The second largest mobile network operator in Nigeria said the programme’s primary objective was to reduce share capital which in turn cuts down Airtel’s debt obligations and cost of operations which has grown in recent times. 

Segun Ogunsanya, CEO of Airtel Africa, claims Airtel’s businesses have generated significant cash hence the decision of the board to launch a share buy-back programme. 

“The board believes that repurchasing its shares is an attractive use of its capital in light of the Group’s strong long-term growth outlook,” said Segun Ogunsanya, CEO of Airtel Africa. 

The buy-back programme kicked off on March 1, 2024, and involves the repurchase of $100 million worth of the company’s shares in 12 months. 

The programme is divided into two tranches with the first tranche worth $50 million running for a period of 7 months – from March to August 2024.

The latest transaction between Airtel and Citigroup involves the repurchase of 487,985 ordinary shares at a weighted average price of £103.94 ($131.70) per share. 

Airtel Africa has struggled to stay profitable due to macroeconomic challenges in Nigeria, its largest market on the continent. The company’s financial statement showed revenue dropped by 21.96% to $1.24 billion in December 2023, from $1.59 billion due to the fall of the naira affecting Airtel’s conversion rates. Airtel recently took steps to reduce its high operating costs like outsourcing most of its tower operations to IHS Towers. The buy-back programme also helps the company reduce its debt obligations as it seeks other ways to maintain profitability. 

Hormuud Telecom Somalia Inc., its largest telco, rolled out faster internet speeds last month, signalling budding growth in the country’s digital services industry.

“As Somalia strides towards stability, the launch of 5G services by Hormuud Telecom emerges as a critical milestone. This initiative is more than just a technological advancement, it’s a symbol of our nation’s commitment to growth and constant improvement,” said Somalia’s Telecommunications Minister Jama Hassan Khalif.

The immediate benefit of this rollout, according to Hormuud, is the seamless upgrade for its 4G customers to 5G at no additional cost, ensuring that a broad base of users instantly enjoy improved internet speed and reliability. A 5G service promises to enhance connectivity and efficiency, aiding the country’s integration into the regional economy and stimulating trade and investment.

The network will initially be accessible in major cities, offering 81% coverage, indicating the extensive reach of the new technology nationwide, the service provider said.

“The network will initially be accessible in Mogadishu, Kismayo, Galkayo and Baidoa, as well as Dhusamareeb, Beledwayne, Afgoye, Merca and Dhobley,” Hormuud said in a statement.

After years of investor reticence and minimal foreign direct investment flows, Somalis themselves have taken significant steps to alter their economic destiny.

Hormuud Telecom, a domestically established firm since 2002, promotes itself as a company “built by Somalis for Somalis.”

Operating from Mogadishu, the company is Somalia’s leading telecom provider, the largest private-sector employer, and the first Somali private enterprise to attain international ISO certification.

With over 12,000 shareholders, all of whom are Somali nationals, Hormuud has grown from the 283 founders who initially started the company. 

Given the widespread reliance on mobile money services among the Somali population, particularly among those without access to traditional banking facilities, the introduction of 5G is also expected to significantly boost the efficiency and security of financial transactions.

Somalia’s formal integration into the EAC came after its Minister of Commerce and Industry, Jibril Abdirashid Haji Abdi, presented the instrument of ratification of the treaty of accession to EAC Secretary-General Peter Mathuki on March 4, 2023, in Arusha, Tanzania.

Its accession to the regional block comes after decades of hesitance due to factional political conflicts that had engulfed it in civil war. As active participation in EAC activities increases, robust digital infrastructure will be essential for further cross-border trade, investment, and collaboration. 

MTN, the largest telecom operator in the country, saw over 2.8 million subscribers drop from its internet business leaving 67.8 million subscribers in January from 70.6 million subscribers in December. The decline was the most MTN Nigeria has seen since May 2023. 

The drop, however, didn’t affect Airtel and Globacom as both telcos gained subscribers in the same month, according to the latest data from the regulator. Airtel gained the most subscribers in January with 890,935 subscribers joining the network and helping to solidify its position as the second-largest internet service provider with 45.9 million subscribers. Globacom also gained 192,313 subscribers in January. 

Subscriber gains from Airtel and Globacom helped to reduce the impact of MTN’s subscriber decline on the industry. Airtel grew its subscriber base from 45.0 million subscribers to 45.9 million subscribers. Globacom also grew its subscriber base from 43.9 million subscribers to 44.1 million subscribers. 

In December 2023, the NCC directed all the telecom operators in the country to deregister all phone lines without a NIN and those with unverified NINs. A spokesperson for MTN Nigeria told TechCabal that the operator started compliance almost immediately after the directive was issued. The company also made several advertorials regarding the directive which led many subscribers to take steps to update or register their NIN.

