Key highlights
- MTN Nigeria spent a total of N1.048 trillion on Capex between 2020 and 2022, far more than its closest rival Airtel.
- A comparison of the Capex of the two telecom companies in the 3 years, shows that while MTN’s Capex is on the increase, Airtel’s is declining.
- Airtel may have to increase its Capex this year and the next as it plans to roll out its 5G network.
An analysis of the capital expenditure (Capex) of two leading telecommunications operators in Nigeria has shown that MTN Nigeria far outspent Airtel in the last three years.
According to its financial results between 2020 and 2022, MTN Nigeria spent a total of N1.048 trillion on capex over the period.
During the same period, Airtel Nigeria’s Capex spending stood at N385.2 billion.
For telecom operators, Capital expenditure is the money spent to acquire, develop, upgrade, modernize, and maintain tangible as well as intangible assets and infrastructure.
A breakdown of the annual Capex for the two operators over the three-year-period shows that while MTN increased its spending on infrastructure year on year, Airtel consistently reduced its spending.
In 2022, for instance, MTN increased its Capex by 23.5% to N504.3 billion from N304.4 billion in 2021. Conversely, Airtel’s Capex for the year stood at $236 million, which is N108.7 billion using the official exchange rate of N460.50 to $1. This was a 15.4% decline in Airtel’s Capex when compared with the N128.5 billion ($279 million) it spent in 2021.
Similarly, MTN’s N304.4 billion Capex in 201 represents a 26.8% increase over the N240 billion it spent on enhancing its network in 2020, which was N240 billion. In the same year, Airtel’s N128.4 billion was a decline when compared with the N148 billion ($323 million) it spent on Capex in 2020.
Factors driving the telco’s Capex spending
MTN’s aggressive Capex spending could be ascribed to several factors which include the fact that it has the highest number of subscriptions and thus would need to invest more in its capacity to deliver a quality experience to its subscribers. As of February this year, data from the Nigerian Communications Commission (NCC) shows that MTN had 92.7 million active mobile subscriptions, over 32 million more than Airtel’s 60.3 million active subscriptions.
Also, MTN as the first telecom operator to roll out 5G network in Nigeria last year had to spend more on building 5G infrastructure across the country. While Airtel also secured a 5G licence late last year and made a payment this January, the company is still working out its rollout and would also be spending billions of naira this year to build 5G infrastructure across the country.
What they are investing in
Explaining the company’s N504.3 billion Capex spending for 2022, MTN’s CEO, Karl Toriola said the company’s spending increased due to due to acceleration in coverage expansion, focusing on the 4G and 5G networks and its rural telephony programme.
- “We deployed 9,027 4G sites, 588 5G sites, and 778 rural sites. 4G accounted for approximately 76% of the total sites deployed during the year.
- “Our accelerated Capex investments allowed us to capture growth opportunities in the data space while mitigating foreign exchange and supply chain disruption risks and the impact of rising inflation. Notwithstanding, the Capex intensity of 17.9% was in line with our target levels, reflecting our disciplined approach to capital allocation,” he said.
Also speaking on Airtel Nigeria’s performance in 2022 with regards to Capex, Airtel Africa’s CEO, Segun Ogunsanya explained that the capex was lower than the prior period largely “due to phasing of materials received with no impact on full-year capex expectations.”
In the period, Ogunsanya said Airtel spent on expanding its 4G coverage across Nigeria.
- “The company led the industry in providing affordable 4G services across the country following the deployment of a fully modernized network which facilitated a 4-fold increase in data traffic over the last three years. The penetration of data customers in Nigeria remains low, providing significant opportunity for future growth,” Ogunsanya stated.
According to the Global System for Mobile Communications Association (GSMA), an association representing the interests of mobile operators and the broader mobile industry worldwide, telecom operators in Nigeria would need to invest around $500 million to roll out 5G in 10 major cities in the country.
What this means
The implication of MTN outspending Airtel on Capex is that MTN is likely to have a better infrastructure and network quality than Airtel, which can give MTN an advantage in attracting and retaining customers. By investing more in tangible and intangible assets and infrastructure, MTN is better positioned to offer a superior customer experience and meet the increasing demand for data services, especially with the roll-out of 5G networks. MTN’s investments in rural telephony programs can also help expand access to telecommunication services in underserved areas.
On the other hand, Airtel’s lower Capex spending may suggest that the company is prioritizing other areas of its business, such as reducing debt or increasing profitability, over infrastructure investment. While Airtel’s CEO emphasizes the company’s expansion of 4G coverage, Airtel’s lower Capex spending compared to MTN over the period may limit the company’s ability to compete effectively in the long term, particularly as the demand for data services continues to grow in Nigeria.
