Airtel Nigeria’s financial performance for the nine months ending December 31, 2024, presents a complex picture of growth and challenge. While data usage surged significantly, the company’s data revenue experienced a substantial decline, raising concerns about its ability to translate increased consumption into higher earnings. The report highlights a 37.2% increase in data usage per customer, reaching an average of 8.4 gigabytes per month, up from 6.2GB in the same period the previous year. However, this growth in usage did not translate into revenue growth, with data revenue falling to $344 million from $539 million in the corresponding period of the prior year. This discrepancy underscores the challenges posed by a stagnant tariff regime in the face of rising operational costs and currency depreciation.
A key factor contributing to the revenue decline is the long-standing delay in tariff adjustments within the Nigerian telecom sector. For eleven years, operators have struggled to increase prices in line with economic realities, leading to a significant erosion of earnings. This stagnation, coupled with the depreciation of the naira and escalating operational costs, including infrastructure investments and network expansion, has created a challenging financial environment for telecom companies. The inability to adjust tariffs meant that operators were essentially absorbing the rising costs of providing services, resulting in diminished profit margins despite growing demand for data. The situation has been further exacerbated by the increasing prevalence and usage of smartphones, which consume more data, putting additional strain on network capacity and requiring further investment.
In response to these pressures, Airtel Nigeria, along with other major operators like MTN, implemented a data tariff hike following approval from the Nigerian Communications Commission. This price increase, described as essential for the survival and growth of the industry, aims to address the accumulated financial strain and enable continued investment in network infrastructure and service improvements. Airtel’s CEO, Dinesh Balsingh, emphasized the importance of the tariff adjustment for maintaining network quality, expanding coverage, and meeting the evolving needs of customers. The expectation is that this price adjustment will help stabilize Airtel’s earnings in the coming quarters and provide the necessary resources for further development.
Despite the revenue decline, Airtel’s financial report also reveals positive trends in other areas. The company witnessed an 8.2% increase in the number of data customers, alongside a substantial 31.4% rise in average revenue per user (ARPU). This growth in ARPU, when considered in constant currency terms, reveals a 44.3% surge in data revenue, driven by the combined effect of increased customer numbers and higher individual spending. This underlying growth potential is masked by the negative impact of the naira’s depreciation, highlighting the significant influence of macroeconomic factors on the company’s reported financial performance. Furthermore, the increasing data consumption by smartphone users, averaging 11.2GB per month compared to 8.8GB in the previous period, indicates a strong and growing demand for data services.
The challenges faced by Airtel Nigeria are not unique to the company but reflect a broader industry-wide issue. The prolonged delay in tariff adjustments has created a cumulative revenue shortfall projected to reach $11.3 billion between 2022 and 2026 for Nigerian telecom operators. This substantial figure underscores the severity of the financial pressures resulting from the combined effects of currency depreciation and escalating operational costs. The inability to adjust prices to reflect these economic realities has forced operators to absorb losses, hindering their ability to invest in network expansion and improvements, potentially impacting the quality of service and hindering future growth.
In conclusion, Airtel Nigeria’s financial performance presents a nuanced picture. While the company has experienced substantial growth in data usage and customer base, its inability to translate this growth into revenue gains highlights the detrimental impact of the delayed tariff adjustments. The recent price increase is a crucial step towards addressing this issue and ensuring the long-term sustainability of the telecom sector in Nigeria. The success of this measure will be crucial in enabling operators to continue investing in infrastructure and meet the growing demand for data services, ultimately contributing to the digital transformation of the Nigerian economy. The coming quarters will be a critical test of the effectiveness of the new tariff structure and its ability to offset the negative impact of macroeconomic pressures and unlock the full potential of the burgeoning data market in Nigeria.