The deadline was supposed to have expired on March 29, 2024, however, the NCC has now extended the deadline for the disconnection of unlinked lines to July 31, 2024, per TheCable. 

The telecom operator has had a history of fines with the NCC which it is still trying to put behind it. In 2015, the company was fined $5.2 billion for failing to disconnect customers with unregistered SIM cards. 

MTN Nigeria’s subscription decline dented the overall industry internet figures in January. According to the NCC, the total number of subscribers that dropped off across all networks was 1.84 million leaving operators with 161.5 million subscribers from 163.3 million in December 2023. Aside from MTN Nigeria, 9Mobile continued its nearly nine-year decline with 94,824 subscribers leaving the network in January. 9Mobile now has 3.53 million subscribers. 

ATC switched off 246 Telkom towers due to unpaid leasing fees in February 2023, worsening a disagreement dating back two years. Telkom Kenya’s debt ballooned to KES 7.1 billion ($51.7 million) by October 2023.  

According to Business Daily, ATC demanded an initial payment of KES 500 million ($3.6 million) and a monthly fee of KES 150 million ($1.09 million) to reactivate the towers but Telkom cited financial constraints preventing it from meeting its debt obligations.

Telkom Kenya owned and managed its towers before ATC acquired 723 towers in 2018. At the time, the telco said the move would “enhance the quality and reliability of our network to benefit our customers.”

As of June 2023, ATC Kenya had 3,643 towers nationwide, including nine distributed antenna system sites.

The number of 4G sites deployed by MTN Nigeria grew 2.7%, said Karl Toriola, the company’s CEO, during an investor call on Monday. That infrastructure expansion increased 4G usage among its customers from 79.1% to 81.5%. 

The number of MTN’s 5G sites saw the most growth rising from 588 to 2,106 sites and pushing 5G penetration to 11.3% from 3.1%. 

Airtel, another major telco, deployed its 5G networks in four cities, including Lagos and Abeokuta and is currently testing the network in Oshogbo. 

Telcos pour billions into infrastructure 

MTN Nigeria and Airtel Africa spent a combined ₦613 billion to expand their 4G and 5G networks by the end of 2022, regulatory filings from both companies show. 

MTN spent N504.33 billion on its network rollout, while Airtel invested N108.79 billion in the same period. Smartphone vendors also responded by increasing shipments of mostly 4G and 5G enabled devices, with data from Canalys showing a 12% growth in smartphone shipments to Africa in 2023. 

As of January 2024, TECNO leads the smartphone vendor market with 26.03%, followed by a sister brand, Infinix, with 20.88%. Samsung is in third place with 11.43%, while Apple is in fourth place with 9.66% of the market.

Growing infrastructure drives usage

By December 2023, 1.04% of internet subscribers in Nigeria used 5G. 4G users also grew to 31.33%, data from the Nigerian Communications Commission (NCC) showed. 

There were only 2.18 million 3G subscriptions in December 2023, while 2G usage, which still accounts for more than half of mobile internet subscriptions (57.84%), also declined.

The growth in 4G and 5G subscriptions happened despite supply chain disruptions and inflationary pressures that raised the prices of smartphones by 30%, data from GSMA showed. In response to those pressures, telecom companies partnered with asset financing companies and smartphone manufacturers to offer flexible financing options. 

Airtel’s partnership with iTel allows customers to buy a range of well-priced smartphones. 

“These deals are helping subscribers acquire 4G/5G devices and routers,” Sam Adeoye, Airtel Nigeria’s head of public relations, added. 

There’s a rising demand for smartphone financing given rising inflation in Nigeria, said Aisha Hussaini, founder of Keza Africa, a device financing startup. 

“Even people who would not have opted for device financing are now choosing it because of the naira devaluation,” Hussaini said.  

Both telcos ended a 15-year-long dispute over interconnection fees after MTN agreed to accept N2 billion in interest payments instead of the original sum of N3 billion, TechCabal exclusively reported this week.

Globacom had initially paid N1.6 billion as the principal debt but had disputed the interest accrued on the debt, a source close to the matter told TechCabal. This prompted the NCC to set a timeline of 21 days for both parties to agree on the interest amount and when it would be paid. 

The NCC intervened to prevent any possible disruptions to the over 61 million subscribers on the Globacom network. 

“The Commission reiterates that strict adherence to the terms and conditions of licenses, particularly those delineated in interconnection agreements, is imperative for all Mobile Network Operators (MNOs) and other licensees within the telecommunications industry,” said the NCC statement. 

Henceforth, mobile network operators must submit records and regular updates regarding interconnectivity to the NCC. The commission also said it would adopt a transparent approach towards industry indebtedness.   

