Analysts see robust 2021 telecoms growth despite 6th monthly NCC subscription drop

NCC’s SIM sales, activation restrictions hurt sector Industry records marginal decline in active internet, mobile subscribers in May 2021

Analysts covering Nigeria’s telecoms market have expressed optimism for robust growth in the sector alongside the rising adoption of e-commerce and other mobile applications, saying the industry has continued its show of resilience and has maintained its position as one of the fastest-growing sectors of the economy in the first quarter of 2021.

Consequently, the latest data published by the Nigerian Communications Commission (NCC) show that active mobile and internet subscriptions declined by -0.89 percent month on month (1.67 million) and -0.91 percent month on month (1.28 million) to 187.03 million and 140.5 million respectively in May 2021 from 188.7 million and 141.8 million in the previous month respectively.

The fall in the subscription is the sixth consecutive monthly decline following the National Identification Number (NIN) and SIM-link exercise required by the industry regulator, NCC. The exercise, which also included restrictions on SIM sales and activation, resulted in a net active subscriber churn of 17.5 million over the six-month period to April and a reduction in the teledensity rate to 97.9 percent in May 2021 from 102.3 percent in December 2020.

However, despite the churn which resulted in the deceleration in the telecoms sector’s gross domestic product (GDP) growth to 7.7 percent in the first three months of 2021 from 17.6 percent reported in the last quarter of 2020, the sector was still among the fastest-growing in 2021 first quarter and a key driver of the country’s 0.51 percent year on year GDP growth, according to the National Bureau of Statistics’ reported data.

Nevertheless, analysts at FBNQuest Capital Research have projected that the sector’s growth and revenue earnings will remain positive irrespective of the initial ban on the sales and activation of SIM Cards.

“Looking ahead, we expect the lifting of the ban on SIM sales and activation by network operators to bode well for sector revenue and earnings growth. We continue to see robust growth in the data segment, driven by mobile data traffic and increasing adoption of mobile applications and e-commerce. We estimate that the sector’s voice traffic also grew by between high single-digit to mid-teens range following a recovery in voice demand after a weak spell in Q2 of 2020 because of the knock-on effects of the pandemic,”.

A further analysis of the data shows that South Africa majority owned wireless carrier, MTN Nigeria, maintains its leadership with a larger chunk of the total market share at 39.7 percent to 74.04 million subscribers as of May 2021. Trailing are indigenously owned telecoms network, Globacom with 26.7 percent or 49.8 million total subscribers on its network; but marginally behind Airtel Africa, by 12 basis points, with 50.03 million subscribers; while 9mobile network maintains about 7 percent of the total share of the telecoms market with 12.84 million subscribers.

Despite the contraction in active subscriber number, the strong growth recorded by the sector was mainly underpinned by doubledigit growth in data traffic due to increased data usage per user, following strong demand for remote working, e-commerce, and streaming services for entertainment.

The monthly porting trend in the telecommunications sector per mobile operator - which refers to the number of transactions whereby a mobile number is transferred from one service provider to another at the request of a subscriber who wishes to change service provider while keeping the same telephone number - was flat as a result of the ban by the sector regulator. A total of 4,085 numbers were ported in December last year, but there were no porting activities across the country in five months. This, however, has been seen as negative to network providers as the rate at which they provide competitive services to customers who seek top-rated telecoms and roaming services from other networks with fulfilling service offerings may have dropped.

In the recent report published by the National Bureau of Statistics (NBS) for the first quarter of 2021, Kano, Lagos and Zamfara had the highest absolute churn of 1.68 million, 1.63 million and 0.85 million, relative to the prior quarter. However, Zamfara, Sokoto and Yobe had the highest churn rates of 28.1 percent, 18.2 percent and 13.4 percent respectively. Of the three states, the first two in the northwest region, and the latter in the northeast, are some of the most challenged states in the country, security-wise.

In demonstration of its market leadership, MTN Nigeria’s 2021 first-quarter financial performance shows it delivered sales and profit before tax growth of 17 percent and 34 percent year on year, respectively. This was largely driven by data revenue growth of 43 percent year on year and an 8 percent year on year increase in voice revenue.

Second placed Airtel Nigeria also saw sales and earnings before interest and tax (EBIT) climb by 23 percent and 16 percent year on year, respectively, on the back of data and voice revenue growth of 39 percent and 13 percent year on year, respectively.

However, Nigeria’s broadband penetration rate crawled to 39.59 percent as of May 2021, from 40.66 percent in the prior month with an average subscription of 75.57 million during the current month under review from 77.61 million in the previous month. Meanwhile, industry sources have asserted that a 10 percent rise in broadband penetration can lead to an increase in the gross domestic product (GDP) of the economy by 1.6 to 1.8 percent.