Technology
FX-Linked Costs to Pressure Earnings of MTN, Airtel, Others
By Modupe Gbadeyanka
The present foreign exchange (forex) crisis in Nigeria will pose a huge threat to the 2020 earnings of players in the nation’s telecommunications sector, the Head of Equity Research at FBNQuest, Mr Tunde Abidoye, has projected.
In a research note made available to Business Post, he said though now more than ever, the industry was set to take a leading role in the government’s effort to diversify the economy, the FX issue could truncate this.
It was stated that through consistent significant investments by the mobile networks, the sector’s contribution to GDP has risen steadily from about 7.7 per cent in 2012 to 10.9 per cent in Q1 2020, now larger than that of the oil sector (9.5 per cent Q1 2020 oil GDP).
With respect to broadband, studies conducted by the International Telecommunications Union (ITU) indicate that a 10 per cent increase in broadband penetration is likely to translate to increases of 2.0 per cent and 1.8 per cent in GDP for low-income and middle-income countries.
The targets (of 90 per cent broadband coverage at speeds of 10Mbps-25Mbps) stated in the national broadband plan 2020 is ambitious and audacious.
“Notwithstanding, we believe they are achievable. The plan’s success will depend on the right mix of policy implementation, private sector-led infrastructure investment, and government incentives. Specifically, impediments to right-of-way access and cost must be removed,” the note said.
In contrast to other sectors that were hit hard by the economic outcomes of the COVID-19 pandemic, the sector was one of the few that recorded growth in Q1.
Its essential role in easing the lockdown through the provision of digital tools for home working and social distancing resulted in a surge in demand for telecom services during the quarter.
In Q1, MTN Nigeria (MTNN) and Airtel Nigeria (not covered) both delivered strong revenue growth of 17 per cent y/y and 27 per cent y/y respectively, mainly driven by stellar growth in data revenue – which were up by more than 50 per cent for both firms.
The solid performance was carried on into Q2 on the back of strong data demand during the lockdown, with solid revenue growth of 17 per cent y/y (data 40 per cent y/y), Airtel’s Q1 2021 (end-June 2020) results which were recently published, providing positive read-across for the broad sector.
“Due to FX liquidity pressures, we expect a rise in FX-linked costs to exert downward pressure on the earnings of telecom operators,” it noted.
Recently, MTNN disclosed that the NAFEX rate of N385/$1 will now be applied to dollar-linked tower costs (vs. CBN’s official rate of N360 previously). The rate was only recently reviewed to N360/$1 in April (from N307 previously).
“However, we believe that the revenue growth from the surge in data traffic will more than offset the rise in costs.
“Regardless, our estimates are conservative. For MTNN, we forecast 2020 revenue and PBT growth of 13 per cent y/y and 6 per cent y/y respectively,” FBNQuest said.
The Nigerian Communications Commission (NCC) takes the quality of service (QoS) very seriously. As such, on a monthly basis, it measures the operators on four key QoS performance indicators namely; (1) the call setup success rate (CSSR), (2) dropped call rate (DCR), (3) the standalone dedicated control channel congestion (SDCCH), (4) the traffic control channel congestion rate (TCCH). The most recent disclosure (October 2019) from the NCC shows that MTNN and Airtel were within the required threshold for all the KPIs, it added.
It was stated that an independent survey on the service quality of GSM operators conducted by REACH Technologies, an indigenous fintech firm, corroborates the results of NCC’s monthly QoS assessment.
The random survey draws a conclusion from a sample size of 133 respondents residing in Nigeria’s urban region. Out of a maximum score of five points, MTNN scored the highest number of points – 2.3 points – on a weighted average basis. Airtel was the next best in terms of QoS with a score of 1.
About 60 per cent of the 133 respondents that were randomly polled subscribe to the MTNN network. This result is important because it underscores MTNN’s larger wallet share of urban subscribers.
By Adedapo Adesanya
The Nigerian Communications Commission (NCC) on Monday approved a 50 per cent tariff increase on calls, SMS, and internet data for telecoms companies in the company.
This comes after telcos suggested a 100 per cent hike in the tariffs, the first of such changes in over 10 years.
Despite the recommendation, the NCC was concerned about the impact this would have on Nigerians, who are battling a cost of living crisis.
The NCC rationalised the 50 per cent hike, saying it wanted to strike a balance between protecting consumers and ensuring the industry’s sustainability.
“The adjustment, capped at a maximum of 50 per cent of current tariffs, though lower than the over 100 per cent requested by some network operators, was arrived at taking into account ongoing industry reforms that will positively influence sustainability,” a statement from the NCC read on Monday night.
Recall that the Minister of Communications, Innovation and Digital Economy, Mr Bosun Tijani, has said the federal government may consider between 30 and 60 per cent hike in tariffs.
“I think it should not be more than anywhere between 30 and 60 per cent,” he said during an interview recently.