After seeing a 1.4% revenue decline within nine months in the connectivity business, Airtel Africa is pushing to correct this trend by entering into infrastructure expansion collaborations with companies like IHS Towers and investing in the 2Africa cable network system. 

The deal with IHS Towers allows Airtel Africa, through its subsidiary Airtel Nigeria, to take 3,950 tenancies over the next five years. Airtel Africa also extended the term of its existing tenancies covering approximately 6,000 tenancies until December 2031. The agreement includes 2,500 collocations in addition to 5G amendments and build-to-suit sites to be owned and operated by IHS Nigeria.  

Taking tenancy at a tower site is part of the strategies telecom operators use to curtail or reduce the cost of operating the business. Also, telcos that own tower sites often deal with tower companies like IHS or American Tower Company to lease and manage them. For example, MTN Nigeria is the biggest client IHS has. 

“Airtel Nigeria, as well as Airtel Africa we serve in other markets in Africa, has been a long-term partner of IHS, and I am delighted that we continue to strengthen our collaboration to help facilitate mobile connectivity in our largest market, supporting our customers in rolling out new sites throughout Nigeria,” said Sam Darwish, chairman and CEO, IHS Towers. 

The telco has also launched Telesonic Limited, a subsidiary that will use Airtel’s ground fibre assets and submarine cable systems to meet the growing demand for wholesale data in Africa. The subsidiary will offer comprehensive terrestrial fibre and submarine cable solutions. 

Apart from managing Airtel’s extensive fibre network (75,000km of terrestrial fibre) across the continent, Telesonic has also invested in Meta’s 2Africa submarine cable system. 2Africa is one of the largest submarine cables interconnecting 33 countries in Africa, the Middle East, and Europe. The 45,000km cable was landed in Accra, Ghana and Lagos, Nigeria this January by the Bayobab Group, marking the third and fourth in a series of six landings from the 2Africa subsea cable system. 

2Africa’s successful landing in Lagos brings the number of submarine cables to eight that have so far landed in Nigeria. 

“No doubt, Africa is experiencing a digital revolution, with surging demand for data centres across various sectors, especially by the continent’s growing youth population. With robust and scalable infrastructure, we aim to bridge the digital divide and unlock opportunities for innovation and economic growth. Our investment signifies not just a technological advancement but also a catalyst for progress, connecting people and ideas across borders,” said Segun Ogunsanya, Group CEO, Airtel Africa. 

Airtel is also concluding plans to break ground on its mega data centre, known as Nxtra, in Lagos, Nigeria in March. The facility will be designed to host high-density racks and integrate the latest practice construction to achieve a 1.3 power usage effectiveness (PUE). The data centre which will go live in mid-2025 will also deliver 34 megawatts of total power, making it the first of its kind in Nigeria. Airtel told TechCabal that the data centre will be industry-agnostic, hence any company from any sector can host their data in the facility. 

If the naira continues its downward spiral, many infrastructure projects, including 5G rollout across the country, will be stalled. Mafab Communications, which won one of the 5G licences in 2021,  is currently pushing to launch its 5G network later this year. However, progress in deploying infrastructure from scratch has been stalled by the foreign exchange crisis in Nigeria. Telecom equipment is mostly imported into the country, hence they are subject to currency fluctuations. Although MTN and Airtel have already launched their 5G networks, experts say they still require massive investments in infrastructure to make the service go around the country and to provide quality service. 

The FX crisis has affected every operator, but smaller players are the most hit, said Tony Emoekpere, president of the Association of Telecommunications Companies of Nigeria (ATCON). 

MTN Nigeria, Airtel, and Globacom are the dominant players in the industry. Last week, Airtel’s financial report showed a 1.4% decline in revenue to $3.86 billion from $3.91 billion posted in the comparable period in 2023. 9Mobile, which is the fourth largest operator, has seen its data subscription revenue significantly depleted as subscribers continue to exit its network. The data subscription figures on 9Mobile stand at 3.81 million as of September 2023, representing a 127% decline from a peak of 17.1 million subscribers recorded in April 2016. 

The challenges will also impact the 70% broadband penetration target set by Bosun Tijani, Nigeria’s minister of communication, innovation, and digital economy. As of November 2023, broadband penetration stood at 41.87%, representing a 14.2% decline from March 2023, when the figures hit a peak of 48.28%. Aside from missing a 50% penetration target for 2023, the industry is about 28% adrift of the 70% target in 2025. 

The telecom industry has also struggled to raise capital and keep up with peak GDP contributions. In 2022, investments in telecoms declined by more than 50% from $753.04 million in 2021 to $399.9 million in 2022. The industry’s GDP contribution dropped by 17.3% to 13.5% in Q3 2023 from 16.06% in Q2 2023. 

