May 16, 2023/Coronation Research
The latest data released by the Nigerian Communications Commission (NCC), the industry regulator, show that internet subscriptions stood at N156.9 million in February ’23, representing a marginal increase of 0.5% m/m (or c.743,000 new subscriptions). Meanwhile, on a y/y basis, internet subscriptions increased by 10%. The increase can be partly attributed to increased usage of digital services. However, we understand that internet subscription activity has been impacted by upticks in headline inflation which has weakened consumer spending.
MTNN accounted for the largest share (40.9%) of internet subscriptions in February ’23. Meanwhile, Globacom, Airtel, and 9Mobile accounted for 26.8%, 26.6% and 5.8% respectively. Among the mobile network operators, MTNN, Globacom and 9Mobile recorded m/m increases in internet subscriptions at 0.9%, 0.8%, and 0.7% respectively. Meanwhile, Airtel recorded a decline of -0.5% (marking its second decline recorded this year).
Based on MTNN’s FY2022 results, service revenue increased by 21.6% y/y. The increase can be partly attributed to significant growth in data revenue (47.9% y/y) which was triggered by a y/y increase in active data subscriptions due to the launch of the 5G spectrum in seven cities across the six geopolitical regions in Nigeria.
Despite Nigeria’s elevated inflation, fx volatility as well as global economic shocks resulting in supply chain disruptions, the telecoms industry has remained resilient. Based on the latest national accounts released by the NBS, the sector grew by 10.7% y/y in FY2022 and contributed c. 13.6% to GDP in 2022. In a separate report by the NBS, capital importation in the telecoms sector grew by 117% q/q to USD168.3m in Q4 ’22, reflecting the sector’s ability to attract foreign investments despite a hazy macroeconomic environment.
The latest inflation report shows that the communications segment increased by 10.5% y/y in March ’23 compared with 10.3%y/y recorded in the previous month. This can be partly attributed to increases in operating expenses.
The recently released fiscal measures for 2023 included the proposed 5% excise duty on telecoms services which was announced initially in the 2020 Finance Act. However, this excise duty was not implemented. We note that a circular released from the federal ministry of communications points towards increased willingness to implement this 5% telecoms excise duty. It is expected to take effect in June ’23. We anticipate that mobile network providers would shift the cost burden onto customers, already grappling with inflationary pressures.
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