Revenues of telecoms companies hit five-year high in September 2024 on the back of increased streaming activities, online learning and remote work adoption by more firms.
Data revenues of telcos (MTN and Airtel) jumped 541 percent to N1.63 trillion in nine months to September 2024, from N254.32 billion reported in the corresponding period of 2019.
Over this period, service revenue grew by 187.39 percent, reaching N3.42 trillion. Voice revenues—once the primary income source for telcos—grew by only 70.74 percent to N1.44 trillion. This shows that data has now overtaken voice, contributing more to telcos’ income than voice services.
Data consumption is dominated by streaming activities, with movies and music listening shifting online.
“We have a lot more users coming online and consuming more content. Trends are changing; digital is here to stay… For instance, more Nigerians are watching Nollywood movies on YouTube,” said Adetutu Laditan, senior product marketing manager for YouTube.
A recent report by GSMA, a global body for telcos, highlighted that 85 percent of Nigerians on the mobile internet use it to make or receive video calls, while 75 percent watch free-to-access online videos, with 54 percent streaming free music. This trend has been accompanied by a rise in smartphone penetration, which in September 2024 outpaced feature phone usage for the first time.
Effect of COVID-19
The COVID-19 pandemic fuelled a widespread adoption of digital services. Lockdowns and social distancing measures forced people to rely on internet-based activities such as video conferencing, online education, and streaming.
“The total data usage on our network grew by 89.5 percent, almost double the previous period. The 4G data usage almost tripled and now contributes to 60 percent of the total data usage,” Airtel said in 2020.
According to the International Telecommunication Union (ITU), the United Nations specialised agency for information and communication technologies, global internet traffic has grown by an average of 30 percent since then. Data from the Nigerian Communication Commission (NCC) reveal that monthly internet usage has increased by 579.39 percent, from 125,149.86 terabytes (TB) in December 2019 to 850,249.09 in September 2024.
In its 2020 industry report, the NCC said, “The year 2020 witnessed a significant surge in data usage… The increase in data usage is directly linked to the outbreak of the COVID-19 pandemic which disrupted normal activities and most functions had to be held virtually including schools, corporate meetings, etc.”
This uptake in data consumption has been sustained with both MTNN and Airtel investing in 4G and 5G rollouts to accommodate increased traffic. Airtel Nigeria invested $1.21 billion in capex during this period, while MTNN staked N2.76 trillion.
Data usage per user has grown over the years. MTNN reported that its average rose to 11.3GB in September 2024 from 7.8GB in March 2023. For Airtel Nigeria, monthly usage increased from 2.8GB in March 2021 to 8.1GB in September 2024.
Increased uptake in data consumption has ensured that the country stays above the regional average, with about 29 percent of Nigerians (about 58 million) using the internet, according to GSMA. In August 2023, Umar Danbatta, the former executive vice chairman of the NCC, disclosed that Nigeria accounted for 29 percent of Africa’s internet consumption.
Economic impact of digital services
The shift towards digital services has also had positive economic impacts. Despite the 2020 recession, the telecoms sector expanded by 10.3 percent year-on-year due to increased data service consumption by households and businesses and higher subscriber numbers, according to the World Bank. Additionally, improved internet access over three years reduced extreme poverty in Nigeria by seven percent.
In response to these shifts, telecom companies have been rethinking their business models. In 2022, MTN rebranded itself as TechCo to reflect a new focus on technology-driven solutions. In 2023, it launched Chenosis in Nigeria, a marketplace where developers within the continent can build technology solutions, infrastructures, and APIs without spending dollars on foreign alternatives.
Airtel and MTN are also expanding their data centre presence in Nigeria to support growing digital service demands.
Broadband Penetration Still Low
Despite these strides, challenges persist. Broadband penetration, which refers to high-speed internet access, remains below 50 percent, and about 120 million Nigerians lack access to mobile internet. Available internet quality also fluctuates, with telcos needing to balance infrastructure investments with high operating costs.
In recent times, MTNN and Airtel have reduced investments in network infrastructure to focus on minimising foreign exchange (FX) exposure and managing rising operational costs.
A digital urban-rural gap continues to plague the country, with smartphone penetration at 59 percent in urban areas but only 26 percent in rural areas. According to the ITU’s Measuring Digital Development Facts and Figures 2022 report, only about 23 percent of Nigerians and other Africans in rural areas used the internet in 2022.
The NCC recently reported that 27 million Nigerians, many in rural areas, still lack access to telecom services. With lower revenue prospects in these regions, telco investments remain limited. For example, while 85 percent of Lagos residents live within five kilometers of a fibre network, only 12 percent of residents in Jigawa have similar access.
FG’s Efforts
To close this gap, Bosun Tijani, minister of Communications, Innovation, and Digital Economy, is championing the construction of 95,000 km more of fibre optic cables at $2 billion to ensure access to all and incentivise telcos’ investments.
Despite these obstacles, data consumption growth is expected to be sustained. Ericsson predicts a 37 percent annual increase in mobile data traffic in Nigeria between 2022 and 2028. GSMA has also noted that expanded 4G network coverage will further boost data usage in the coming years.
“The increase in data traffic will be driven mainly by the growing usage of data-heavy services, primarily video streaming and online gaming,” the industry body said.