“It is what it is, the telecom industry is bleeding. As things stand, investors are unwilling to put in money because the economics do not make sense,” said Gbenga Adebayo, president of the Association of Licensed Telecommunications Operators of Nigeria (ALTON).  

Why diesel price is rising in Nigeria

Diesel is very critical to the power consumption needs of operators in the telecom industry, especially the base stations. The price of diesel has fluctuated within the range of N900 to N1200 in recent times. However, TechCabal found that the price moved between N1200 and N1350 at Enyo and AP filling stations, respectively. The price movement happened between Saturday, February 3 and Monday, February 5. 

Mokolade Ashafa, a filling station manager, attributed the price increase to the difficulty marketers face accessing the product from the depot. Diesel prices rose from ₦288.09 per litre in January 2023 to ₦1,126.69 per litre in December 2023, data from the National Bureau of Statistics showed. 

Nevertheless, most of the power costs are not borne directly by telcos like MTN and Airtel. The base stations of most operators are outsourced to infrastructure companies such as IHS and American Tower Company (ATC). The infrastructure companies then shoulder the responsibility of providing 24/7 electricity to the base stations. These companies use a mix of diesel and renewable sources to power the base stations. A change in diesel prices automatically affects infrastructure companies’ costs. Costs are transferred to the telcos, who must then adjust consumer prices. 

Telecommunication companies spent about ₦429.43 billion on fueling base stations representing an increase of 34.57% from the ₦319.11 billion spent in 2022, as per a Punch report. 

However, telcos cannot increase prices independently without the Nigerian Communications Commission’s approval. The price of internet data was recently increased by 10% by telcos like MTN Nigeria. But telecom stakeholders say it has taken the regulator so long to approve an upward price review that is globally competitive and one which assures investors of return on investments.   

Beyond regulators, the telecom operators also contend with consumer advocacy groups. The industry was dragged to court by the National Association of Telecom Consumers of Nigeria (NATCON) over the 5% data and airtime tariff increase approved by Ali Isa Pantami, former minister of communications and digital economy. The case is still in court and restricts the operators from implementing the 5% data, airtime hike, said Adeolu Ogunbanjo, president of NATCON. 

Ogunbanjo said what the association is trying to avoid is a situation where subscribers are saddled with extra pressure on their income, hence the government needs to find a way to address issues like multiple taxation and wild disparity in Right of Way charges the operators are facing.

The agreement follows efforts initiated by the Nigerian Communications Commission (NCC) at the behest of Glo. In January, Glo faced the threat of disconnection by MTN Nigeria and was given 21 days by the NCC to settle its debt or risk seeing its 61.5 million subscribers blocked from calling MTN lines.

Glo’s interconnection fees debt grew over the year because it often paid substantially less than the bill it racked up. There have been multiple threats from MTN and Airtel Nigeria to disconnect Glo over the years, with MTN disconnecting Glo for five days in 2019. 

The recent disconnection process began in November 2022 due to an accumulated debt owed to MTN Nigeria by Glo, and MTN sought NCC’s approval for a disconnection, eventually receiving it in December 2023. 

A source at NCC said the new executive vice chairman plans to do things differently by ensuring all telecom operators comply with the market rules. 

*This is a developing story

Massive devaluations of Nigeria’s Naira and the Malawian Kwacha squeezed Airtel Africa’s margins and resulted in profits of $2 million for the year. The Naira’s devaluation cost Airtel $301 million. Excluding these impacts, profit before tax for the nine months ended 31 December 2023 would have been $840 million.

The telco’s $2 million profit is far from the $523 million profit it recorded in the nine months ended December 2022. The poor results also dragged down Airtel’s revenue by 1.4% to $3.8 million from $3.9 million a year ago.

The company’s Group Chief Executive Officer, Olusegun Ogunsanya, is undeterred by the results.

“Whilst further currency devaluation, particularly in Nigeria, has weighed on our reported financial performance, it will not affect the execution of our growth plans,” he said. Ogunsanya said the group will focus on capital allocation priorities, enabling the firm to fully repay HoldCo debt when due in May 2024, ensuring the continued success of their balance sheet de-risking strategy. The GCEO also said they would invest in new business opportunities like their new data centre business, Nxtra by Airtel, which was launched in December. The board intends to launch a share buy-back programme of up to $ 100 million, starting early March 2024 over 12 months.

The telco’s financial statement also reported that its group mobile services revenue grew by 18.6%, driven by voice revenue growth of 11.2% and data revenue growth of 28.5%. Mobile money revenue grew by 31.8% in constant currency. Similarly, its total customer base grew by 9.1% to 151.2 million as the penetration of mobile data and mobile money services continued to rise, driving a 22.4% increase in data customers to 62.7 million and a 19.5% increase in mobile money customers to 34.3 million.