Broadband Penetration in Need of leg-up

June 25, 2017

By FBNQuest

The latest data released by the NCC, the industry regulator, show that internet subscriptions stood at 90.1 million in April, representing a y/y contraction of -1.2%.

The figure implies density of 49% in a population estimated at 185 million, placing Nigeria well above the African average of around 16% as estimated by McKinsey. On a m/m basis, internet subscriptions picked up marginally by 0.2%.

However, given the persistent macro challenges in Nigeria, we doubt that the FGN will hit its broadband penetration target of 30% over the next 18 months.

The dynamics within the broadband industry have changed particularly due to fx volatility over the past eight quarters as the industry depends heavily on imported infrastructure.

The operating costs for telecommunications operators have spiked and the inflow of fresh investment has been minimal.  Broadband penetration currently stands at 21%.

In April MTN emerged as the leading operator in terms of internet subscriptions, accounting for 34% of the total, while Globacom was the second largest with a 30% market share.

Meanwhile, Etisalat had the lowest share with only 12.7 million internet subscribers.

We note that the latter is currently facing loan repayment issues. Its US$1.2bn loan, which was accessed in 2015 when the naira was trading at N197 to the dollar, is now more expensive in naira terms.

Etisalat also faced challenges converting its revenue from naira to US dollars as fx illiquidity plagued the market up until February this year.

The regulator insists that subscribers within the network will continue to experience quality service.

Data speed in Nigeria remains relatively slow. A recent report by Akmai Technologies (a media and software content delivery company) shows that Nigeria’s average internet speed in Q1 2017 stood at 3.9Mbps, compared with the global standard of 7.2Mbps.

Unless increased investments are recorded within the broadband segment, the telecommunications sector may not be able to repeat the successes it recorded in mobile telephony.

Dipo Olowookere

Dipo Olowookere is a journalist based in Nigeria that has passion for reporting business news stories. At his leisure time, he watches football and supports 3SC of Ibadan.

Mr Olowookere can be reached via [email protected]

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