Nigeria’s Telecommunications Sector Growth Sustains Momentum – Report

Growth in Nigeria’s telecommunications sector has remained robust when compared to total GDP, in real terms; the telecommunications sector contributed N 1,580 billion to GDP in the second quarter of 2016, or 9.8 per cent, which represents an increase of 1.0 per cent points relative to the previous quarter.

This is the largest contribution to GDP made from this sector in the rebased period, however due to differing seasonal patterns; the contribution from telecommunications is usually the largest in the second quarter.

According to data released by the National Bureau of Statistics (NBS) with input from the Nigerian Communications Commission (NCC) although growth in the telecommunications sector remained positive, in contrast with the economy as a whole, year on year growth nevertheless dropped in real terms from 5.0 per cent in the previous quarter to 1.5 per cent, the lowest rate since 2011 Q3.

The share of telecommunications in total real GDP had declined throughout 2010 to 2014, but for the last five quarters growth in telecommunications has been higher, meaning the trend has reversed.

The report is reproduced below.

Subscribers as of June 2016

The total number of subscribers has increased rapidly over the past decade; at the end of 2005 there were 19,519,154 subscribers, but by the end of 2015 there were 151,017,244, which is equivalent to an increase of 13,149,809 every year. However, growth has been declining more recently, possibly as a result of high market penetration leaving less room for large expansion.

In June 2016 – the end of the second quarter – there were 149,803,714 subscribers compared with 148,775,410 in June 2015, which represents an increase of 0.69 per cent. The yearly increase in total subscriber numbers has been decreasing steadily for the past year; in June 2015 the year on year increase was 12.05 per cent. However, after falling between January and April 2016, the number of subscribers began to increase again, and in June the number was 0.71 per cent higher than at the end of the first quarter in March.

This increase is despite a sharp drop in CDMA subscribers; between June 2015 and June 2015 the number fell from 2,105,981 to 454,092, a decrease of 78.44 per cent (explored further below). Although CDMA remains the second most popular technology type, this decrease has meant that the GSM technology type has entrenched its position as the dominant provider of mobile subscriptions.

June. Considering the large fall in subscriber numbers, this is only slightly less than the share of 99.48 per cent that Visafone accounted for in March. However, it is nevertheless the smallest share recorded since August 2014.

Subscribers by Technology Type

Subscriber data is broken into four sections according to the technology type used. The first two are for mobile technology; Global System for Mobile Communications (GSM) and Core Division Multiple Access (CDMA), whilst the latter two are fixed lines, either wireless or wired. Mobile subscribers using GSM dominate, and accounted for 99.58 per cent of the total in June 2016, followed by CDMA with 0.30 per cent of the total, whist fixed wired and wireless make up 0.08 per cent and 0.03 per cent respectively. The dominance of GSM users has increased since June 2015 when 98.46 per cent of subscribers used this technology type; however this increase was largely as a result of the decline in CDMA users over the second quarter of 2016. The proportion of subscribers using fixed lines has remained broadly stable over the past year, albeit at very small levels.

The dominance of GSM over CDMA in the mobile technology is characteristic worldwide; GSM accounted for over 80 per cent of the global market in 2009 Q2 according to industry estimates1. With GSM technology, it is cited as being easier to switch networks, and it is regarded as being more accessible for international use, especially given that some markets (such as in Europe) have mandated the technology by law. However, CDMA is more prevalent in the United States.

Mobile Subscribers (GSM)

In June 2016, the total number of GSM subscribers was 149,179,083, an increase of 2,692,267, or 1.84 per cent relative to June 2015. In both percentage and absolute terms, the year on year increases in GSM subscriber numbers have been falling steadily over the past 12 months. In March 2016, the year on year growth rate was 4. 06 per cent, and in June 2015 the rate was 12.22 per cent. However, the number of GSM subscribers increased throughout the second quarter of 2016, from 146,866,356 in April.

