Nigeria’s telcos record first internet subscription growth in nine months

After eight consecutive months of internet subscription decline, Nigeria’s telecommunication sector recorded its first growth in August, data from the Nigerian Communications Commission (NCC) shows.

The fading impact of the Federal Government’s policy that temporarily banned the sale and activation of new SIM cards is the reason behind the first increase in internet subscriptions, analysts said.

The sector with the highest customer base by any Nigerian industry reported 0.35 percent month-on-month growth in internet subscription to 139.87 million in August from 139.38 million in July.

On a year-on-year comparison, the increase was however lower by 6.67 percent when compared to the 149.34 million reported in the comparable period of 2020.

“The m/m decline which began in December ’20 when the ban was announced peaked in March ’21 at -2.4%. The ban was lifted in April ’21 and the rate of decline in active internet subscriptions has steadily decreased since then,” research analysts at FBNQuest said.

Breakdown of the NCC data shows that MTN Nigeria, in the review period had the largest market share (41.9%) with 58.6 million internet subscribers. The market share for Globacom, Airtel and 9mobile were 27.6percent, 26.2percent, and 4.3 percent respectively.

Meanwhile, the complexity around the government SIM registration policy stifled the telecom industry growth. In the last one and half years, growth in Nigeria’s telecommunication industry consecutively reported a slowdown to June 2021.

The sector reported a growth of 5.90 percent in the second quarter (Q2) of 2021, 12.2 percentage points lower than the 18.10 percent reported in the corresponding quarter of 2020, and lower than the 7.69 percent growth in Q1’ 2021 by 1.79 percentage points, according to the second-quarter GDP report by the National Bureau of Statistics (NBS).

“It can be traced to the complexity in the acquisition of new SIM cards as well as the linkage of NIN to phone numbers,” Ayo Ebo, senior economist/head, research and strategy, Greenwich Merchant Bank, said in August.

Before the second quarter of 2020, about the same period the government commenced the policy that banned SIM registration, which also required telecom users to link their National Identity Number (NIN) to their SIM, the mobile service industry was growing by double digits every quarter. It grew 18.1 percent, 17.36 percent and 17.64 in the second, third and fourth quarter of 2020, helping to lift the economy out of the pandemic-induced recession as other sectors contracted.

The second-quarter growth of 5.90 percent is the lowest the sector has recorded in three years, an indication that the economy may have grown better if it had continued on its double-digit growth trajectory.
The ill-timed policy, which mandated the telecom sector to register over 100 million people in two weeks or lose half of their customer base, stifled the sector growth.

According to data from the Nigerian Communications Commission (NCC), the biggest telecom provider, MTN Nigeria, lost 4.8 million subscribers in Q1’ 2021. Airtel lost 5.26 million subscribers, while Globacom and 9mobile lost 1.92 million and 131.7 thousand subscribers, respectively. This means about 12.1 million subscribers were lost in Q1’ 2021.

The telcos have done a great deal in growing their subscribers over the years. As of 2001, only about 400,000 Nigerians had telephone lines from the defunct Nigerian Telecommunications Limited (NITEL). In 20 years, Nigeria has about 208 million active lines.

This means that every year about 10.4 million lines were activated and 866,000 lines were activated on an average monthly.

The telcos listed on the Nigerian Exchange Group – MTN and Airtel – saw a surge in their revenue despite the loss in subscribers. MTN grew its revenue 17.2 percent year-on-year to N385.1 billion, while Airtel recorded revenue growth of 15.4 percent growth to $1.03 billion in Q1’ 2020.

MTN recorded a 42 percent growth in profit to N73.7 billion in Q1’ 2020 compared with N51.7 billion in Q1’ 2021. The management of MTN explained that the effect of the SIM ban on voice revenue was offset by increased data usage by active SIMs in its base and migration to a higher quality of experience. Airtel also grew its profit by 1.8 percent to $415 million.

However, over 2 million Nigerians were rendered jobless by the suspension of sale, registration and activation of SIM cards, according to the Arewa Telecom Operators Agents and SIM card Dealers Association (ATOASDA). There are now about 23 million jobless Nigerians, according to the NBS.

The telecoms industry in the second quarter of 2021 attracted its lowest foreign investments ($340,000) since the data agency, NBS, started collating figures in 2013.

Before now, the sector had attracted an average of $87.7 million every quarter since 2013, according to data compiled by BusinessDay.

Read also: NCC denies disqualifying Nigerians below from getting SIM

That helps provide a context of the magnitude of the slump in foreign investment in a sector that has powered Nigeria’s economy in recent times and has been resilient in the face of two recessions in five years.

While NCC attributed the decline to both COVID-19 and the exchange rate volatility, analysts say it can also be traced to the recent move by the government, as policy uncertainty remains one of the biggest barriers preventing foreign investors from exploring the opportunities in Africa’s largest economy.

Investment in the telecoms sector slowed in the whole of 2020 following a 55.7 percent decline to $417.48 million from $942.86 million. The decline mirrors the 60 percent slump in total foreign direct investment into Nigeria in the same period, as the COVID-19 pandemic upended investment flows.

But the sector’s customer base and the already existing infrastructure is expected to help boost the industry growth, according to analysts.

“Nigeria is regarded as the biggest telecoms market in Africa with a teledensity of 99.18% as at end-August ’21, based on a population estimate of 190 million,” analysts at FBNQuest said.

Quoting the data by the state-funded NBS, the asset management arm of FBN Holdings said haven, expanded by 5.9 percent year-on-year in the second quarter of 2021, the 14.4 percent contribution by telecommunications to Nigeria’s GDP in the review period is the highest it has contributed to GDP so far.

Meanwhile, the federal government, Last month, approved the deployment of the 5G network in Africa’s most populous nation. The deployment, according to the minister of communication and digital economy, is scheduled for January next year and is expected to be deployed in phases, starting from major cities in the country.

“We understand that as part of its 5G technology deployment plan, the NCC will hold an auction of slots in the 3.5GHz spectrum band for Mobile Network Operators (MNOs). The commission has pegged the reserve price for acquiring each slot at NGN75bn – NGN100bn and anticipates raising NGN500bn from the auction,” FBNQuest said.

According to the telecom industry regulator, Nigeria’s broadband penetration stood at 41.0 percent in August 2021, from 39.8 percent recorded in the previous month. The Nigeria National Broadband Plan for 2020-2025 which was unveiled last year and aims to deliver data download speeds of at least 25Mbps in urban areas and 10Mbps in rural areas, with effective coverage available to at least 90 percent of the population by 2025 at a price not more than NGN390/GB of data.

While not unachievable, attaining a population coverage target of 90 percent, FBNQuest said it “would require a concerted effort by key stakeholders and sizable investments of between USD3.5bn and USD5bn by the major network operators.”