Nigerian Telecommunications Sector Report 2023 - A Beacon of Hope
2022FY in the global economy was pervaded by uncertainties as the Russian-Ukraine conflict persisted, causing supply-chain disruption and rising energy costs globally. We witnessed the pass-through effect on energy costs in Nigeria, and the telecommunications sector was not spared from the unfortunate incident. However, the industry still recorded decent growth, as evidenced by their most recent financial results and contribution to the nation's GDP numbers.
Coming to the peculiar development in the sector, in 2021, the telco players took some heat in their voice revenue as the Government introduced the critical linkage of NIN to customers' SIM. As a result, the companies had to stop SIM sales in the period, impacting subscribers' growth. In 2021, total subscriptions declined by 4.47% Furthermore, in April 2022, the Federal Government directed the telcos to ban SIMs without NIN linkage.
Given the sector's resilience and the country's favourable demography, we witnessed a surge in Data Revenue in 2022. This boosted the industry's total revenue in the period. Furthermore, it was an eventful year for the sector, as the media was laced with news of 5G deployment, final PSB license awards, Elon Musk's Starlink entrance into the market and Google's Submarine cables. Considering these developments, we are optimistic of the growth in the sector and its overall impact on the economy in 2023FY.
Across the companies under our coverage, we issue a 'STRONG BUY' rating on MTNN and a 'SELL' rating on Airtel Africa. We opine that Airtel Africa is overvalued at the current market price of NGN1,548.7 as of 16th March 2023.
ARM Securities Limited is a full-service brokerage house that offers best-in-class brokerage services to local as well as foreign private and institutional investors. Formerly known as Hamilton Hammer, the Company commenced operation in 1994 and was acquired by ARM Investment Managers in 2008--an acquisition which has successfully re-positioned the company as a recognized brokerage firm in Nigeria. The Company is a dealing member of the Nigerian Stock Exchange (NSE) and is regulated by Securities and Exchange Commission (SEC). ARM Securities research team provides insightful commentaries on the Nigerian economy and its equity and debt markets using an approach which incorporates a thorough understanding of the fundamentals of the industries and companies under coverage. The research therefore adopts an integrated methodology of top-down analysis and bottom-up stock selection, which focuses on publicly quoted companies on the Nigerian Stock Exchange that are judged to offer the highest potential for earnings growth. In addition, its analysts provide periodic commentaries on a range of topical global and local issues which provide investing clients with a holistic view of the opportunities and risks in today’s financial market landscape.
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