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Telecoms Face Revenue Strain, Suffer 41% Revenue Per User Decline

by Royal Ibeh
7 months ago
in Business
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The financial performance of Nigerian telecommunications companies has taken a significant hit, as the average revenue per user (ARPU) dropped by 40.87 per cent to $1.85 in Q3 2024, compared to $3.12 in the same period last year.

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This decline highlights the adverse effects of the weakened naira on the industry, as rising exchange rates and inflation continue to squeeze telco earnings.

MTN Nigeria, once the top performer in the MTN Group with a Q1 2023 ARPU of $5.03, saw its ARPU fall to $2.09 in Q3 2024. Airtel Nigeria also experienced a sharp drop, moving from a $3 ARPU in 2023 to just $1.60 in the third quarter of 2024.

These declines have affected both companies’ revenue growth, with MTN’s service revenue increasing by 33.6 percent in naira, but suffering from a sharp decline when converted to dollars, while Airtel Nigeria reported a 46.87 percent drop in revenue to $755 million.

The weakening naira, exacerbated by the Central Bank of Nigeria’s unification of the foreign exchange market in 2023, has caused substantial foreign exchange losses for telcos, contributing to Nigeria’s record-high inflation and rising operational costs.

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With energy prices soaring—diesel costs surged by 90 percent, telecom companies face mounting pressure on their financials. MTN’s operating expenses jumped by nearly 96 percent in the first nine months of 2024, and Airtel has seen a similar strain.

Both companies have responded by scaling back investments, with MTN reducing its capital expenditure by nearly 28 percent, while Airtel cut its spending by over 36 percent. In an effort to mitigate rising costs, telcos are looking into renewable energy options and renegotiating contracts with tower providers to reduce their dependence on expensive diesel.

Industry experts warn that without substantial price hikes or a shift in operational strategies, telecom providers may continue to face financial challenges. “Pricing is needed for survival,” said MTN Nigeria CEO Karl Toriola, underscoring the urgency for the sector to address the growing financial strain.


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