MTN’s return to profit masks hard times in Nigeria’s telecom sector
by Jumoke Akiyode & PATRICK ATUANYA
August 3, 2017 | 1:47 am| | | Start Conversation
MTN will announce that it has returned to profit today, Thursday, 3 August, for the first six months of the year ending June 2017, according to a statement filed on the Johannesburg Stock Exchange (JSE).
“MTN expects to report interim 2017 basic headline earnings per share of between 210 cents and 230 cents and basic earnings per share of between 280 cents and 300 cents. This compares with a headline loss per share of 271 cents and attributable loss per share of 301 cents reported in the prior comparable period,” the company said in a statement filed with the JSE on 27 July.
However, analysts have cautioned that the return to profit of MTN masks the reality that many of the players in the Nigerian telecom sector are struggling to survive.
The Nigerian telecommunications industry, which had grown rapidly and attracted billions of dollars of investments into the economy after oil and gas, is currently facing hard times, as operators struggle for survival.
Culprits for the stunning turnaround in fortune of the once high flying sector, include major market dominance in terms of subscriber base by one player, infrastructure ownership and revenue sharing, and a drastic reduction of average revenue per user (ARPU), BusinessDay findings reveal.
While voice revenues have been declining for some years in the sector, the problem today is that data services which were expected to take up the slack, are being found to cannibalise voice and give little or no room for telco’s to make money.
“For emerging markets like Nigeria, you find that a bunch of users who would typically call, or go to a call centre to call friends, can sit at home or wherever, chatting away for a whole month with so many friends for as low as 100 megabites a month, with the advent of applications like WhatsApp,” one telecoms industry insider told BusinessDay, on condition of anonymity because he was not authorised to speak to the media.
“That is why the NCC is trying to help push up data prices, else more telco’s will pack up.”
Until June 2016, the telecoms sector was growing rapidly and comprised 9.8 percent of Nigeria’s GDP, but this growth has now stalled, with the sector at a strategic crossroads.
Sources in the telecoms industry say that there is definitely no room for new entrants in this market and that there might be a need for existing players to be consolidated for the sake of survival and healthy completion.
In Nigeria’s telecommunications market, the ARPU generally has been on the decline. Reports show that in January and July 2016, ARPU fell by 21.7 and 15.7 percent respectively, for the same periods in 2015.
In response to economic realities and subscriber expenditure, informed sources say, telecoms subscribers are generally spending much less in 2017.
Unfortunately, operating capital required to support the huge user base has not declined in proportion. In fact, capital expenditure has somewhat risen, as a result of the same economic realities.
As such, there is an ongoing battle for survival of operators in the industry.
“The same asset that once generated a dual income stream, now majorly services only one. Most telco’s except the dominant player, are reporting operating profits but losses at the bottom line,” another inside source tells BusinessDay.
Globacom, Airtel and Etisalat, now 9mobile, have found it very difficult to catch up with MTN, which is the largest operator by subscriber numbers, and also has a larger percentage of the market revenue share.
Statistics from the Nigerian Communications Commission (NCC) shows that MTN has 37.22 percent of the telecoms market share, with just over 53 million subscribers, followed by Globacom, 26.22 percent market share with about 37.4 million subscribers. Airtel comes next with 34.1 million subscribers, taking 23.92 percent of the market and then 9mobile with just over 18 million subscribers; down from it’s over 21million subscribers in 2016, due to shakeups from bank loan debts.
“The market competition is clearly dominated by MTN, which although has lost a few million subscribers in the last year or two, as a result of a huge regulatory fine, has the capacity to cope with economic challenges because of its infrastructural advantage, that is the ownership of both the 2.6GHz spectrum frequency and the 700MHz spectrum.
“It also has a laid underwater cable system which is the MTN West Africa Cable System (WACS). This clearly gives advantage of much wider coverage, advanced data capacity at a reduced cost,” Olusola Teniola, President, Association of Telecommunications Companies of Nigeria, told BusinessDay.
Both large and small mobile network operators are currently working to try and mitigate the current challenges related to squeezed margins, and in other cases generating losses, and lack of direct access to foreign currencies, with the smaller firms struggling the most to compete. Although analysts say that reduced competition will be a lose-lose situation for all operators, and the public as a whole, experts suggest that for there to be healthy competition in the market, smaller operators may have to be consolidated.
Industry watchers say N-tel, a new entrant into the telecoms market has had a tough time since it started operating about a year ago, and is not likely to break-even in the market anytime soon, especially with news yesterday that Kamar Abass, its current Managing Director, has resigned.
“With the situation of things, there is definitely no room for new entrants in the market, as even the existing ones are fighting not to die.
Boye Olusanya, CEO, 9mobile recently revealed in his first meeting with the media that the company is open to investors.
Without investors, 9mobile may not survive in Nigeria’s telecoms market and may have to merge with any other existing operator to remain competitive in this tightening industry.
Jumoke Akiyode & PATRICK ATUANYA
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