MTN, Airtel’s jostle for 40m unbanked Nigerians intensifies

Making choices between two similar things can be really tough at times. Like British author J. K. Rowling said, “it is our choices that show what we truly are, far more than our abilities.”

This is the dilemma investors and subscribers find themselves in as Nigeria’s telecommunication giants, MTN and Airtel apply numerous approaches to reward loyal customers while also attracting new customers by offering them mouth-watering promotional deals and offers.

From the very beginning, both companies have contended toe to toe for revenue, for-profit and for a customer base, rivalling at the peak of Nigeria’s telecom space.

The latest development in the rivalry between the two firms is the granting of ‘payment service bank’ licenses to MTN and Airtel, two of the country’s biggest providers of telecom services.

Both received final authorisation from the Central Bank of Nigeria (CBN) in April, six months after an approval-in-principle was issued last November.

Last Thursday, MTN Nigeria’s fintech subsidiary, MoMo Payment Service Bank (MoMo PSB) Limited, formally commenced operations. Also, in a stock market statement, Airtel Africa announced subsidiary SmartCash PSB had started providing services through selected retail outlets with plans to expand across Nigeria in the coming months.

Estimated at over 40 million, Nigeria’s unbanked adult population who are mostly in the hard-to-reach rural communities are expected to have access to these incoming financial services.

“This is an important milestone for MTN Nigeria in our mission to support the delivery of financial services to everyone in Nigeria,” CEO of MTN Nigeria, Karl Toriola, said.

As their PSBs begin operations, MTN and Airtel will not provide every type of banking service in Nigeria. They won’t be able to lend to or facilitate foreign exchange transfers for customers, for example.

But the license will “open the opportunity for expanding reach to more remote, lower-income customers that banks have been unable to reach,” says Ashley Immanuel, the former CEO of EFInA, a group that publishes research on access to financial services in Nigeria.

The approval, which bank chiefs had earlier made frantic efforts to stall, has unearthed the underbellies of conventional bank players, who seem nervous about the coming of the telcos, as they hold a competitive edge in the retail goldmine.

“This is the beginning of our journey to revolutionise the financial services landscape in the country,” Airtel Africa CEO, Segun Ogunsanya said in a statement.

He added that the new would reach “the millions of Nigerians who do not currently have access to financial services by delivering current and savings accounts, payment and remittance services, debit and prepayment cards and more sophisticated services.”

As the telecoms giants begin operations, the competition has kicked off in earnest with strong revenue growth in their latest financial results, helped by increased revenue from voice calls and data consumption by network subscribers.

“Nigeria’s two largest GSM providers continue to post stellar performances despite the continued regulatory headwinds resulting from the Nigerian Communications Commission’s mandate that all subscribers’ SIM cards be linked to National Identification Numbers,” FBNQuest, an investment banking and asset management business of FBN Holdings plc, said.

According to Airtel Nigeria’s financial report, the total customer base of Airtel Nigeria increased to 44.4 million from 42.4 million the previous year, while data customer base increased by 14.9 percent to 20.3 million from 17.7 million the previous year.

Data gleaned from Nigerian Exchange Limited (NGX) showed Airtel Africa share price has grown by 46.60 percent year till date (YTD) from N1050.5 on January 5, 2022 to N1470 on May 20, 2022.

Read also: MTN welcomes over 6.6m Nigerians as shareholders

On the other hand, the yellow network, established in 2001, has also recorded remarkable growth.

The just-concluded public offer has seen its share price improve to N270 as at May 20, 2022, from the N90 in 2019 when it just got listed on the Nigerian Exchange Group.

“The approval of payment service banking licence for MTN and Airtel may well see both stocks continue to outperform through the year,” said Tajudeen Ibrahim, director of research at top investment bank, Chapel Hill Denham.

MTN Nigeria’s strength and growth have been conspicuous. First to enlist in the local exchange, first to test 5G, first to digitally trade shares, they have by and large, been pacesetters and are arguably one of Nigeria’s finest companies by market capitalisation in the NGX.

According to MTN Nigeria’s first-quarter financial report ending March 2022, it recorded revenue growth of 22.2 percent to N470.98 billion from N388.32 billion in the same period last year.

Unlike Airtel Africa which recorded total revenue of $1.22 billion consisting of 41.5 percent of Airtel Nigeria’s revenue, first-quarter financial report showed MTN Nigeria recorded a growth of 22.2 percent to N470.98 billion from N388.32 billion in the same period last year.

According to FBN Quest, the revenue growth for both companies was primarily driven by solid data revenue growth.

Airtel Nigeria’s data grew by constant currency growth of 32.5 percent while that of MTN Nigeria surged by 54.5 percent.

MTN Nigeria recorded a data revenue of N163.31 billion in the first three months of 2022 compared to N105.7 billion in the same period last year while Airtel Nigeria recorded data revenue of $507 million in the same period this year compared to $422 million in the comparable periods last year.

“Increased data usage per subscriber, sustained expansion of 4G network coverage and higher smartphone penetration were the supporting drivers of data revenue,” FBN Quest said.

Airtel Nigeria’s data usage per customer increased to 4.2GB/month in the first three months of 2022 from 3.2GB in the same period last year.

Aside from data, Airtel Nigeria’s revenue from voice grew by constant currency growth of 15.6 percent faster than the 6 percent voice revenue growth of MTN N.

Airtel Nigeria recorded a voice revenue of $268 million in the first three months of 2022 compared to $ 240 million in the same period last year while MTN Nigeria recorded voice revenue of N218.4 billion in the same period this year compared to N208.6 billion in the comparable periods last year.

Airtel’s voice revenue growth is attributed to its net customer’s addition of 2.4 million.

Both companies also recorded growth in other revenue. Airtel recorded a growth of 51 percent while MTN Nigeria recorded a growth of 31.3 percent.

Airtel Nigeria’s other revenue increased to $44 million in the first three months of 2022 from $30 million while that of MTN Nigeria increased to N31.6 billion in the comparable periods from N27.7 billion last year.

MTN’s other revenue comprises revenue from cloud and infrastructure services, information and communication technology (ICT) revenue.

Furthermore, MTN’s revenue from SMS, interconnect and roaming, handset and accessories, digital, and valu added services were N86.1 billion in total from N68.2 billion in the period under review last year.

Airtel Nigeria and MTN nigeria recorded an operating profit growth of 20.93 percent and 34.72 percent respectively in the quarter under review.

Airtel Nigeria recorded an increase in operating profit to $208 million from $172 million in the previous year while MTN increased to N179.3 billion from N133.1 billion in the first three months of 2021.

While the profit after tax of Airtel Nigeria wasn’t stated, its parent company; Airtel Africa, reported a profit after tax increase of 56 percent to $240 million at the end of the quarter, March 2022 from $154 million in the same period last year.

MTN Nigeria however reported a profit growth of 31.2 percent to N96.8 billion in the period under review from N73.7 billion last year.

MTN Nigeria’s cash flow however declined to N210.9 billion in the first quarter of 2022 from N348.7 billion in the comparable periods last year.

Airtel Nigeria only reported its operating cash flow which was up by 64.3% to $210 million in the quarter under review from $135 million , due to the expansion of underlying Earning Before Interest Tax Depreciation and Amortisation(EBITDA).