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A new report released by Agusto & Co, regulatory changes, with the initiation of the NIN-SIM verification exercise, drove a considerable decline in the industry’s growth rate to 6.3 per cent in Q1 2021 from 17.7 per cent in Q4 2020.
It said in order to complete the NIN-SIM exercise, the NCC mandated the suspension of SIM card activations and registrations, thereby slowing the industry’s growth pace.
“In only four months of the NIN-SIM verification exercise, the industry’s active telephony subscriptions reduced by 7.7 per cent from 204.5 million as at the end of December 2020 to 188.7 million at the end of April 2021. On the back of anticipated SIM deactivations for subscribers without valid NINs, we estimate that the subscriber base will shrink by three per cent (year-on-year) by the end of 2021 to 198 million subscribers.
“However, due to the sustained uptake in mobile Internet services and increasing diversification of value-added services by telcos, we believe revenue will grow, albeit by a lower rate of five per cent in 2021 (2020: 14 per cent). We anticipate that logistics around the NIN-SIM verification exercise will be resolved by the end of 2021 and thus, double-digit top line growth should be restored by 2022,” the report noted.
It added that unstable macroeconomic environment in Nigeria poses a huge threat to successfully harnessing the vast potential of the telecommunications industry.
“In the span of five years (2016-2020), Nigeria has gone through two economic recessions while the naira has continuously lost value against the world’s major currencies, negatively impacting purchasing power and the ability to maintain quality network equipment and services.
“In addition to the fragile macro economy, the telecommunications industry has also had its fair share of unfavourable regulatory changes through onerous tax regimes, delayed approvals and heavy regulatory penalties,” it noted.
The agency observed that the COVID-19 pandemic posed an extraordinary test for the entire global community considering several social isolation measures mandated to curb the spread of the coronavirus.
For this reason, the telecommunications industry, according to the report, provided businesses and individuals with connectivity, which fostered resilience as the world grappled with the pandemic.
The report observed that at the peak of the isolation, Internet traffic in Europe increased by about 70 per cent while demand for streaming services grew by at least 12 per cent, with some of the streaming service providers having to lower video quality to manage the rise in Internet traffic.
It noted that in Nigeria, the proportion of mobile Internet users to mobile phone subscriptions increased from 69.1 per cent in January 2020 to 75.4 per cent as at December 2020. Agusto & Co expects the country’s telecommunication consumption pattern to be sustained in the near-term given lingering concerns around the emergence of COVID-19 variants.
Agusto & Co says it expects the challenges of the industry to remain with high business costs, especially given the consistent devaluation of the naira, prevailing inflationary pressures and the adverse impact of regulatory changes.
“However, the Industry’s outlook remains stable on the premise that telecommunications will provide recovery support to key economic sectors post-pandemic. Anticipated business diversification efforts of operators will also support our outlook,” it stated.
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