The second quarter of 2016 saw a partial reversal of trends that had been recorded since August 2015. After declining between then and March 2016, the number of MTN and Etisalat subscribers began to increase again; the number of MTN subscribers rose from 57,045,721 to 58,409,767 between March and June 2016, and Etisalat subscriber numbers rose from 21,877,542 to 22,469,896 over the same period. These changes represent quarter on quarter growth rates of 2.39 per cent and 2.71 per cent respectively, although year on year growth rates were still negative, at -7.01 per cent for MTN and -1.67 per cent for Etisalat.

Airtel also witnessed a reverse in trend. In the second quarter of 2016 the provider recorded growth of -5.57 per cent, following consistent positive growth since August 2014. Nevertheless, the year on year growth was positive at 8.17 per cent, and there was a slight increase between May and June of 0.44 per cent. Airtel ended the quarter with 31,978,848 subscribers.

By contrast, Globacom continued their uninterrupted growth in subscriber numbers. With the highest quarter on quarter growth and and year on year growth rates of 4.95 per cent and 16.20 per cent respectively, Globacom also recorded the largest increases in absolute terms by both measures. At the end of the second quarter Globacom had 36,320,572 subscribers.

As a result of these trends, Globacom increased their share of total subscriptions to 24.35 per cent, from 23.48 per cent at the end of the previous quarter and 21.34 per cent a year previous. Both MTN and Etisalat also increased their percentage share of subscribers relative to the previous quarter; MTN’s share increased from 38.70 per cent to 39.15 per cent and Etisalat’s share increased from 14.84 per cent to 15.06 per cent.

However, both providers nevertheless recorded a decrease in their share relative to June 2015, when the shares for MTN and Etisalat were 42.88 per cent and 15.60 per cent respectively. Airtel was the only provider to record a decrease in their share relative to the previous quarter; in June 2016 their share was 21.44 per cent compared to 22.98 per cent in March. However, this still represents an increase relative to the share of 20.18 recorded in June 2015.

Mobile Subscribers (CDMA)

IN June 2016, at the end of the second quarter of 2016 there were 454,092 CDMA subscribers, which represent a decline of 61.19 per cent relative to the end of the previous quarter. This is the second consecutive sharp decline in CDMA subscriber numbers; in March there was a drop of 45.55 per cent from 2,148,727 in December 2015 to 1,170,031. As a result, the year on year fall was 78.44 per cent, from 2,105,981 in June 2015.

Both providers of this technology type contributed to the decline, but Visafone recoded the larger fall both quarter on quarter and year on year, of 61.37 per cent and 78.54 per cent respectively, compared to 27.09 per cent and 58.66 per cent respectively for Multilinks. This, accompanied by Visafone’s much larger share of the market meant that Visafone was the main driver of the large decrease in subscribers. Of a decline in absolute terms of 715,939 subscribers quarter on quarter, Visafone accounted for 714,282. Nevertheless, the decline in the number of Multilinks subscribers has been consistent since 2014; there have been only two months in which they have recorded increases, and the only quarter to recorded positive growth was the second quarter of 2015 since May 2014.

Despite the large fall in Visafone subscribers, Visafone remained by far the largest CDMA provider, and accounted for 99.02 per cent of CDMA subscriptions in Fixed Wireless Line.

As with CDMA subscribers, the number of fixed wireless line subscriptions dropped sharply in June 2016, after having remained fairly stable for over a year. However the decline was less sharp than for CDMA subscriptions. In June 2016 there were 45,087 subscriptions, compared with 51,383 in March 2016 and 58,935 in June 2015, which imply declines of 12.25 per cent and 23.50 per cent respectively.

In percentage terms, Multilinks recorded by far the biggest decreases. In June 2016 the provider had 428 subscribers, compared with 1,787 in March 2016 and 3,387 in June 2015, which represents falls of 76.05 per cent and 87.36 per cent. By contrast, Visafone recorded quarter on quarter and year on year decreases of 9.95 per cent and 19.60 per cent respectively. However, given Visafone’s larger share of the market, their decline had a far larger impact on overall numbers of fixed wireless line subscribers. Of the 6,296 fixed wireless line subscribers that were lost between March and June 2016, 4,937 of these were accounted for by Visafone. In June 2016 Visafone had 44,650 subscribers, compared to 49,596 in March 2016 and 55,548 in June 2015.

