BusinessDay

Airtel, MTN grow profits amid subscriber slowdown

Airtel Africa and MTN Nigeria posted growth in their second-quarter profits, but continue to struggle to get back to their peak periods in terms of the number of returning subscribers and the headwinds that have impacted subscribers’ wallets.

In its recently released financial statement, Airtel, the second largest telecom operator in Nigeria, saw its profit increase 25 percent in the second quarter ending June 2022 to $178 from $148 million in the same period last year. The telco’s revenue rose by 13 percent to $1.26 billion in the period under review from $1.11 billion in the same period last year.

MTN, the largest telecom operator in the country, also reported a profit after tax of N181.6 billion for the first half of the 2022 financial year, up 28.1 percent from N141 billion in the corresponding period last year, according to its latest financial report. The telco’s revenue rose to N950 billion from N791.2 billion in the corresponding period last year.

While the two companies saw growth in different service areas including fintech and data, the number of subscribers is far less impressive. This affected revenue in voice calls.

Segun Ogunsanya, chief executive officer of Airtel, said the telco faced headwinds from outbound voice calls following the decision by the Nigerian Communication Commission to ban SIMs not registered with the National Identity Management Commission (NIMC) and without National Identification Numbers (NINs).

For consumers to gain access to their SIMs again, telcos have been working with the NIMC to link the NIN information received with the SIM of the respective subscribers and share the same with the commission. After moving the deadline for customers to register their NIN with their SIM, the NIMC finally closed registration on April 4, 2022. All SIMs that have not been linked to a NIN were subsequently placed on ‘receive only’ status, which means all their outgoing calls were barred with immediate effect.

Subscribers of such lines can only link their SIMs to their NINs in order to have the restrictions lifted. Airtel saw a total of 13.6 million customers initially barred. However, the telco said it has seen 5.3 million subscribers, about 39 percent, submit their NIN out of which 2.3 million – about 17 percent – have subsequently been verified and unbarred.

“Revenue in reported currency grew by 13 percent. This overall growth is slightly slower than recent trends due to some specific challenges this quarter largely as a result of the effect of voice customers barred in Nigeria,” the telco noted in the report.

Airtel estimates that barred SIMs resulted in the loss of approximately $34 million of revenues in the second quarter, providing a drag on revenue growth of almost 3 percent at the group level (impact of 7.5 percent in Nigeria).

MTN also acknowledged similar outcomes in its report. The telco saw approximately 10 million subscribers whose SIMs were barred submit their NIN, of which only 2.6 million have been reactivated following verification by NIMC.

“In terms of how general traffic trends have evolved since the implementation of the directive, we have seen a gradual recovery in total voice traffic as the affected subscribers are reconnected to resume voice calls, and gross connections continue to ramp up. Data revenue has continued a steady increase supported by the switch to data by affected subscribers although it has not yet fully compensated for the decline in voice revenue of restricted subscribers,” Karl Toriola, CEO of MTN Nigeria, said.

The implication is that NIMC’s capacity deficiencies have become the albatross of the telcos. The total number of Nigerians with NINs stood at 82.73 million as of May 2022, which is a growth of about 10.3 million from January when the number was at 72.7 million. This means that NIMC issues an average of about 2 million NINs per month.

Aliyu Aziz, director-general of NIMC, also confirmed this in an interview on the Nigerian Television Authority, saying while the commission has the capacity to issue about three million NINs monthly, the most it can accommodate is only 100 million Nigerians. In other words, once the capacity hits that capacity, millions of Nigerians wouldn’t be able to get their NINs unless the commission’s server is upgraded.

The commission has experienced a series of server glitches since February as the deadline for registration kept approaching. In April, many Nigerians who wanted to renew their international passports were left stranded because the server was not working.

For telcos like MTN and Airtel, the capacity deficiency is not good news. At 82.7 million already and going by the 2 million monthly verification, it means the NIMC could hit the 100 million capacity by November.

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The combined subscriber total of MTN at 79 million and Airtel at 59 million is above the 100 million mark of the commission. It, therefore, means that many subscribers of the telcos would not get back full access to their SIMs.

In the meantime, the telcos have to grapple with galloping inflation in the prices of commodities impacting the ability of subscribers to buy more airtime or data bundles.

“Inflation is also having an impact on our cost base, particularly on energy costs, but our continued efficiency drives have ensured that we have still been able to increase our margins, albeit at a slightly slower rate,” Ogunsanya said in the Airtel report.

The telco recently sold off some tower assets in Tanzania, Madagascar, and Malawi to a Joint Venture comprised of SBA Communications Corporation and Paradigm Infrastructure. While it is yet to sell tower assets in Nigeria, Airtel is battling with the wild fluctuation of the foreign exchange.

“Our largest exposure is to the Nigerian naira, for which a 1 percent devaluation would have a negative impact of $19 million on revenues, $11m on EBITDA, and $7 million on finance costs,” the telco added.

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