A report by Moody’s Investors Service has said that Nigeria holds the key to the growth of telecom’s sector in in the Sub Saharan Africa (SSA).
Moody’s, in the report that was released on Monday, tipped Nigeria to lead the sector’s growth in Africa because of its large population and relatively low internet and mobile phone penetrations compared to its population.
It also estimated that mobile subscribers in SSA would increase by 150 million over the next five years, with most of the growth coming from markets with large populations and low penetration rates.
The report, which was titled: “Sector In-Depth: Telecommunications-Africa,” stated that African telecoms would benefit from strong growth but are faced with increasing sovereign risks.
It added that growth would “be highest in the SSA countries with large populations and relatively low mobile penetration rates such as Nigeria, Ethiopia, Democratic Republic of Congo, Tanzania and Kenya.
“We expect the strong growth of the telecommunications sector in many SSA countries to continue over the next three to five years. This will be supported by the region’s young and fast-growing population, relatively low mobile and even lower internet penetration rates and growing adoption of smartphones.”
Moody’s hinged its strong growth outlook for the telecoms sector in SSA on the sector’s sustained growth in revenue since 2018 by its largest mobile network operators (MNOs) like the MTN Group Limited, the Vodacom and the Airtel Africa Plc, which contrasted high-income countries where the mobile phone market has been saturated in terms of subscribers that made network operators’ earnings to be stagnating.
The report also expected that demand for telecom services would be broadened as the large under-banked population in Africa would be targeted by mobile network operators with mobile money solutions that add another source of revenue growth and customer loyalty.
It said: “The convergence of payment services integrates telecommunication services deeper into people’s lives, which will in turn increase mobile and data subscription rates.”
The report also anticipated increased investment in upgrading telecom’s infrastructure to 4G technology to accommodate increasing traffic and meet demand for higher speeds.
It said: “Telecom companies are investing in network capacity and speed to absorb growing demand. Operators are planning capital spending of $37 billion over the next five years, according to GSMA. Operators are prioritising investments over other uses of capital and are reducing dividends and rationalising portfolios.
“For international telecom companies, investments in Africa provide growth opportunities in contrast to stagnating earnings in their mature home markets. The Vodafone Group Plc, the Orange and Emirates Telecommunications Group (Etisalat) have invested in Sub-Saharan Africa to diversify away from their mature domestic markets. For these operators, revenue from SSA represents a modest 11 per cent to 14 per cent of total revenue but generally accounts for most of the growth.”
The Moody’s stated that although mobile phone penetration has grown rapidly in SSA since 2011, the region still remained among the lowest globally.
It said the SSA had 477 million mobile subscribers as of 2019, according to the GSMA, accounting for 43 per cent of the population, which is still low compared with global penetration rates and subscribers typically hold more than one SIM card.
The report added that internet usage by only 25 per cent of the population of SSA would increase with the introduction of 4G enabled smartphones.
It said: “Internet adoption and usage will increase rapidly over the next three to five years as operators roll out networks and upgrade technologies. In addition, 4G-enabled smartphones will become increasingly affordable through the rollout of devices costing less than $100 and via financing partnerships between telecom operators, local banks and global technology companies, including Google.
“We estimate that unique mobile subscribers in SSA will increase by 150 million over the next five years, with most of the growth to come from markets with large populations and low penetration rates. Data usage will grow even faster as existing subscribers upgrade to smartphones and become data customers and as existing data customers consume more data on more advanced devices.
“This is credit positive for MTN, the largest operator by mobile subscribers in Nigeria and Uganda; for Bharti Airtel through its majority ownership of Airtel Africa, the second-largest operator in Nigeria, Uganda, DRC and third-largest operator in Tanzania; for Vodafone through its majority ownership of Vodacom, the largest operator in DRC and Tanzania; and for Orange as the third-largest operator in DRC. It will also be a credit positive for Africell, which acquired a licence to enter Angola in 2021. Ethiopia is a closed market but in May 2021 awarded an operating license to a consortium led by Safaricom and Vodacom.”