August 25, 2023/Coronation Research

According to the latest data released by the Nigerian Communications Commission (NCC), internet subscriptions stood at 159.5 million in June ’23, reflecting a 5.6% y/y increase. Meanwhile, on a m/m basis, internet subscriptions declined marginally by -0.06% (c.99,000). Internet subscriptions continue to remain resilient despite the country’s hazy macroeconomic environment.

MTN accounted for the largest share (38.5%) of internet subscriptions in June ’23. Meanwhile, Globacom, Airtel, and 9mobile accounted for 27.9%, 27.4%, and 6.2% respectively. It is worth noting that mobile network operators (MNOs) such as MTN, Airtel, and 9mobile recorded marginal m/m declines in internet subscriptions at -1.1%, -0.5%, and -0.6% respectively. Meanwhile, Globacom recorded an increase during the period.

Based on MTN’s H1 2023 results, service revenue increased by 21.6% y/y. The increase can be attributed to increases in data revenue (34.8% y/y) as well as revenue from fintech (7.8%) and digital (50.8%) services. Furthermore, given the recent fx policy reforms by the FGN, select MNOs recorded fx losses as disclosed in their respective 2023 half-year financial statements. The core challenges within the telecoms sector are high input costs due to fx depreciation, insecurity, and vandalism of critical telecoms infrastructures across the country.

Despite these challenges, the telecoms industry has remained resilient. Based on the latest national accounts released by the National Bureau of Statistics (NBS), the sector grew by 9.7% and contributed c.16.1% to GDP in Q2 ’23.

As part of the four Executive orders signed by the President Tinubu, the proposed 5% excise duty on telecommunications has been suspended. This can be viewed as a positive for consumption patterns, as further tax adjustments would lead to increased data costs. The latest inflation report by the NBS shows that headline inflation rose by +129bps to 24.08% y/y from 22.79% recorded in the previous month.

In a separate report by the NCC, the total volume of data consumed increased by 46% y/y to 518,381.8TB as at end December ’22 vs 353,118.9TB recorded in the corresponding period of 2021. The increases in data consumption can be partly attributed to increased internet subscriptions during the period on the back of improved dependence on digital connections, as well as competitive product offerings across the major networks.

Furthermore, according to the report, total FDI into the Nigerian telecoms industry declined by -46.8% y/y to USD399m as at end-2022 compared with USD753m recorded at end-2021. Broadband penetration increased to 47% in June ’23 compared with 44.3% recorded in the corresponding period of 2022. This y/y increase can be largely attributed to a surge in e-commerce and fintech activities.

The NCC recently licensed the launch of Starlinks broadband services, a satellite-based wireless broadband service. We note that licensing more active broadband service providers should assist with deepening broadband penetration and as such, enable the NCC achieve its broadband target of 70% by 2025.

For full economic note, please click here