Despite Nigeria’s growing economic difficulties, two of the largest telecom companies’ most recent financial reports reveal that they kept a large bet on the country last year.
MTN Nigeria Communications Plc and Airtel Africa Plc raised their network capacity investments to a minimum of N732.42 billion in 2023.
The expenditures made by both telecoms were directed towards both new and old technologies. MTN, for example, proceeded with its 5G deployment, adding 2,106 sites by the end of 2022, up from 588. This is a 258.16% increase. As of December 2023, Airtel boasts 235 5G sites and 4G services across all of its websites.
MTN increased its capital spending by 13.21% to N570.97 billion from N504.33 billion in 2023, while recording a loss. Airtel increased its network infrastructure spending from $167 million (N77.66 billion at N465/$) in the same time of 2022 to $178 million (N161.45 billion at N907/$) during the nine months that ended in December 2023.
In 2023, these investments yielded returns. By December 2023, there were 2.33 million 5G subscriptions, up from 265,118.02 in May 2023, a 780.32 percent increase. From 55.37 million in May 2023 to 70.31 million in December 2023, 4G grew by 26.99 percent.
Similar to other businesses in the economy, telecoms had difficulty luring in foreign capital; in 2023, investments in the telecom sector fell by 70.50 percent to $134.75 million.
The chief executive officer of MTN Nigeria, Karl Toriola, stated that “2023 witnessed a very challenging operating environment characterised by rising inflation, currency devaluation, and foreign exchange shortages” in the company’s 2023 financial report.
Operators in the industry had to rely on commercial papers, letters of credit, and new debts to finance their capital expenditures due to FX shortages and a slowdown in foreign investments. The overall debt of MTN Nigeria increased from N689.67 billion to N1.18 trillion, a 70.69 percent increase.
Increases in commercial papers (from N22.44 billion to N234.11 billion) and letters of credit (from $161.24 million to $402.73 million) contributed to the telco’s growing debt.
Three commercial papers with a face value of N125 billion, N52 billion, and N72 billion were issued by MTN in 2023. The first was on August 1, 2023, and the second was on November 7, 2023.
The telecom company outlined its approach to investing: “To mitigate the effects of these headwinds on our operations, we continued to invest in our network infrastructure… to enhance capacity and expand coverage. This enabled us to meet the rising demand for data and… accelerate the growth of our commercial operations.”
The financial year that concluded in 2023 saw an increase in Airtel Africa’s debt of $583 million to $3.52 billion (the telco operates in 14 markets, with Nigeria being its largest). Despite the economic downturn, Airtel plans to keep making infrastructure investments.
The group chief executive officer, Olusegun Ogunsanya, stated: “Despite the inflationary and currency headwinds, we remain focused on the execution of our growth strategy, and when combined with our strong operational execution, this has ensured that we continue to see sustained, positive growth momentum across the business.”
One of the main drivers of Nigeria’s economy and the engine of its ambitions for a digital economy is the telecom industry. According to Umar Danbatta, a former executive vice chairman of the Nigerian Communications Commission, the industry has created 500,000 employment and drawn in $70 billion since its founding in 2022.
Nominally, the industry contributed N25.22 trillion (at current prices) to the GDP of the nation in 2023.
Revenues for both companies increased significantly in 2023, but MTN reported a loss as a result of inflation and foreign exchange losses that affected their profitability after taxes. They have been advocating for an upward price review in an effort to counteract them.
The CEO of MTN Nigeria, Toriola, recently stated: “Regulated tariffs must be raised due to the magnitude of the effects that growing inflation and currency devaluation will have on business. We are working with the authorities and relevant regulatory agencies to achieve this goal.”
