Thursday, 21st September 2023

Telcos’ rising revenues, profits fail to reflect in quality of services

By Adeyemi Adepetun, Helen Oji, Michael Akinadewo and Azeezat Adekola  
23 May 2023   |   3:30 am
The exceptional financial performance of mobile network operators (MNOs) manifesting in billions of naira in profits does not trickle on service delivery with subscribers demanding for improvement.  


• MTN rakes N7.2 trillion income, invests 18% on capital projects in five years
• Airtel capital spending shrinks by 23 per cent since 2020
• Access gap needs N700b, says NCC • Telecoms stock defies industry challenges
• NATCOMS claims MNOs infrastructure over-stretched
• ALTON assures of service improvement • Nigerians await Mafab, Airtel’s 5G

The exceptional financial performance of mobile network operators (MNOs) manifesting in billions of naira in profits does not trickle on service delivery with subscribers demanding for improvement.

The two listed telecom companies are posting mouth-watering revenues and profits, underpinning the profitability of the entire sector, but doing little to improve the quality of service.

MTN is considered the biggest spender in terms of capital expenditure (CAPEX). Yet, its total CAPEX envelope in the past five years is dwarfed by its huge revenue, which The Guardian estimated at N7.2 trillion. About 18 per cent of the amount went into total capital expenditure in the period.

In the same period covering 2018 to 2022, the telecoms giant posted a profit after tax (PAT) of N1.2 trillion, which was N86 billion less than its CAPEX outlay.

The speed of growth of infrastructure spending vis-à-vis the bottom-line numbers is also revealing of the strategic direction of the company. Checks by The Guardian show that the telco grew its PAT by 146 per cent in five years as against 96 per cent growth rate of CAPEX. The revenue performance lagged behind slightly CAPEX at 94 per cent.

MTN, in its 2022 financial report alone, declared N2 trillion in revenue and posted an operating profit of N733.3 billion. The multinational’s performance and spending on infrastructure is unmatched in the industry. But there is a similar trend showing a somewhat tradeoff between profitability and infrastructure support.

Its rival, Airtel Nigeria, raked in the sum of N980 billion, which represents a 20.3 per cent growth year-on-year (YoY) growth on its 2021’s N864.9 billion.

The audited financial report released by Airtel’s parent company, Airtel Africa, showed that the Nigeria operating arm recorded a 13.4 per cent growth in voice revenue to N484.9 billion, while data revenue for the period rose by 27.8 per cent to N407.1 billion.

Unlike MTN, Airtel’s profits and revenue have an inverse relationship with CAPEX. From 2020 till last year, the company’s CAPEX fell from N149.5 billion ($325 million) yearly budget to N115.46 billion ($251 million), showing a contraction of almost 23 per cent.

In contrast, both operating profit and revenue grew by over 36 per cent each in the three-year circle. For revenue, the figure rose from N631.58 billion ($1.373 billion) in 2020 to N863.88 billion ($1.878 billion), showing an increase of 36.8 per cent in the period.

Airtel’s CAPEX-to-profit ratio in the period analysed was 44 per cent, which is a far cry from MTN’s over 100 per cent. The combined CAPEX-to-revenue is 17.85 per cent.

While the telecoms operators are posting hefty profits for their shareholders, network freezing, fast depletion of data, inability to access bonus offers, drop calls and poor handling of subscribers by customer care agents have continued to hobble their services.

Nigeria is ranked 151st amongst 182 countries in the latest Speed Test Global Index published by U.S.-based Internet speed analysis firm, Ookla, which implies that Nigeria’s broadband Internet speed is slower than the global average. Also, the fourth yearly edition of the Digital Quality of Life Index (DQL) ranked Nigeria 86th regarding digital well-being, out of 117 countries recently surveyed.

An in-depth research by the Alliance for Affordable Internet (A4AI) late last year, revealed that only 12.1 per cent of the Nigerian population enjoys good quality Internet services, saying this is impacting small and medium-scale enterprises (SMEs).

In view of these rising gaps, the Nigerian Communications Commission (NCC) has been urged to stress-test all the operating networks to ascertain their levels of integrity.

With complaints coming mostly from MTN, Airtel and Globacom subscribers, telephone users urged NCC to beam its light on the operations of all the operators, and revisit the set key performance indicators (KPIs), and where necessary, apply heavy sanctions.

Indeed, this issue of poor service and high cost were major talking points at the just-held 5th Telecoms Campus Conversation at the University of Ibadan, Oyo State, which was organised by the NCC.