On his part, the Chief Executive Officer of MTN Nigeria, Mr Karl Toriola, said telcos are proposing a 100 per cent increase in tariffs to the Nigerian government.
He, however, pointed out that it won’t get such approval but said a substantial change, beneficial to all stakeholders, could be agreed upon.
It is not certain what the reaction of the telcos may be concerning this new development. If they disagree with the approval, it may lead to another round or dialogue or limitation of service offerings.
By Modupe Gbadeyanka
The acceptance of the Naira for payments for cloud services in Nigeria by global cloud leader, Amazon Web Services (AWS) has continued to excite its customers in the country.
Before now, Nigerians subscribing to the company’s cloud services were forced to purchase foreign currencies, particularly the United States Dollar (USD).
But to make transactions easier for its teeming clients in the country, AWS announced it was now accepting payments in local currency.
“With payments in their local currencies, customers can avoid foreign exchange costs associated with making foreign currency payments.
“This also removes payment friction for customers in countries where local regulations put limits on the foreign currency amount a customer can access,” the American firm said in a statement.
By lowering the barrier for Nigerian companies to pay for cloud services in their local currency, AWS has given itself an edge, but the growing local alternatives may still present a challenge.
The organisation said it is not just about price anymore—it’s about local relevance and helping businesses navigate the complexities of Nigeria’s economic environment.
The decision of AWS to accept naira payments comes in response to the growing appeal of local cloud providers in Nigeria.
Recall that in January 2023, the firm launched its AWS Local Zones facility in Lagos to reduce latency and improve performance for Nigerian businesses—often an important factor since many Nigerian companies host their services in AWS’s European region due to geographical proximity.
By offering a new payment option alongside this infrastructure, AWS can solidify its foothold in the Nigerian market, especially as local providers continue to present an attractive, economically aligned alternative.
“This is a welcomed development. We have been waiting for this to happen for a long time. I am glad it has finally become a reality. I don’t need to buy forex (foreign exchange) to pay for Amazon cloud services,” a tech enthusiast based in Lagos, Mr Kolade Adewale, told Business Post.
“I want to believe that the competition from Microsoft’s Azure may have forced AWS to include the Naira as a payment option. This is what competition does to the market. You can see such in the telecommunications and petroleum sectors with Dangote Refinery,” another tech enthusiast, Mr Goke Fashina, said.
By Adedapo Adesanya
The Minister of Communications, Innovation and Digital Economy, Mr Bosun Tijani, has said the federal government may consider between 30 and 60 per cent hike in tariffs and not the 100 per cent proposed by telecommunications companies in the country.
“I think it should not be more than anywhere between 30 and 60 per cent,” he said during an interview on Channels Television on Wednesday night, monitored by Business Post.
He said that even though the companies are insisting that a 100 per cent increase is what is needed to stabilise the sector, the government knows that such a level of increase will be harmful to the people.
“We have already made it clear that we are not going to approve 100 per cent. These companies are asking for 100 per cent, stating clearly that this is what they believe they need to get.
“But what we are looking at in terms of the sector is that if this is the sector that is responsible for driving growth in our country, it will be harmful to our people to allow MNO to increase by 100 per cent,” Mr Tijani said.
The Minister noted that the Nigerian Communications Commission (NCC) is still working on the tariff increase and is yet to arrive at a particular figure.
This points to continued standoff after it was widely expected that the tariffs will be announced last Friday.
According to him, it is necessary to look at the numbers, the implication any increase will have on the people and the sustainability of the sector for proper balancing.
Mr Tijani said that for mobile network operators to improve their service to the required standard, there is a need for them to keep improving their equipment.
Speaking recently, the Chief Executive Officer of MTN Nigeria, Mr Karl Toriola, said telcos are proposing a 100 per cent increase in tariffs to the Nigerian government.
He, however, pointed out that it won’t get such approval but said a substantial change, beneficial to all stakeholders, could be agreed upon.
“So, I’m not sure they will give us 100 per cent, but I am optimistic they will give us something substantial and maybe progressively over the course of the year we can have smaller adjustments that will help us to get back to where we need to be,” Mr Toriola said.
-
Feature/OPED5 years agoDavos was Different this year
-
Travel/Tourism8 years ago
Lagos Seals Western Lodge Hotel In Ikorodu
-
Showbiz2 years agoEstranged Lover Releases Videos of Empress Njamah Bathing
-
Banking7 years agoSort Codes of GTBank Branches in Nigeria
-
Economy2 years agoSubsidy Removal: CNG at N130 Per Litre Cheaper Than Petrol—IPMAN
-
Banking2 years agoFirst Bank Announces Planned Downtime
-
Sports2 years agoHighest Paid Nigerian Footballer – How Much Do Nigerian Footballers Earn
-
Technology4 years agoHow To Link Your MTN, Airtel, Glo, 9mobile Lines to NIN