Analysing the performance of the Nigerian telecoms industry during pandemics

The Nigerian telecommunication system was fully deregulated in 2000 after the establishment of the Nigerian Communication Commission (NCC) in 1992.

Since then, the industry has evolved from having players such as MTN, Visaphone, Multilinks, Globacom, Airtel, and 9Mobile to having just 4 key players who now provide mobile and internet services.

The number of internet and mobile subscribers have significantly grown over the years as the population grew and the need for distance communication increased. Between 2011 and 2020 the number of mobile subscribers increased from 95.89 million mobile subscribers to 204.6 million mobile subscribers. Besides population growth and modernisation, epidemics have also contributed to the recorded growth.

The most notable epidemics in Nigeria in recent times are the avian influenza (bird flu) in 2006, the ebola virus outbreak in 2014, and COVID-19 which began in 2020. The bird flu outbreak, however, did not have a significant impact on economic activities besides the agricultural sector at that time.

Ebola virus outbreak

According to a report from KPMG West Africa in 2015, the ebola virus did not have a significant impact on the Nigerian economy due to how quickly the outbreak was contained. Nigeria’s then Finance Minister, Ngozi Okonjo-Iweala, however, reported a 0.5% deduction from the 2014 GDP forecast as a result of insurgency and ebola.

Although economic activities weren’t significantly affected by the ebola virus, the Federal government postponed the resumption of schools to 13th of October 2014 to better curtail the spread of the virus during the period.

Businesses also began taking precautionary measures for the safety of their staff.

In the initial period when Nigeria witnessed the Ebola outbreak, the number of mobile and internet subscribers in the country grew marginally month-on-month. However, between the months of November 2014 and February 2015, mobile and internet subscriptions recorded an average growth rate of 1.26% and 3.61% respectively.

The total number of mobile subscribers increased from 132.6 million in June 2014 before the outbreak of the virus to 135.4 million at the end of October 2014. Similarly, internet subscriptions increased from 67.4 million as of June 2014 to 73.3 million at the end of October 2014.

However, the contribution of the telecommunication sector to Nigeria’s real GDP in Q3 2014 when the ebola virus broke out declined from 9.25% in Q2 2014 to 7.57%.

Coronavirus outbreak

Unlike the Ebola virus, the coronavirus hasn’t been fully curtailed since its outbreak in Nigeria in February 2020. Due to the virus’ rapid spread, the federal government declared a complete lockdown in 3 major economic cities – Lagos, Abuja and Ogun state from March 31, 2020, till May 4, 2020. Subsequently, the lockdown was eased with restrictions placed on public gatherings and the enforcement of the use of masks.

These regulations and the need for business continuity forced businesses and individuals to look for alternative ways to communicate.

Just between February 2020 and March 2020, the number of internet subscribers grew by 3.18% moving from 131.6 million subscribers at the end of February to 135.8 million subscribers at the end of March.

Due to the huge increase in revenue generated by telecom companies in 2020, they began to offer subsidized service rates to their customers both as incentives to customers and also as a marketing tactic, to increase their market share.

For example, MTN Nigeria gave 300 SMSs to its subscribers to communicate with their loved ones. Globacom also introduced an ultra-affordable data bundle subscription of 1.25GB for N200 on Sundays only.

Data gathered from the National Bureau of Statistics showed that in 2020, mobile subscriptions grew by 10.8%, moving from 184.7 million subscribers in Q4 2019 to 204.6 million at the end of Q4 2020.

Internet subscriptions sporadically grew by 22.4% from 126.1 million subscribers in 2019 to 154.3 million subscribers at the end of 2020.

Mobile subscription year-on-year growth distribution

MTN: +17.45%Glo: +6.07%

Airtel: +10.87%9

Mobile: -4.84%

Others: -8.61%

Internet subscription year-on-year growth distribution

MTN: +20.78%

Glo: +38.61%

Airtel: +19.60%9

Mobile: -11.75%

Others: -3.05%

Financial Performance

MTN Nigeria’s total revenue in 2020 grew by 15.1% from N1.2 trillion in 2019 to N1.3 trillion at the end of FY2020. Specifically, revenue on voice calls increased by 5.6% from N725.4 billion in 2019 to N766.4 billion. Revenue from data exponentially increased by 51.5% from N219.4 billion in 2019 to N332.4 billion in FY2020.

Other sources of revenue such as interconnect and roaming, handset and accessories, digital, value-added services and others also recorded an increase except for SMS that declined by 8.7% year-on-year.

The 9 months ended, 31 December 2020 financial performance of Airtel Africa revealed that the Group’s revenue increased by 13% from $2.52 billion as of Q3 2019 to $2.85 billion as of Q3 2020. Specifically, voice revenue increased by 5.3% from $1.5 billion in Q3 2019 to $1.5 billion as of Q3 2020.

Data revenue also rose by 24.4% year-on-year from $677 million as of Q3 2019 to $842 million as of Q3 2020. Other sources of revenue to the telecom companies such as mobile money business, VAS, messaging also grew in the period.

Bottom-line

As unfortunate as epidemics are to economic growth and some sectors in the economy, the telecommunication sector benefits greatly from them as already seen. The sector grew by 15.29% in 2020 in real terms (real growth) despite the general decline seen in the economy (GDP fell by 1.92%) in 2020.