Recent data on key industry fundamentals published by the Nigerian Communications Commission (NCC) showed that the total number of broadband subscriptions grew 1.8% m/m and 19.0% y/y to 73.5 million.
Furthermore, Broadband penetration expanded to 38.49% in January 2020 from 37.80% in December 2019 and 32.34% in Jan 2019.
In a related development, the Nigerian Bureau of Statistics published data on active voice subscriptions within the country for Q4 2019 which showed a sturdy 6.9% y/y increase to 184.7 million subscriptions from 172.8 million subscriptions in Q4 2018.
We note that Nigeria’s key telecommunications companies have invested heavily in internet infrastructure in a bid to improve 4GLTE coverage across the country. Furthermore, increased competition among the providers has forced bundle prices lower, making internet usage very attractive to the average Nigerian.
In addition, increasing smartphone penetration, increasing digitisation of the Nigerian economy and a fledgeling social media culture are some among many factors driving internet penetration within the country.
Nevertheless, we believe the sector still requires more investment to bring it at par with what obtains in more developed climes. With internet penetration still at 38.49%, we think significant potential exists for telecom and internet service providers in Nigeria.
Considering the COVID-19 pandemic ravaging the country which has led to movement restrictions in various states and with key population centres like Lagos and Abuja seeing its citizens forced to stay at home, we expect a surge in data usage among the populace. We consequently expect better numbers from the telecom companies in the months ahead. In light of this, we see key telecom stocks like MTNN and Airtel Africa as good defensive stocks in this pandemic.
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