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BMI View: We maintain our positive outlook for the Nigerian telecommunications sector in our Q416 report update , but we have made some minor downwards revisions to account for the slowdown in 2016. The telecoms sector has undergone significant contraction again in Q116 due to the discounting of inactive SIMs. Furthermore, the challenging economic environment in 2016 will lead towards negative GDP growth this year. Looking ahead, s ubscription growth in the mobile market continues to be driven by factors including operators' promotional activities, multiple SIM ownership and the extension of network coverage to underserved areas. Meanwhile broadband penetration remains very low. There continues to be significant demand for traditional voice and data services, and to a large extent this demand has remained untapped.
Latest Updates And Industry Developments
Nigerian mobile subscriptions reached 150.2mn by the end of Q216, up 1.1% y-o-y, with penetration reaching 80.3%. In Q116, the mobile sector contracted by 1.5%, with the total customer base shrinking by 2.26mn. Airtel and Globacom continued to see positive customer growth in the first quarter of 2016. However, as in Q415, both MTN and Etisalat experienced declining customer bases. Q216 saw the market returning to growth by adding over 1.6mn new subscribers
We currently expect the number of 3G and 4G customers to rise to about 38.9mn by the end of 2016, equivalent to 25.2% of the mobile subscriber base, rising to 101.6mn by the end of 2020, equivalent to 54.1% of the market.
MTN and the government of Nigeria agreed in June that the operator will pay a fine of NGN330bn (USD1.671bn), down from the original fine of USD5.2bn, for failing to disconnect unregistered SIMs. Further reducing the burden to a manageable level for the operator, MTN will pay the fine over a period of three years. MTN is considering issuing an IPO to raise an estimated USD1.0bn to pay for the fine.
|Organic Growth Prospects Available|
|Source: BMI research|
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