Nigeria is losing its status as the top-earning market for telecommunication companies, as average revenue per user (ARPU) declined by 38.79 percent year-on-year to $1.89 at the end of 2024 from $3.08 in 2023.
The drop is largely attributed to the continuous naira’s depreciation against the dollar.
The naira has lost about 70 percent of its value since a June 2023 devaluation crashed the currency from N470/$ to N1528/$, affecting the financial performance of businesses operating in the country and contributing to record losses.
“Revenue in naira has stopped growing as the number of subscribers has increased. Falls in ARPUs indicate pressure on prices and reductions in average usage,” noted GSMA, the global body for telecom operators.
Historically, Nigeria was the largest revenue contributor for multinational telecom operators like MTN Group and Airtel Africa. However, steep foreign exchange losses due to the naira’s volatility have eroded investor dividends and pushed Nigeria down the earnings’ rankings.
MTN Nigeria, which once led as MTN Group’s highest revenue-generating subsidiary, has slipped behind MTN South Africa. Despite recording its highest-ever revenue of N3.36 trillion, its ARPU fell to $2.17 in the last quarter (Q4) of 2024, a 35.42 percent drop from $3.36 in Q4 2023.
The company, part of the MTN Group, which operates in 16 countries, has seen its position as the group’s top market (with a $5.03 ARPU in Q1 2023) fall to 11th place ($2.17 ARPU) in Q4 2024.
In naira terms, ARPU grew by 52.73 percent to N3,542 in Q4 2024 from N2,319.20 in Q1 2023. However, this growth was negated by the naira’s depreciation from N907.1/$ in 2023 to N1,535/$ by the end of 2024.
Airtel Nigeria has also struggled, with its ARPU falling to $1.6 in December 2024, a 75 percent decline from $2.8 seen in the same period in 2023. This figure now falls below Airtel Africa’s regional average of $2.6, highlighting Nigeria’s weakened profitability within the group. Revenue for Airtel Nigeria fell 40.34 percent year-on-year to $738 million for nine months ended December 2024.
This decline has impacted operators as the “financial performance of the mobile industry in Nigeria has slowed down in recent years after a long period of sustained growth,” said GSMA.
Operators couldn’t match rising expenses, mostly in dollars. This led to a reduction in network investments and deteriorating service quality in 2024.
Karl Toriola, chief executive officer of MTN Nigeria, highlighted that operating expenses have surged by 300 percent over the past decade. “At the end of the day, no cash was left to pay our bills. We were burning 120 percent of our cash flow,” he said.
These financial struggles directly impacted capital expenditure. MTN’s core capex declined by 1.30 percent year-on-year to N443.48 billion, while Airtel Africa, which serves 57.67 million Nigerian subscribers, allocated $456 million for capex in the nine months ending December 2024, marking a 7.8 percent year-on-year drop.
“Mobile service providers need to generate sufficient revenue to cover their operating costs and support this level of capex over the medium term,” explained GSMA.
This decline in ARPU drove calls for increased tariffs and a shift in operational strategy to optimise cost. The Nigerian Communications Commission (NCC) caved in and approved a 50 percent hike in tariff prices, acknowledging the growing gap between operational costs and revenue.
“These adjustments will support the ability of operators to continue investing in infrastructure and innovation, ultimately benefiting consumers through improved services and connectivity, including better network quality, enhanced customer service, and greater coverage” the NCC said.
Operators expect that this increase in cash flow and average earnings will translate to higher investments. MTN, for instance, expects the tariff increase to boost its revenue by N1.34 trillion, improving cash flow for future investments. All operators expect to invest more in 2025, especially since the regulator tied cost hikes to better service quality.
While telcos’ ARPUs are expected to recover, the impact on consumers dealing with rising living costs remains a concern. Bismarck Rewane, CEO of Financial Derivatives Company, cautioned that while the tariff hike will bolster operators’ revenues, it may also lead to reduced usage as consumers adjust to higher prices.
