Tuesday, November 09, 2021 / 09:46 AM / by FBNQuest Research / Header Image Credit: Udonis
Our chart below drawn from the Nigerian Communications Commission (NCC) data, shows that active mobile lines and internet connections grew modestly, by 0.8% and 0.4% m/m to 190.9 million and 140.3 million respectively in September ’21. The growth in September marks the second consecutive month of growth, after a steady drop in subscriber numbers which started in November ’20 due to new customer identification registration requirements by the industry regulator. Sales of new SIM cards were also temporarily halted by the NCC. The m/m increase in subscribers numbers reflects the easing of the regulator’s ban on new SIM in April ’21.
However, the fortunes of the two major GSM operators, MTN Nigeria (MTNN) and Airtel Nigeria (Airtel, not covered), have not been adversely affected by the loss of subscribers. Proshare Nigeria Pvt. Ltd. Despite losing c.1.4 million active subscribers q/q, MTNN’s Q3 ’21 sales and net income were up by c.23% y/y and 59% y/y respectively. Similarly, in constant currency terms, Airtel’s Q2 (end-Sep) sales and EBIT were up 27% y/y and 36% y/y respectively.
Data revenue for both firms have been growing strongly (57% y/y MTNN; 42% y/y Airtel; for Q3 end-Sep). The pandemic has had a positive impact on the earnings of network operators through increased data adoption and exponential data use for remote working and other applications such as entertainment and gaming.
Also, with respect to voice revenue, for both firms, the reduction in subscriber numbers was more than offset by an increase in the voice usage per customer.
After about two years of stalling, last week, the CBN granted both firms approval-in-principle for their mobile money payment service (PSB) licence.
Both firms must wait for final approval from the CBN before launching full-fledged operations. The licence allows operators to carry out basic payments and remittance services, as well as the acceptance of deposits from small businesses among others.
Compared to Safaricom’s Mpesa in Kenya, the license allows for less functional offerings. However, given that about 36% of Nigerians are still financially excluded, according to Efina, we believe this is a significant step toward driving mobile payments and reaching the CBN’s financial inclusion goal.
Although MTNN has rallied .c10% on the back of these positive data trends, we still see potential upside of c.20% from current levels. We believe the fundamentals are strong on a medium-term view […]