Due to Multilinks recording a larger decrease in percentage terms, Visafone’s share of total subscriptions continued to rise, from 96.52 per cent in March 2016 to 99.05 per cent in June 2016. This was the first period in which Visafone dominated the fixed wireless line market to a greater extent than the CDMA market, although both markets are recording consistent declines in subscriber numbers.

Fixed Wired Line

In contrast to fixed wireless line and CDMA technology types, the number of fixed wired line subscribers increased slightly both quarter on quarter (by 0.20 per cent) and year on year (by 1.41 per cent). In June 2016 there were 125,452 subscribers to this technology type, compared to 125,196 in March 2016 and 123,708 in June 2015.

IpNX was the only fixed wired line provider to record a quarter on quarter decline in their number of subscribers, which fell from 2,764 in March 2016 to 2,597 in June 2016, a fall of 6.04 per cent. The other three providers for this technology type all recorded small increases, although none of the increases were above one per cent 21st Century and Glo Fixed each recorded increases of 0.35 per cent relative to March 2016; the number of 21st Century subscribers increased from 103,191 to 103,552, and the number of Glo Fixed subscribers increased from 11,750 to 11,791. The increase recorded by MTN Fixed was slightly less: their number of subscribers increased from 7,491 in March to 7,514 in June 2016, an increase of 0.20 per cent.

The picture was markedly different for year on year growth rates. Only 21st century recorded a positive increase relative to June 2015, whose subscribers increased by 4.23 per cent. The other three providers recorded declines, although the largest decline was for MTN Fixed, whose numbers declined by 22.45 per cent. IpNX and Glo Fixed saw their number of subscribers fall by 8.52 per cent and 0.36 per cent respectively over the same period.

GSM internet subscriptions

Of all GSM users, a total of 92,181,978 had an internet subscription with one of the four carriers of Airtel, Etisalat, Globacom and MTN in June 2016. This means that all of the active GSM lines, 61.79 per cent had an internet subscription. Throughout most of 2014 and 2015 this proportion had been increasing, however in the first two quarters of 2016 it had declined; from 65.26 per cent in December 2015 to 62.61 per cent in March 2016, and further to 61.79 per cent in June 2016.

This proportion also lower than in June 2015, when it was 63.28 per cent. This was the first month or quarter to record a fall in this proportion relative to the previous year.

Whereas the number of GSM subscriptions increased by 1.21 per cent relative to the end of the first quarter, the number of GSM Internet subscriptions reduced by 0.11per cent , from 92,285,052 in March 2016. The fall was not consistent throughout the quarter – there was a slight increase in May. As in the previous quarter, the fall was entirely as a result of fewer MTN internet subscriptions. There were 32,974,177 internet subscriptions with MTN in June 2016, 1.15per cent less than the 33,356,595 internet subscriptions recorded in March 2016. All other providers saw slight increases, although in each case the increase was less than one percent. As a result, MTN’s share of GSM internet subscriptions fell to 35.77per cent , down from 36.15per cent in March 2016 and 43.67per cent in June 2015. However, it is still the largest provider for this technology type.

Although they recorded slight increase relative to the previous quarter, the number of internet subscriptions with other GSM providers was broadly flat. The largest increase was recorded by Airtel, whose number increased by 0.99per cent relative to March 2016. This compares with an increase of 0.37per cent for Globacom and an increase of 0.07per cent for Etisalat over the same period. Year on year a markedly different picture emerges. Airtel, Etisalat and MTN all record decreases, of 1.55per cent, 0.21per cent, and 18.55per cent respectively. Globacom on the other hand recorded a marked increase of 37.75per cent

CDMA internet subscriptions

Although the ratio of internet to mobile subscriptions among CDMA providers is low relative to GSM subscribers, it increased markedly in the second quarter of 2016 following another large increase in the first quarter. This was entirely as a result of the large fall in the number of CDMA mobile subscribers however. The number of internet subscriptions actually fell by 19.35per cent between March and June of 2016, from 124,910 to 100,743, but this fall was still less than the 61,19per cent fall recorded in CDMA mobile subscriptions over the same period. However, it means that GSM technology continues to entrench its position as the most popular technology type for internet subscriptions.

