The complexity of the Federal Government’s policy that affects the acquisition of new SIM cards as well as the linkage of National Identity Number (NIN) to phone numbers is expected to reduce the mobile phone subscriber base, according to Agusto & Co. 2021 Telecommunications Industry report.
The telecoms sector, which has the largest customer base by any industry in Nigeria is projected by the credit rating agency to shed at least 3 percent of its subscriber base in 2021.
“On the back of anticipated SIM deactivations for subscribers without valid NINs, we estimate that the subscriber base will shrink by 3% (year-on-year) by the end of 2021 to 198 million subscribers,” research analysts at Agusto & Co. said.
Data by the Nigerian Communications Commission (NCC) revealed that in the last ten months to July 2021, the telecommunication industry shed 9.67 percent of its subscribers to 187.81 million in the seventh month of this year from 207.91 million in October 2020.
The mobile services industry has not only been affected by the fragile macroeconomy, but the unfavourable regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties have also taken a toll on its growth.
“Regulatory changes, with the initiation of the NIN-SIM verification exercise, drove a considerable decline in the industry’s growth rate to 6.3% in Q1 2021 from 17.7% in Q4 2020. To complete the NIN-SIM exercise, the NCC mandated the suspension of SIM card activations and registrations, thereby slowing the industry’s growth pace,” Agusto & Co. said.
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According to the credit rating agency, in only four months of the NIN-SIM verification exercise, the industry’s active telephony subscriptions reduced by 7.7percent from 204.5 million as at the end of December 2020 to 188.7 million at the end of April 2021.
Before Q2’ 2020, about the same period the government commenced the policy that banned SIM registration, which also required telecom users to link their 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.
But, analysis of the second-quarter GDP report by the National Bureau of Statistics (NBS) showed that the sector reported its lowest growth in the first half of 2021. The sector expanded by 5.90 percent in Q2, 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.
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.
However, due to the sustained uptake in mobile internet services and increasing diversification of value-added services by telcos, Agusto & Co. said it believes revenue will grow, albeit by a lower rate of 5 percent in 2021 (2020: 14%).
“We anticipate that logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and thus, double-digit top-line growth should be restored by 2022,” it said.
Outlook
Agusto & Co expects the challenges of the industry to remain: high business costs, especially given the consistent devaluation of the naira, prevailing inflationary pressures and the adverse impact of regulatory changes.
However, it said the industry’s outlook will remain stable on the premise that telecommunications will provide recovery support to key economic sectors post-pandemic.
“Anticipated business diversification efforts of operators will also support our outlook,” it concluded.