The NCC, however, advised Nigerian telecommunications subscribers to lodge any complaint relating to their experiences in service delivery and related issues with a view to ensuring service quality by all licensed telecoms operators.

The commission’s Head of Consumer Affairs Bureau, Banji Ojo, explained: “When you bought data that is supposed to last for a period, (but) unfortunately it finished before the end of the period, that is what we called data depletion.

“Our duty is to keep on informing our consumers, to educate them to know what they are into. Consumers are crucial. Without consumers, there will be no NCC. We have a code called 622; when you dial it, it will take you to our agents. We have agents that will pick up your calls and speak with you in your language of choice.

“The essence of it is that we know that telecommunication companies may not be able to resolve your complaints. We want to give telecommunication consumers another platform to be able to complain. Dial 622. The moment you send the message, it will be relayed to us,” he added.

Chief Technical Officer, MTN Nigeria, Mohammed Rufai, said the firm was investing continuously in the network, adding that to ensure the service remains optimal, large numbers of people are always on the field optimising sites across the country.

He said so many challenges are confronting service quality, which includes vandalism of telecoms mast and cuts to optic fibre, theft of batteries, among others, “all these impact on service quality.”

Speaking with The Guardian, the President, National Association of Telecoms Subscribers of Nigeria (NATCOMs), Chief Deolu Ogunbanjo, said telecoms firms should improve services, owing to the fact that they are declaring huge profits year in, year out.

However, Ogunbanjo said the current telephone infrastructure in the country has been over stretched.

“For a fact, the push for the cashless economy in the last few months has greatly impacted telecoms infrastructure. Many people now use data because of the cashless economy. If you want to buy something as low as N500, you transfer. The point of sales (PoS), automated teller machine (ATMs), among others, ride on telecoms infrastructure.

“We need more telecoms masts, not sure the 40,000 we have are sufficient for the over 200 million people. UK with a population a little above 50 million have up to 65,000 Base Transceiver Stations, compared to Nigeria,” he stated.

The NATCOMs chief called on NCC to ensure that operators expand their infrastructure in the country.

Indeed, checks by The Guardian showed that MTN is expanding its reach with 5G infrastructure, after securing the license in December 2021 alongside Mafab Communications. It began with a pilot service in August 2022 and went commercial by September of the same year.

While MTN has deployed service in strategic cities, with about 588 sites already, Mafab, which got five months extension till January 2023, was yet to rollout anything, raising concerns in some quarters about the viability of the firm to deliver 5G services. Airtel too, which emerged sole bidder last December, is yet to discuss its rollout plan for 5G services in the country.

In the audited financial report of March 31, 2023, Airtel Africa Chief Executive Officer, Segun Ogunsanya, said: “The acquisition of 5G spectrum will underpin our growth strategy by enabling the launch of higher speed connectivity to enhance customer service and accelerate digitalisation for consumers, enterprises, and the public sector.

Amidst all these, MTN and Airtel have invested N117 billion in renewing their 3G licence, with focus on expanding 4G network in the country. As at the beginning of this year, 4G penetration via the MTN network was 79.1 per cent of the population.

MTN and Airtel recently paid N58.7 billion each to the NCC for the 2100MHz spectrum, which will allow them to continue to deliver 3G services for the next 15 years.

But Nigerians would rather the operators consolidate and improve the quality of 4G across the country.

But commenting on the downturn in service quality, the Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, said there are no general issues, “except for pockets of glitches in some areas”.

“There are no general concerns across the national network,” he insisted.

Adebayo, who assured of improved service, said however, that to have stable service, “we must eliminate issues of willful damage to network infrastructure across the country.”

Further, ALTON Head of Operations, Gbolahan Awonuga, who also said services have been stable, however, admitted poor service largely in Abuja, saying “inadequate infrastructure because of the way the town was planned and largely due to the problems from LCDA, which are always after renewal fees, even when the one you paid was yet to expire.”

Chairman, Aliu Yusuf Aboki, West Africa Telecommunications Regulators Assembly (WATRA), said it is possible to have optimal telecoms service, “but fundamentally, we need to that even if you have infrastructure in place, there are issues that confronts this target, which include power, diesel cost skyrocketing, vandalism, among others

To bridge the access gap in the industry, NCC has said N700 billion would be needed.

The commission’s Executive Vice-Chairman, Prof. Umar Danbatta, gave this figure when he appeared before the House of Representatives Committee probing the commission over the alleged failure to provide mobile telecommunication networks in rural and under-served areas.