Internet subscriptions among Multilinks subscribers have dwindled to almost zero. According to the Nigerian Communications Commission data, there were only 4 internet subscriptions with Multilinks by the end of the second quarter of 2016, down from 142 in March 2016 and 126 in June 2015. These represent quarterly and year on year falls of 97.18per cent and 96.83per cent. This compares with 4,460 mobile subscriptions, which implies a ratio of 0.09per cent. In addition, Multilinks internet subscriptions account for an insignificant part of total CDMA internet subscriptions.

Given the decline of Multilinks internet subscribers, essentially all of the CDMA internet subscriptions are now with Visafone. Nevertheless, Visafone has also seen a decline in internet subscriptions. In June 2016, they had 100,739 internet subscribers, which compares with 124,768 in March 2016 and 115,481 in June 2015, quarterly and year on year falls of 19.26per cent and 12.77per cent respectively. Given the much larger falls in mobile subscriber numbers however, the ratio between mobile and internet subscribers for Visafone increased from 10.72per cent in March to 22.40per cent in June 2016, after spiking in April at 28.11per cent.

The total number of CDMA subscriptions declined by 14.57per cent overall over the first quarter, compared with a decline of 4.89per cent for GSM subscriptions, which means that the latter continues to entrench its position as the most popular form of internet subscriptions.

Porting Activities

Porting activities refer to the transferal of subscribers to different network carriers. Therefore, incoming porting activities refer to those subscribers that have joined a network, whilst outgoing porting activities refer to those whom have left. The second quarter of 2016 recorded a decrease in the amount of porting activity, both relative to the first quarter of 2016 and the second quarter of 2015.

Incoming

There was a total of 61,754 incoming porters in the second quarter of 2016 (across all three months). This compares with a total of 51,301 in the first quarter, and 54,714 in the second quarter of 2015, increases of 20.02per cent and 12.54per cent respectively. The quarter on quarter increase was primarily as a result of an increase of 43.15per cent in incoming porting activity recorded by Etisalat; although given that this provider had seen declines in the previous two quarters this was only equivalent to a year on year increase of 0.28per cent. Etisalat remained the provider to record the most incoming activity, and accounted for 57.83per cent of activity in the second quarter of 2016.

MTN also recorded a large increase in the number of porters, from 1,353 in the first quarter to 2,878, or more than double. Year on year the increase was 31.60per cent. Despite this, MTN recorded by far the smallest share of incoming activity, as in all previous quarters, and accounted for 4.67per cent. Globacom however, recorded a quarterly decrease of 33.96per cent, from 5,683 to 3,872 between the first and second quarter, and accounted for the second smallest amount of incoming activity at 6.29per cent. Nevertheless, the provider recorded a year on year increase of 6.61per cent. In contrast to the other providers, Airtel recorded essentially no change in incoming porting activity relative to the previous quarter, recording only a 0.03per cent increase. However year on year, Airtel recorded an increase of 43.57per cent, and the provider continued to account for the second largest amount of incoming porting activity of 31.21per cent.

This was partly as a result of the number of incoming porters to MTN more than doubling between the first and second quarters of 2016, rising from 1,353 to 2,878. However, MTN remains the provider to record the least porting activity, and still accounts for only 4.67per cent of all incoming porting activity.

