Telcos on track to miss Q1 2023 revenue targets over cash scarcity
GSM companies listed on the Nigerian Exchange could post a revenue drop in the first quarter of 2022, Nairametrics reliable gathers.
This is due to the impact of the cash scarcity that has rocked the Nigerian economy since the beginning of the year.
The apex bank had in December set a deadline for the expiration of the old N200, N500, and N1000 notes respectively triggering long queues in banks.
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Telcos have posted double-digit growth in the last three years largely on the back of rapid growth for their data segments.
In the first quarter of 2022, MTN reported revenue of N470.9 billion about 22% higher than the N385 billion it reported in 2021.
Airtel, which reports its year-end on March 31st, posted revenue of $507 million for the period January to March 2022 representing a 20% rise year on year.
Telcos are behind revenue target
Reliable sources in Nigerian GSM Companies informed Nairametrics that for the first time, they are behind revenue targets by as much as double digits and fear they might end up with a year-on-year drop in revenues.
According to intelligence reaching Nairametrics, the inability of Nigerians to readily access cash meant they had to rely on their mobile phones to carry out online banking transactions. Unfortunately, this piled pressure on network infrastructure leading to several pinpoint network failures for the telcos.
The impact inadvertently weighed in on the ability of telco customers to purchase airtime which they use for talk time or data. Nigerians who relied on USSD to purchase airtime also faced several network downtimes that are likely to impact negatively sales. Sources suggest these challenges are likely to weigh down on revenue growth at the end of Q1 with fear that it could even be worse than expected.
At the last MTN Teleconference for investors, the management of the company was asked about the impact of the naira redesign on their businesses and if they are seeing a spike in usage, particularly, in rural areas, and if people trying to open an account just to join the financial ecosystem? MTN provided a response that did not suggest that there was a significant increase in new signups.
- “In terms of access to cash, which remains a key part of our customer base today, we are working to enable our payment platform, and therefore allow customers to not depend on cash, but rather depend on their wallets for payments at key merchant points through partnerships and our merchant drive and expansion this year. We are providing simple solutions that would allow our customers to use either our app or USSD push to enable payment and also leverage the existing merchant base and merchant base that we’ll be creating ourselves. So, on the Naira redesign, we’ve seen a lot of upside on that part of our wallet acquisition, and we also will be enabling payment to take full advantage of the cashless economy that the CBN is preaching.”
Other sectors affected
Asides from telcos, utilities such as the power sector also faced challenges with cash shortages as customers struggled to pay their bills. Several reports of network failures spurned the ability of customers to buy electricity when they needed it.
Businesses in the fast and moving consumer goods segments, farmers, and retail distributors also complained of the same issue. There is palpable fear that the economy could record a much lower GDP growth at the end of Q1 largely due to the effects of the naira scarcity.
Nigerians have grappled with severe cash shortages since the apex bank introduced the cash withdrawal limits as well as the ban on old notes. However, a Supreme Court ruling upturned the bank’s ban extending it to December 2023.
Despite the intervention of the apex court, long queues persisted late into March until the central bank finally publicly accepted the supreme court ruling. Queues are gradually disappearing but the cash squeeze remains as banks continue to comply with the cash withdrawal policy.
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Meanwhile, active subscriptions for telecom services across the networks of MTN, Globacom, Airtel, and 9mobile have continued to rise steadily. According to the latest industry statistics released by the Nigerian Communications Commission (NCC), mobile subscriptions rose by 15% year on year to hit 226.8 million in February 2023.
The data shows that the four mobile operators have added a total of 29 million subscriptions in the last year. As of February 2022, the total active subscriptions of the telcos stood at 197.7 million.
Compared with the January 2023 figure, the subscriptions on the networks rose by 0.42% in February as the operators recorded a total of 955,539 new subscriptions in the month.
