Nigeria is no longer the highest-earning telecom provider market. The average revenue per user (ARPU) fell from $3.08 in 2023 to $1.89 by the end of 2024, a 38.79 percent year-over-year fall.
The ongoing devaluation of the naira relative to the dollar is mostly to blame for the decline.
Since a devaluation in June 2023 caused the naira to plummet from N470/$ to N1528/$, it has lost around 70% of its value, impacting the financial performance of domestic companies and causing historic losses.
“Revenue in naira has plateaued as the number of subscribers has increased. Falling ARPUs reflect price pressure and decreased average usage,” according to the GSMA, the global association for cellular companies.Â
In the past, Nigeria has contributed the most to the profits of international telecom companies such as MTN Group and Airtel Africa. However, Nigeria has fallen in the profits rankings, and investor dividends have been eroded by significant foreign exchange losses brought on by the naira’s volatility.
Formerly the top-earning affiliate of the MTN Group, MTN Nigeria has fallen behind MTN South Africa. Its ARPU dropped to $2.17 in the last quarter (Q4) of 2024, a 35.42 percent decrease from $3.36 in Q4 2023, even though it recorded its highest-ever revenue of N3.36 trillion.
With a $5.03 ARPU in Q1 2023, the firm, a part of the 16-country MTN Group, was the group’s top market. However, in Q4 2024, it dropped to 11th place ($2.17 ARPU).
ARPU increased from N2,319.20 in Q1 2023 to N3,542 in Q4 2024, a 52.73 percent increase in naira terms. However, the naira’s decline from N907.1/$ in 2023 to N1,535/$ by 2024 offset this growth.
Airtel Nigeria has also had difficulties; in December 2024, their ARPU dropped to $1.6, a 75 percent decrease from $2.8 at the same time in 2023. Nigeria’s reduced profitability within the group is highlighted because this number currently falls below Airtel Africa’s regional average of $2.6. For the nine months ending in December 2024, Airtel Nigeria’s revenue dropped 40.34 percent yearly to $738 million.
The “financial performance of the mobile industry in Nigeria has slowed down in recent years after a long period of sustained growth,” according to GSMA, which has affected operators.
Increasing costs, primarily in dollars, were too much for operators to keep up with. As a result, network investments were cut, and service quality declined in 2024.
MTN Nigeria CEO Karl Toriola emphasized that operating costs have increased by 300 percent over the last ten years. Ultimately, there was not enough money to cover our expenses. He stated, “We were using up 120 percent of our cash flow.”
These financial difficulties directly impacted capital expenditure. In the nine months ending December 2024, Airtel Africa, which serves 57.67 million Nigerian users, spent $456 million on capital expenditures, a 7.8 percent year-over-year decrease, while MTN’s core capital expenditures fell 1.30 percent to N443.48 billion.
The GSMA clarified, “Mobile service providers must make enough money to pay for their operating expenses and sustain this level of capital expenditure over the medium term.”
This drop in ARPU sparked calls for higher prices and a change in operating strategy to maximize cost. Recognizing the widening gap between operating costs and revenue, the Nigerian Communications Commission (NCC) gave in and authorized a 50% increase in tariff charges.
The NCC stated that these changes will help operators continue investing in innovation and infrastructure, eventually benefiting customers by improving connectivity and services like better network quality, customer service, and wider coverage.
Operators anticipate that this increase in cash flow and average profitability will result in larger investments. For example, MTN anticipates that the rate hike will increase its revenue by N1.34 trillion, improving its cash flow for future investments. Given that the regulator linked cost increases to improved service quality, all operators anticipate increasing their investments in 2025.
Although it is anticipated that telecoms’ ARPUs will rebound, consumers’ reactions to growing living expenses are still a worry. Although the tariff increase will increase operators’ profits, Bismarck Rewane, CEO of Financial Derivatives Company, warned that usage may decline as consumers get used to the increased costs.