Danbatta disclosed that as of 2013, there were 207 clusters of access gaps that affected 37 million people in Nigeria, adding that progress has been made in reducing the clusters in rural, un-served, and under-served areas nationwide.

The EVC, however, hinted that the number of Nigerians in the clusters had reduced from 37 million to 31 million in 2019.

The telecoms industry regulator, told the committee that the NCC’s estimation of N700 billion to bridge the gap in access to telecommunication services was a call to action for the government, private sector, and development partners to work together to mobilise resources and deploy innovative solutions that can expand access to quality telecommunications services in rural and under-served areas.

This is even as he charged the Federal Government to also create an enabling environment for this plan to thrive so that it can attract private sector investment in telecommunications infrastructure development in rural and under-served areas.

He clarified: “Private sector players and development partners can also play a critical role in expanding access to telecommunications services in rural and under-served areas and improve services generally. This can be achieved through partnerships with the government, community-based organisations, and other stakeholders to deploy innovative solutions that address the unique challenges of providing telecommunications services in rural and under-served areas.

“Development partners on the other hand can support the government and private sector in mobilizing resources, technical assistance, and capacity building to address the digital divide in the country.

“This can be done through the provision of grants, concessional loans, and technical assistance to support the deployment of innovative solutions that can expand access to telecommunications services in rural and under-served areas.

“To achieve success in the telecommunication Space, there must be synergy between and among the stakeholders of the sector”, Danbatta stressed.

Despite the gaps in the industry, kudos should still be given to the operators as they have been able to activate 323 million telephone lines since the telecoms revolution began over two decades ago. Out of these connected lines, 226 million have been active.

Further analysis of these operators, especially those listed on the NGX, showed their resilience on the stock exchange.

For instance, MTN, which was admitted into the Nigerian Exchange Limited (NGX) on May 16, 2019 at a share price of N90 per ordinary share, by the end of that year, the share price soared by 16.7 per cent to close at N105 per share.

Checks showed that one year after the listing, by 2020, the share price had risen to N169.9 per unit representing an 88.8 per cent growth from its listing price.

MTN Nigeria also has quite a record in dividend payout. In 2019, less than a year after it was listed, MTN paid N7.92 per share. This increased in 2020, when MTN Nigeria paid N9.4 per share.

The numbers also increased in 2021/2022 based on MTN’s new business lines premised on the acquisition of approval-in-principle to operate payment service bank (PSB) and the new 5G licence.

By 2022, MTN was the leading mobile operator in Nigeria with a market share of 37.9 percent and posted a year-to-date gain of 9.14 per cent at the end of 2022 a performance that pushed the All Share Index performance of 19.98 per cent.

The company started the year 2022 at a share price of N185 and closed at about N215 representing a price-to-earnings ratio of 12.55x.

The telecoms giant paid a final dividend payment of N10.00 per two kobo ordinary shares to shareholders for the year ended December 31, 2022.

The shareholders gave their approval to the proposed dividend at the company’s fourth yearly general meeting held recently. The dividend is subject to necessary deduction of withholding tax and to shareholders whose names appear in the company’s register of members by the close of business on March 27, 2023.  This brings the total dividend for the year ended December 31, 2022, to N15.60. The cash dividend was paid to eligible shareholders on April 20, 2023.

Final dividend paid amounted to N203.55 billion and an interim of N113.988, putting the total dividend for 2022 at N317.538.

Also, Airtel Africa, listed a total of 3,758,151,504 ordinary shares on the Nigerian Exchange Limited (NGX) in July, 2019. The shares, which were listed at an offering price of N363 per ordinary share, closed at N399.30 per share. The listing added N1.36 trillion to the market capitalisation of the exchange

Airtel Africa’s net profit for the first quarter ended March 31, 2022 soared by more than four-fifths on the back of increased revenue, according to the wireless operator’s financial report for the period. Turnover leapt by 23.3 per cent to $4.7 billion from a year earlier, with a boost from earnings from data as well as mobile money.

Profit before tax stood at $1.2 billion, rising 75.6 per cent over what was posted a year ago, while after-tax profit scaled up to $755 million. That compares with the $415 million reported for the financial year 2020, implying an 82 per cent increase.

Its financial statements for the nine months ended 31st December 2022 indicated that its total customer base increased 10.1 per cent year-on-year (YoY) to 138.5 million across 14 markets.

This followed similar growth reported in its half-year results. The operator said that the penetration of mobile data and mobile money services continued to rise in the third quarter and in turn drove up the data customer base by 13.6 per cent year-over-year – to 51.3 million users – and the mobile money customer base grew 22.2 per cent – to 31.4 million.