Nigeria telecom firms are still positioned for significant growth in their businesses even as yearly revenues continue to hit record levels. Latest figures available to BusinessDay show that combined revenues in the telecom sector hit N1.34 trillion ($8.6 billion) in 2010 from billing Nigerians for using their services.

The revenue figures for the telecoms sector are contained in a report by Pyramid Research, a leading global telecom intelligence company.
These results reflect the rising status of the telecom sector as the third largest contributor to Nigeria’s gross domestic product (GDP) in the non-oil sector, behind agriculture and trade. The sector contributed 8.2 per cent to the GDP, which exceeded the combined contributions of manufacturing, banking and solid minerals put at 3 percent, 4 percent and 0.4 percent, respectively.

The Ministry of Finance, in its medium-term Fiscal Strategy Paper for 2011-2013, projects that the sector will maintain an 8.2 per cent contribution level in 2012 and 2013 as competition remains stiff. “Growth in telecom and other services sectors is crucial to Nigeria attaining its aspiration of becoming one of the 20 leading economies in the world by 2020. Agriculture can’t take us there. The future is in services,” Abimbola Adesanya, a telecom consultant, said an interview with BusinessDay.

BusinessDay had earlier reported that MTN Nigeria recorded revenues of N749 billion for its financial year ended December 2010. This is about 56 percent of the estimated N1.34 trillion combined income of Nigeria’s telecom operators, in line with MTN Nigeria’s 52 percent market share in the telecom industry.

The report notes that “2010 was another growth year for the Nigerian telecom sector, with estimated service revenue of $8.6 billion by year end, a 6.7 percent year-on-year increase (in US dollar terms)”.
The report explains that liberalisation of the telecoms market in 2003 has resulted in high growth rates “fueled by new entrants and the launch of mobile value-added and broadband services.”

The report states that “with a population of about 150million and mobile penetration at just 55.8% by year-end 2010, the Nigerian telecom market is forecast to have exceptional continued growth”.

Pyramid Research forecasts that it “expects the growth of total market services revenue to continue over the next five years at a 5.9 percent cumulative average growth rate (CAGR)”.

It however notes that “Pay-TV, fixed VoIP, broadband Internet and mobile data are anticipated to be the fastest-growth segments. Although the growths in the mobile and fixed voice segments are not as striking, they will continue to represent the bulk of the revenue.”

“The competitive landscape of Nigeria’s telecom sector has forced operators to rollout new infrastructure to improve coverage and quality, which has resulted in a surge of subscription growth and usage,” says Majd Hosn, associate research analyst at Pyramid.

“Projects such as the MainOne undersea cable have created a strong surge in the quality of the infrastructure backbone,” indicates Hosn. “This will translate into increased usage of connectivity, expected to reach 33.8 percent market share in 2015, and infotainment, expected to have a 21 percent mobile data revenue share in 2015,” he explains.

Pyramid Research states that though the infrastructure sharing debate is also ongoing in Nigeria, it expects to see some regulations and actions taken to expedite it.

“Operators will be able to use less of their expenditure on infrastructure development and more on implementing strategies to expand their customer base and average revenue per user (ARPU), such as mobile broadband and value-added services.”

It also notes that the Nigerian Communications Commission’s plan to increase the competition in the telecom sector has been successful. “The addition of marginal lower-spending subscribers to the market, and increased competition among existing GSM- and CDMA-based operators will continue to drive ARPS downward,” notes Hosn. “Number portability in 2011 is expected to further increase the competition and allow for a reshuffling of market shares. This could represent a struggle to keep churn rates low but also an opportunity to attract customers from competitors,” he adds.

Analysts have wondered why the Nigerian Communications Commission (NCC) has been foot-dragging over the implementation of the project which they noted has significantly improved the quality of service in a place like India where it has been implemented.

Participants at the 61st Telecommunications Consumers Parliament held earlier this month enjoined the NCC to expedite action on the number portability programme.