Nigeria’s telecommunications companies are facing a difficult month in which their revenue could see a significant drop should the federal government drag the proposed audit of players in the market beyond the month of November.
The federal government through the Ministry of Communications and Digital Economy had on Wednesday, 9 December directed the telcos including MTN Group, Airtel Africa, Globacom, and 9Mobile to suspend the sale of SIM cards while authorities check their compliance with registration guidelines.
The government agency, the Nigerian Communications Commission, didn’t say how long the suspension would take.
“Mobile network operators are hereby directed to immediately suspend the sale, registration, and activation of new SIM cards until the audit exercise is concluded,” the NCC said in a statement on its website.
According to industry sources BusinessDay spoke to, the order is part of measures being taken by the government to create a central identification database for all Nigerians above the age of 16 years. The central database is expected to help security agencies fight crimes.
It would be recalled that the Nigerian Senate had in November summoned the Minister of Communications and Digital Economy, Isa Ali Pantami, over what it described as the inability of the ministry to stop the use of mobile phones to negotiate ransom payment by kidnappers in the country. The Senate had directed the minister to appear before its Committee on Legislative Compliance and Communications on the need for him to implement resolutions of the upper chamber on how to curb insecurity in the country which is related to the mandate of the Ministry of Communication.
In response to the summons, the minister had said that based on the report submitted by the NCC on September 26, 2019, Nigeria currently does not have any single case of improperly registered SIM on any of the networks.
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However, in the event of evidence to the contrary, the minister vowed to sanction any individual or institution found wanting. The new audit by the NCC is expected to verify if all mobile network operators (MNOs) have followed the required standards for SIM registration.
The last time an audit of the industry was conducted, MTN, the largest telecommunication company, was fined $5.3 billion for failing to disconnect subscribers with unregistered or incomplete SIM cards. The matter was resolved a year later when the company paid N330 billion naira ($839 million) after extensive negotiations.
A spokesperson for Airtel Nigeria told BusinessDay that the telco has already complied with the NCC directive.
Olusola Teniola, immediate past president, Association of Telecommunication Companies of Nigeria (ATCON), told BusinessDay that a major concern for players is the length of time it will take to complete the audit, as this has many implications for business operations in the space.
“We don’t know how long this is going to take. Is it a week? Because anything more than a week presents a challenge for the operators,” Teniola said.
The uncertainty is already beginning to scare investors in the space. On Thursday, December 10, MTN shares declined by as much as 8.6 percent in Johannesburg, the most in almost seven months, before paring the decline to 5 percent later in the day. MTN Nigeria Communications, the subsidiary on the Nigerian Stock Exchange, fell 0.8 percent in Lagos.
Airtel Africa fell by 1.2 percent in London.
Investors are afraid that among other things, the directive will impede the telcos’ ability to generate revenue, at least for the period the audit will last. Experts, however, say this will be insignificant should the audit be concluded within a window of one week. But if it drags longer, the telcos face a serious quagmire.
“Nigerian authorities are usually slow in carrying out regulatory oversight,” said an industry stakeholder who did not want to be mentioned to enable him speak freely.
Stakeholders also expect revenue to take a nosedive if the audit process drags for long. Airtel, for instance, had projected an improvement in annual revenue per user (ARPU). The telco’s ARPU for voice services dropped from $2.25 in 2017 to $1.69 in 2019. The company’s capital expenditure has spiked since 2017, rising from $395 million to $630 million in 2018. Ahead of its stock market listing in 2019, the company said it expects capital expenditure to increase as high as $700 annually for the short term. In its half-year report, the company recorded 8.9 percent growth in revenue to $341 million in June compared to the same period in 2019.
MTN Nigeria, on the other hand, has seen a 13.9 percent growth in its total revenue for the third quarter of 2020, recording a total revenue of N975.76 billion this year, up from N856.549. In October, however, the largest telco in Nigeria dropped subscriber market share, making it the second month in a row its market share has declined.
Should the audit plan drag for a whole month, MTN may not recover its lost share of the market by the end of the fourth quarter.
Teniola said the audit can actually go on while the telcos register new subscribers given that the operators already work within a well-planned structure.
“It is important to note that the issues around security are already being prioritised by players. Our members have always been aware of the concern of security,” he said.
