Mobile subscriptions tailing off in Nigeria

Details: James Barton; Category: Trends & Forecasts; 24 November 2011; 8113 views

Nigeria's mobile market saw a surprise contraction of the mobile subscriber base during the three months to June 30 2011...

Nigeria's mobile market saw a surprise contraction of the mobile subscriber base during the three months to June 30 2011. According to subscriber figures published by the NCC, the mobile market recorded net losses of 333,000 subscribers or contraction of 0.4% q-o-q in Q211 to reach 89.653mn. The decline was driven by significant subscriber losses by the country's four CDMA operators as well as second- and third-ranked Globacom and Airtel in the GSM segment.

Meanwhile, MTN and Etisalat recorded considerably fewer net additions in Q211 than in the previous quarters. The net losses of subscribers in Q211 are not an indication that the market is approaching saturation, considering mobile penetration was just 55.2% at the end of June 2011. However, most urban areas are increasingly saturated and operators will need to extend their networks into underserved areas to achieve future subscriber growth.

This contraction in Q211 compounds other issues – including mobile saturation in urban areas and disconnection of unregistered SIMs – which will likely lead to slower growth in H211. The NCC extended the deadline for mandatory SIM registration after the original deadline of September 2011. Mobile penetration in Nigeria is expected to reach 58.5% by the end of 2011 and just over 70% or 125.3mn subscribers by 2015; however, rapid network expansion and lower tariffs due to competition pose upside risks to this forecast.

However, the possibility of operators opting to roll out higher value services to the expanding middle class in urban areas as opposed to basic voice and SMS services to low value rural dwellers could adversely affect penetration rates.

The broadband market received a boost with the commercial launch of Spectranet's WiMAX network in October 2011. Spectranet, along with Mobitel and Multilinks, won spectrum in the 2.3GHz auction in May 2009. Meanwhile, fourth-ranked mobile operator Etisalat launched a 3.75G/HSPA+ service in Lagos and other major cities, with transmission speeds of up to 42Mbps.

These developments bode well for broadband penetration in Nigeria. Meanwhile, the contraction of the fixed line telephony market accelerated in Q211 as the market decline by 11.6%. This brings total decline in H111 to 18%; by the end of 2011, the market will likely have declined by around 31%.