Analysis of the Operations and Performance of MTN Nigeria and Airtel Nigeria as at September 30, 2019

Introduction

August 6, 2019 makes it 18 years since the introduction of the Global Systems of Mobile Communications (GSM) into the Nigerian society by former President Olusegun Obasanjo during his first term in office. The arrival of the GSM was needed due to the problematic and highly criticized services of the Nigerian Telecommunications (NITEL) which maintained monopoly over the Nigerian telecommunications industry. Since then, there have been different innovations in the telecommunications industry as the telecoms operators strive for survival and market share. For example, Airtel has changed to different names over its years of existence so as to have a ground in the industry. Airtel (Econet), MTN and MTEL were the first three companies that started together when GSM was introduced in the company. Since then, it has change from Econet to Vodacom in 2004, to Vmobile still in 2004, to Celtel in 2006, Zain in 2008 and Airtel finally since 2010.
This analysis therefore takes into consideration the operations and performance of the two Telecoms companies- MTN and Airtel listed on the Nigerian Stock Exchange. In this analysis, insights into the operations of the two companies in Nigeria are provided as well as review into their Financial performance for the period ended September 30, 2019.
Mobile Lines Users in Nigeria in 10 Years
In the space of 10 years (2009 to 2018), active mobile lines in Nigeria has increased by 163% more than the forecasted growth in Nigeria’s population during the same period by 130%. Active mobile lines increased from 65.53 million in 2009 to 81.19 million in 2010, representing a growth rate of 24%. By 2014, the active mobile lines in Nigeria already doubled the amount it was in 2009.

Source: NCC

In 2015 and 2016, active mobile lines increased by 8.7% and 3.6% respectively and this period can be seen as a period of peak as growth in mobile lines increased at a decreasing rate. By 2017, the country recorded its only decline of mobile active users in 10 years. During this period, active mobile lines declined by 6.4% to 144.63 million from 154.12 million recorded in 2016. A major factor responsible for this was the decrease in the number of Airtel and Etisalat (9 Mobile) subscribers during the period as Airtel lost 45,000 subscribers while Etisalat saw a decrease in the number of its internet subscribers by 288,518. By 2018, active mobile lines in Nigeria was already at 172.49 million.

Source: NCC, CBN
With 103 million internet users in June 2018, active mobile lines was 172.49 million in 2018 according to the Nigerian Communications Commission, thereby leaving the active mobile lines users as a percentage of the population at 84% from 73% recorded in 2017.

Note: In calculating the population forecasts for 2017 and 2018, a growth rate of 3% was assumed since 3% was used in calculating the growth rates from 2009 to 2016.

Over the 10 years period, active mobile lines as a percentage of the population was lowest in 2009 at 42% and highest in 2018 at 84% with the major decline occurring in 2017.

Share of Telecoms Operators in Nigeria’s Telecommunications Space (Q3 2019)

According to the data obtained from the Nigerian Communications Commission, there are 178.9 million mobile GSM subscribers in Nigeria as at September 30, 2019 of which Visafone has the lowest GSM subscribers with a subscriber base of 118,842 representing 0.01% of the entire market share.

Source: NCC
As at the third quarter of 2019 (September 2019), MTN has the highest market share of 36.5% with a subscriber base of 65.33 million which is 4 times more than the subscriber base of 9 Mobile which has a subscriber base of 15.97 million and controls a market share of 8.9%. With subscriber base of 49.21 million and 48.91 million, Globacom Limited and Airtel Nigeria respectively control 27.5% and 27.3% of the market share as at the September 2019.

About MTN Nigeria Communications PLC

With a Network infrastructure value of N1.04trillion (Network infrastructure netbook value at 493.62bln) and total assets valued at N1.54trillion as at September 30, 2019, MTN Nigeria Communications PLC together with its subsidiaries (XS Broadband Limited, Visafone Communications Limited and Yello Digital Financial Services Limited) carry on the business of building and operating GSM Cellular Network Systems and other related services (Provision of broadband fixed wireless access service, high quality telecommunications services and mobile financial services (fintech)) nation-wide in Nigeria.

Review of the Performance of MTN Nigeria as at September 30, 2019

MTN Nigeria generated N856.48bln in the third quarter of 2019 and this increase of 12% from the Q3 2018 revenue (N764.46bln) was largely driven by a 33% increase in data revenue (N162.26bln compared to N122.20bln in Q3 2018) and 8% in voice revenue (N533.76bln compared to N493.32bln in Q3 2018). However, revenue from its digital services revenue declined by 21% to N26.39bln as against N33.58bln generated from the same service in Q3 2018. It is therefore project that revenue in full year 2019 will surpass the revenue in 2018 and will be the biggest revenue so far to be recorded by the company.
The components of MTN Nigeria’s revenue are as follows:

  1. Airtime and Subscription Valued at N533.76bln
  2. Data at N162.27bln
  3. SMS at N10.25bln
  4. Interconnect and Roaming at N95.37bln
  5. Handset and accessories at N848mln
  6. Digital services at N26.39bln
  7. Value Added Services at N25.31bln and
  8. Other revenues valued at 2.30bln
    Source: MTN Nigeria Communications PLC

From the statistics obtained from the Nigerian Communications Commission, MTN Nigeria has 65.33 million subscribers, representing 36.5% of the total market share, reaching over 64 cities in the country. Based on the revenue data of the company, it therefore means that 65 million Nigerians spent N533.76bln on the purchase of airtime for call and subscription in the first 9 months of 2019. The Return on Equity which measures the rate at which MTN Nigeria uses its asset to create profit for its shareholders is 0.10% and it was calculated by dividing the Profit After Tax of the company by the average of its equity value as at December 2018 and as at September 2019. The earnings per share valued at N7.29 as at Q3 2019 compared to N5.65 as at December 2018, shows that the company is more profitable compared to the previous period of December 2018. Also, the Price-Earnings Ratio shows that MTN shareholders are paying N17.91 to own N1 of the profit of the company, thereby leaving the share’s earning yield to be 5.5% (by taking the inverse of the P/E ratio) as at September 2019.
During the period under review, MTN Nigeria spent N33.17bln on network maintenance and paid N22.07bln as regulatory fees. Its finance costs (which comprises of interest paid on borrowings of N32.40bln, interest expenses on leases, other interest expenses, Time value accretion on regulatory fine, and foreign exchange loss) during the period under review amounts to N91.98bln compared to N53.22bln in Q3 2018, representing 73% increase in finance costs in one year. An expense to note also in the Nigerian Police Trust Fund Act which was signed during the year. The act which is expected to last for 6 years, imposes a levy of 0.005% (5 naira per 100 thousand naira) on the net profit of companies operating in Nigeria. As such, MTN Nigeria paid N10.729million to the fund to add up to its total revenue of N58.85bln during the period.

About Airtel Nigeria

A leading provider of telecommunications and mobile money services in Nigeria, the unconditional trading on the shares of the company commenced on the Nigerian Stock Exchange on July 9, 2019 after the successful pricing of its Initial Public Offering at N363 per share on June 28, 2019. Like MTN Nigeria, Airtel also applied for Payment Service Bank license and Super-Agent license with the Central Bank of Nigeria of which the approval of the brand name was received in July 2019. And on 21 October 2019, the Group announced a partnership with Ecobank which will allow Millionss of Airtel Money and Ecobank customers across Africa to improve their access to mobile financial services and carry out a variety of mobile transactions.

Review of the Performance of Airtel Nigeria as at September 30, 2019

Airtel generated more voice revenue in Nigeria during the period than it does in the whole of East Africa, by 34% as voice revenue in Nigeria was at 398 million dollars (N122.186bln) while that of East Africa was 296 million dollars (N90.872bln). Same goes for data revenue as the company generated 199 million dollars (N61.09bln) in data revenue in Nigeria while data revenue from the whole of East Africa was 144 million dollars (N44.21bln) during the period (representing 38% data revenue in Nigeria more than that in East Africa).
However, the penetration of Airtel’s mobile money (Airtel Money) operation in Nigeria is still very low as it only contributed 3 million dollars to its Nigerian total revenue while the same mobile money contributed 73 million dollars to the company’s total revenue in East Africa (impacted by the wide adoption of mobile money services in Kenya) and 28 million dollars to the revenue generated from the rest of Africa.

With a customer base of 39.5 million as at September 30 (according to the company’s Financials), it means 39.5 million Nigerians spent N196.48 billion to buy Airtel recharge cards for data, make calls and access other services provided by the company.
The largest contributor to the revenue growth of the company is the data revenue as it grew by 76% from 113 million dollars (N34.69bln) in September 2018 to 199 million dollars (N61.09bln) in September 2019. Voice revenue grew by 13.1% and this is attributed to the double digit growth in its customer base. According to the company, customer growth resulted from the efficient sales and distribution system as well as expansion of network infrastructure. Furthermore, while data revenue contributes 31% to Airtel Nigeria’s total revenue, voice revenue now accounts for 62% of the company’s revenue and other revenue accounts for the remaining 7%.

Conclusion

The period covered by the financial statements of the two companies could not make direct comparison of the performance of the two companies to be done as the September financial statement of Airtel spans 6 months while that of MTN is for 6 months. Nevertheless, the analysis provided glimpse into the performance of the two companies on a separate basis while extracting the Nigerian financial information from the financial report of Airtel Africa.
That said, the market share of each companies reflected in their financial statements as MTN which has larger market share performs better in the 3 quarters ended and the performance of Airtel too was impressive but with room for improvement in the operation of the company’s mobile money services in the country.

Download MTN Nigeria Q3 2019 Financial Statement Here

 

Download Airtel Africa Half Year 2019 Financial Statement Here

 

For further enquiries, questions, opinions and contributions, you can feel free to send in your comments through the comment section.

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