Major reversal growth trajectory hits telecoms industry

• Sector loses 12.1m subscribers in five months
• Broadband penetration drops by 3.84%, as 6m Nigerians lose Internet access
• Future GDP growth, contributions look bleak
• Stakeholders foresee faster recovery

Nigeria’s telecommunications sector, which has been a major contributor to the country’s Gross Domestic Product (GDP), has suffered a decline in growth trajectory. This is due to drop in subscriptions and other industry fundamentals in the last five months.

Findings showed that growth of the sector has been on the downward slide as over 12 million mobile subscriptions have been cut off. Access to the latest industry subscription statistics released at the weekend by the Nigerian Communications Commission (NCC) confirmed this challenge as the country’s tele-density dropped by 6.34 per cent.

Telephone density or tele-density is the number of telephone connections for every hundred individuals living within an area. It varies widely across the nation and also between urban and rural areas.

A GeoPoll report on mobile phone penetration in sub-Saharan Africa cited a 2017 Pew Research Centre survey showing that 80 per cent of Nigeria’s adult population owns a mobile phone – 32 per cent smartphone and 48 per cent non-smartphone.

While Nigeria isn’t as big on mobile money as Kenya and some other African countries, mobile phones have hugely powered app-based and USSD-based fintech solutions, with most of Africa’s web traffic coming from mobile phones (71.5 per cent in Nigeria).

It’s been over 20 years since the NCC held its GSM auction, but that landmark anniversary appears to have gone by without much notice. Perhaps, this was because of the recently lifted embargo placed on SIM registration, which virtually stalled an industry that accounted for 12.45 per cent of the country’s GDP as of Q4.2020.

Nigeria has recorded a steady increase in mobile phone users since 2001. According to Statista, the country moved from 270,000 cellular subscriptions in 2001 to 185 million in 2019. Another report revealed that Nigeria topped the list of Internet subscriptions in Africa in Q4.2020 with a wide gap. In the second to fourth positions were Egypt, Kenya, and South Africa, where mobile telephony was introduced in 1996, 1999 and 1994 respectively.

Other industry fundamentals, which further confirmed the huge risk the sector has found itself, include that broadband penetration went down by 3.84 per cent, where some seven million Nigerians have lost access to the Internet through broadband and another 6.5 million lost online capabilities through the narrowband (GSM technology).

Further analysis of the data showed that Airtel had lost 5.25 million subscribers within the last five months. Specifically, Airtel, which had 55.6 million customers as at December 2020, saw that figure dropped to 50.3 million as at March. It currently controls 26.3 per cent of the market.

MTN, which had 80.7 million users as at December, lost 4.8 million within the period under review, and currently has 75.9 million customers, and 39.5 per cent market penetration.

Globacom only lost 1.92 million customers. The telecommunications firm had 54.8 million customers four months backs, but currently has 52.9 million and 27.7 per cent expansion.

Only about 131,766 customers lost access on the 9mobile network. The firm had 12.9 million users as at December 2020, but it dropped slightly to 12.8 million by March.

The drop, according to industry analysts, has been due to the Federal Government-imposed linking of National Identification Number (NIN) to SIM cards and subsequent banning of registration and activation of SIM cards within the period, which led to the inability of subscribers to retrieve their lost SIM cards.

They also blamed this on the shrinking disposable income of an average Nigerian, owing to the poor economic conditions of the country.

Checks by The Guardian showed that the telecoms sector’s contribution to GDP in 2012 was 7.7 per cent, but the figure doubled to 14.3 per cent as at the second quarter in 2020. This represented a N2.3 trillion growth, whereas the total contribution of Information and Communications Technology (ICT) to GDP was put at 17. 5 per cent.

Analysing the impact, Nigeria Coordinator, Alliance for Affordable Internet (A4AI) Olusola Teniola, said the impact of the SIM activation policy is a Q1.2021 story and a Q2.2021 reality.

He said it is forecast that a material impact will be recorded across both quarters with a strong likelihood that opportunity gains presented will now be reflected as losses. According to him, to retain shareholder value, management of telecoms operations will adjust costs appropriately and spending to retain value as best as possible.

Teniola added that the ripple effect of the losses will reduce total revenue for Q1 2021 through to end of 2021, which will negatively impact on the sector’s GDP contribution. “Since the economy seeks further stimulus and growth, the relevance of the ICT sector to achieve this will be threatened,” he stated.

A4AI chief explained that the security threats have caused uncertainty in the investment community as a result of the inability of telcos activating new SIMs onto their network.

Teniola said with the recent lifting on the ban of new SIM sales, it is more than likely that total industry revenue will remain flat going forward.

On his part, the President, Association of Telecommunications Companies of Nigeria (ATCON), Ikechukwu Nnamani, said the loss of subscribers was mainly due to ongoing re-verification of SIM registration, which have seen a lot of un-properly registered SIM being taken off the networks.

Nnamani said at the time this was going on, operators were prevented from reactivation of new SIMs. “The restrictions on new SIMs registration and activation have recently been lifted so we expect the trend to start being reversed in the coming months,” he stated.

Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, disagreed that the projected telecoms growth would be impacted greatly by the losses. Adebayo said the situation is temporary as the country has started overcoming the impact with more Nigerians now able to obtain their NIN, integrate it with their SIM, and with the partial lifting of the ban, things will start picking up.

“One good thing coming out is that those who acquire and discard SIM cards at will and not staying long on the networks are not going to be able to do so with ease in the new dispensation. Some recharge once and chunk the SIM and buy the next SIM, that will be more or less a thing of the past. The operators will retain more loyal and long term subscribers,” he stated .

On possible impact on the New National Broadband Plan 20202 to 2025, and contributions of the sector to the GDP, the ALTON Chairman said there is need to wait and see what happens by next quarter before “we can begin to evaluate any of such impact on the Broadband penetration. We do know that the Broadband plan is robust and has sufficient safeguards to mitigate situations such as this.”

According to him, mitigating the impact will require cooperation and collaboration with and among all stakeholders in the ICT Eco system, which will help things to ramp up very quickly.