After falling for the previous two quarters, the number of incoming porters to Etisalat increased by 43.15per cent. This was equivalent to an increase of 10,733 porters, slightly more than in the increase in the total number of incoming porters. This is explained by a 33.96per cent fall in incoming porting activity recorded by Globacom. By contrast to the large changes recorded by other providers, Airtel recorded just a 0.03per cent increase relative to the previous quarter.

Outgoing

There were a total of 60,356 outgoing porters in the second quarter of 2016, an increase of 13.94per cent relative to the 52,973 outgoing porters recorded in the previous quarter, and an increase of 10,58per cent relative to the 54,581 outgoing porters recorded a year previous. Airtel, Etisalat and Globacom each contributed to the increase, and recorded relatively large growth rates both year on year and quarter on quarter. MTN was the exception; this provider recorded decreases over both periods.

The largest increase in outgoing activity was recorded by Globacom, who recorded an increase of 76.37per cent, from 7,152 in the first quarter to 12,614 in the second quarter of 2016. Year on year the increase was lower at 47.00per cent, from 8,581 outgoing porters in the second quarter of 2015. Etisalat recorded the second largest increase, of 59.44per cent or from 4,800 to 7,653 between the first and second quarters, and by 28.88per cent from 5,938 in the second quarter of 2015. The number of outgoing porters recorded by Airtel was 13,192; which was 32.12per cent higher than the 9,985 recorded in the previous quarter and 26.06per cent higher than the 10,465 recorded in the second quarter of 2015.

By contrast, MTN recorded 26,897 outgoing porters in the second quarter of 2016, which represents a 13.34per cent decline relative to the 31,036 recorded in the previous quarter and a decline of 9.25per cent relative to the 29,637 outgoing porters recorded in the second quarter of 2015.

Despite the above changes in porting activity, the ranking of the four providers remained the same in terms of the share of outgoing porting activity. MTN accounted for the largest share, as in all previous quarters for which there is data. Airtel remained the provider to account for the second largest amount of outgoing porting activity, although at 21.86per cent, their share is only slightly higher than that of Globacom, who accounted for 20.90per cent. Etisalat remains the provider to account for the smallest amount of porting activity, and accounted for 12.68per cent in the quarter under review.

Net Porting Activities

In the first quarter of 2016 Etisalat remained the largest beneficiary of porting activities, and in net terms they recorded an increase from 20,076 to 27,956 between the first and second quarter of 2016. Despite recording a larger increase in outgoing activity than incoming in percentage terms, in absolute terms the latter was larger. Airtel also recorded a net gain, although at 6,023, this was slightly less than in the first quarter of 2016 in which the figure was 9,224.

By contrast both Globacom and MTN continued to record net losses from porting activity. Globacom recorded a net loss of 8,742, a substantial increase compared to the loss of 1,289 recorded in the previous quarter. MTN however saw a reduction in their net loss, from 29.683 in the first quarter of 2016 to 24,019 in the second quarter. Nevertheless, they remain to provider to lose the most from porting activity.

Tariff Details

Across all providers, there are numerous options for tariff plans, each differing according to the overall cost and the services provided. This reflects the fact that there are many facets to the services telecommunications companies provide, such as SMS messaging, local and international call and data bundles. The variety of options may reflect the telecommunications companies attempting to attract customers with more tailored packages, catering to a wide range of different user needs.

Tariffs tend to differ according to whether they are on-peak or off-peak, whether the service is to someone on the same network (on-net) or a different one (off-net), and whether they are pre- or post-paid. However not all networks offer different prices according to these characteristics; for its pre-paid plans, Etisalat offers the same prices for on-net and off-net calls regardless of what bundle is purchased, and Airtel do not distinguish between on-peak of off-peak calls.

As a result of the different options available, whether or not prices are higher or lower than in 2014 largely depends on usage. For example, Airtel 2Good Classic (a particular package offered by Airtel) offers cheaper rates than Airtel Connect (an alternative package), but charges a daily fee of five naira. Therefore which is cheaper will depend on usage; the more the line is used, the more it would be worth paying the five Naira daily fee.

Source: Footprint to Africa

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