Growth Potential in Nigerian Telecoms Sector Remains Strong—Absa
Absa, a leading pan-African bank with a strong footprint across the African continent, has highlighted the opportunities for new businesses in the Nigerian telecommunications sector as well as the sector’s limitless growth potential.
The bank said the opportunities and the growth potential remain strong, in spite of the challenges in the sector, and therefore called on smart investors and entrepreneurs to tap into the opportunities and expected growth.
The banking group, which operates two licensed subsidiaries in the country, Absa Capital Markets Nigeria Limited and Absa Securities Nigeria Limited, and has deep expertise in advising and financing telecommunications, media and technology transactions across the continent, provided an interesting perspective on the sector during a media roundtable session held recently in Lagos themed The Nigeria Telecoms Sector: Exploring the Opportunities.
According to Sadiq Abu, the Chief Executive Officer, Absa Nigeria, the issues plaguing the smooth operations of telcos in the country include power deficit, vandalism of transmission infrastructure assets, theft, and multiple taxation.
He said these despite the operating challenges, the sector continues to present enormous opportunities for growth, especially in relation to broadband internet, last mile connectivity and telco infrastructure (data centres, fibre optic networks, etc). There remains a vast and growing demand for data, despite the apparent maturity of voice revenue streams.
“The telecommunications industry is generating interest from local and foreign investors. This is because the capacity for growth in the industry is limitless. And telcos are already strategically developing useful business vehicles to take advantage of emerging opportunities in the industry,” Sadiq said.
“Meanwhile, the various challenges that are bedeviling the smooth operations of telcos provide expansive opportunities for smart entrepreneurs who possess an innovative and unerring vision of what can be done to help the players maintain cost advantage or protect critical transmission infrastructure assets through the provision of services that hedge against disruption in the supply chains.”
Also speaking during the event, Hasnen Varawalla, the co-head of Investment Banking Origination for Absa said Nigeria’s telecommunications sector is one of the largest sectors on the African continent and can serve as a strong driver for wider employment generation, financial inclusion and robust foreign direct investment (FDI).
“Two of the telcos that have listed on the Nigeria Stock Exchange (NGX) currently form 54% of the overall capital base of the NGX and as of 2021, the sector reportedly contributed around 17% of the GDP,” Varawalla said.
He explained that the sector drives financial inclusion, supports fintech activities, aids the ongoing explosion in e-Commerce services and integrates cities. He said some of the attractive propositions in the industry include telecommunications infrastructure (data centres, fibre networks, etc), the gradual rollout of 5G technology combined with the new interest in digital work tools to meet the demands for distant work arrangements, as well as the emerging trends in fintech.
“Absa is a significant capital provider to the entire telecoms sector in Africa. Our role is not limited to providing capital though; we are amongst the most active advisers to telco/telco infrastructure companies having led and/or participated in many landmark transactions across the continent, including the GBP 595m Airtel IPO on the NGX, the sale of 9mobile to Teleology, Vodacom IPO on the Tanzania Stock Exchange, the US$ 378 IHS IPO on the NYSE, the acquisition by IHS of MTN’s tower portfolio in South Africa, amongst others.
“We continue to make available our deep telecoms sector expertise to help telcos take advantage of emerging opportunities that will fast track the timely achievement of their growth aspiration,” Varawalla said.
Adedotun Sulaiman, the Chairman of Absa Nigeria, enthused about the potential trapped in the Nigerian telecommunications sector and the implication for the economy. He promised that Absa will always be available to provide a useful perspective on key sectors of the economy.