Why MTN, Airtel, Glo, 9Mobile’s Revenue May Decline In 10years-Investigation
For years, MTN, Airtel, Globacom and 9Mobile have dominated Nigeria’s communication pattern, raking in billions as revenue from voice calls and data usage. However, recent development in digital communication is threatening the revenue base of these telcos, writes Fred Omotara. Except
Traditionally, most telecom companies make the bulk of their money by offering voice and data services to consumers and selling connectivity services to enterprises such as cloud storage and tower service access to other telcos.
But historically, voice services have been the biggest revenue driver for telecom companies. Telcos earn revenue when people make traditional phone calls and send an SMS—the two basic services they’ve offered to customers for the last few decades.
During the last three months of 2020, Airtel Africa’s Nigerian subscribers spent an average of 174 minutes on phone calls, up from 158 minutes a year earlier. In total, the company’s Nigerian subscribers spent 23.6 billion minutes on calls in Q4 2020. In 2020, Airtel Nigeria recorded $882 million (₦336.2 billion) in revenue from voice calls. For MTN Nigeria, phone calls brought in ₦766.4 billion or 57% of the company’s total revenue in 2020—it made another ₦12.3 billion from SMS.
Revenue from voice services also differ by type. While call tariff between domestic subscribers is the primary revenue driver, telcos make money from interconnect fees and roaming. Interconnection fee is the amount paid when a telco’s subscribers make or receive phone calls—locally or internationally—from subscribers of other telcos. For example, when a 9Mobile subscriber calls an MTN subscriber, 9Mobile pays a fee as interconnect charges. As of 2018, interconnect fees stood at ₦4.30 and ₦24.40 for local and international calls, respectively.
Telecom companies also earn when a subscriber enables roaming for calls and data while travelling internationally. This feature allows people to continue to use their mobile number when they travel for short stays, say for tourism, abroad. Ideally, some sort of partnership must exist between two or multiple international telcos for roaming to work. In 2020, MTN Nigeria earned ₦133.1 billion from interconnect and roaming fees, up from ₦125 billion 2018—an interesting growth possibly due to Covid-19 limitations on international travel.
However, over the last few years, consumer behaviour and spending patterns have changed, and it is starting to impact the outlook of the telecom industry. The most essential so far has been the growth of digital services.
With the domestic adoption of digital services such as WhatsApp, Telegram, and Facebook for everyday communication, telcos are losing revenue. Text, voice and video calls, which telcos offer as paid services, are available for free on digital platforms. This has been a source of worry for not just Nigerian telecom operators but mobile companies across the world.
The outbreak of Covid-19 last year has significantly accelerated this adoption of digital communication services and put a clock on the decline of voice revenue for telecom companies. Spurred by workplace transformations, white-collar workers in the services industry have pivoted to remote work. They have embraced services such as Zoom, Microsoft Teams, Google Suite, Slack, and Skype for work communication and collaboration. Meanwhile, these are subscription-based services that remit zero fees to telecom companies for communication over their infrastructure.
Hence, it is not absurd to assume that telco’s voice revenue will decline significantly in the next ten years and be on the verge of disappearing altogether.
In the views of Vincent Nwani, a business consultant, “Recent digital development has shown that corporate organisations are now shifting towards conference and video communication via WhatsApp, Telegram, Skype, Facebook and others.
“Obviously, this will lead to revenue losses on the part of the Telcos. How much that will be? Time will tell.”