradual paradigm shift from voice telephony services to data and digital services. In line with the global trend to drive the vision of Internet of Things (IoT), the network service providers in the country embarked on aggressive promotional campaigns. As a result, all market players follow each other in introducing daily packages and engage in serious price war,” the regulator said in a statement sent to BusinessDay.
“Some operators were actually pricing below cost and this will affect the ability to continue in operational existence if the issues were not addressed urgently,” it said.
However, the Nigerian Senate suspended the plan.
Before the new suspended price floor of N0.90k/MB, the industry average for dominant operators including MTN Nigeria Communications Limited, 9mobile and Airtel Nigeria Limited was N0.53k/MB.
9mobile offered N0.94k/MB, Airtel N0.52k/MB, MTN N0.45k/MB, and Globacom N0.21k/MB.
The smaller operators/new entrants charge the following: Smile Communications N0.84k/MB, Spectranet N0.58k/MB, and NATCOMS (NTEL) N0.72k/MB.
Jumoke Akiyode-Lawanson
