Improvement in Broadband Penetration – Coronation Merchant

The latest data released by the Nigerian Communications Commission (NCC), the industry regulator, show that internet subscriptions stood at 151 million in June ‘22. This represents a y/y increase of 7.7% and a m/m increase of 0.4% (or c.650,000 new subscriptions).

The figure implies a density of 76% in a population estimated at 200 million, placing Nigeria well above the African average of c.37% according to Statista. Telecom operators have ramped up SIM registration and NIN enrolment capacity after the partial deactivation of the lines of users yet to link Subscriber Identification Module (SIM) cards with unique National Identification Number (NIN) in April ’22.

MTN Nigeria (MTNN) accounted for the largest share (42.3%) of total internet subscriptions among the mobile network operators. Based on MTNN’s Q1 ’22 results, service revenue grew by 22% y/y. This was due to significant growth in data (+54.5% y/y), value added service (+46.5% y/y) and voice (+6.5% y/y).

Among the mobile network operators MTNN recorded the highest m/m increase in subscriptions of (+1.1%), this was followed by Airtel (+0.9%). Glo remained unchanged (+0.0%), while 9mobile recorded a decline of -2.6% in subscriptions. Furthermore, the commission’s data show that as at end-June ’22, outgoing porting requests were highest for 9mobile (1,661) while MTNN was the chief recipient of incoming porting requests (1,770).

According to the latest national accounts, the telecommunications segment grew by 14.5% y/y in Q1 ’22, compared with 5.3% y/y recorded in Q4 ‘21. The segment continues to benefit from growth in subscriptions and increased usage from existing subscribers. This is partly driven by adjustments to hybrid work structures.

Furthermore, the latest inflation report shows that the communications segment increased by 11.2% y/y in June ‘22 compared with 11.0% y/y recorded in the previous month. This can be partly attributed to growth in operating expenses.

The commission has hinted that an increase in the price of telecommunication services such as calls, and data is unlikely in the near-term. This is despite the push by telecom operators under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON) to increase the cost of these services.

In June, broadband penetration increased to 44.3%, compared with 40% recorded in June’21. The FGN had through the National Broadband Plan 2020-2025 set a target of 90% penetration by 2025.

The steady growth in broadband penetration will have a positive impact across other sectors such as healthcare, education, agriculture, finance, transportation, and commerce. However, existing challenges such as epileptic power supply, poor infrastructure, and right of way (RoW) fees continue to hinder expansion in broadband penetration.

We recall that in 2020, the Nigerian governors’ forum resolved that telecom operators should pay a RoW fee of N145 per linear meter of fibre. However, based on local newswires, only Kaduna, Ekiti, Katsina, Plateau, Ekiti, Kwara, and Imo are implementing the new fees.

However, we understand that Anambra waived RoW fees for telecom operators in an attempt to boost broadband penetration in the state.

Many states continue to charge relatively high RoW fees. Industry sources suggest that, in states like Benue, Ogun and Lagos, it costs operators N2,500, N4,000 and N1,500 per linear metre of fibre respectively in RoW charges. The absence of a unified RoW fee across the country continuously stalls the advancement of broadband fibre networks.

The NCC has disclosed that the rollout of fifth generation (5G) spectrum services is expected to commence in August ‘22. The commission has also confirmed the issuance of the final letters of award of the 5G spectrum licenses to MTN and Mafab Communications, winners of the 3.5 gigahertz (GHz) spectrum auction conducted in December ‘21. The two licensees are now expected to accelerate the deployment of 5G network that will deliver higher data speeds, ultra-low latency, more reliability, increased network capacity, availability, and uniform user experience.

Regarding mobile money, prior to 2020, the CBN had excluded mobile network operators from offering mobile money services. However, in August‘20 as part of the CBN’s financial and digital inclusion strategy, the regulator granted final approval to Glo’s Money Master Payment Service Bank (PSB) and 9Mobile’s 9PSB to begin operations.

In May’22, final approval was granted to MTNN’s MOMO PSB and Airtel Africa’s SMARTCASH PSB to begin operations. The PSB licenses should enable telecom operators to engage in financial services which include receiving cash deposits, processing payments and remittances, issuing debit and prepaid cards, operating electronic wallets, among others.

The sector still requires significant investment in telecommunications infrastructure to drive broadband (and internet) penetration as well as affordability for data packages.