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Wednesday, June 29, 2022

Listed Telecoms Worth Twice Entire Consumer Goods Sector

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The telecommunication (telecoms) stocks are two times the entire value of consumer goods firms after surging through the summer on investors’ interest.

The two largest Nigerian telecom stocks-MTN Nigeria Plc and Airtel Africa- are worth collective N3.81 trillion on Monday, and make up 28.12 percent of the Nigerian Stock Exchange (NSE) All Share Index.

That’s higher than the N1.75 trillion combined market value of the 15 largest consumer goods firms that includes names such as Nestle, Nigerian Breweries, Flour Mills, Unilever, PZ Cussons, and Dangote Sugar.

MTN Nigeria, worth N2.39 trillion, has gained 12.20 percent since the start of the year while Airtel Africa rose 27.20 percent so far, outperforming the NSE ASI Index of -5.78 percent.

While consumer goods firms are grappling with weak consumer spending, decrepit infrastructure, poor government policies and the Covid-19 shock, telecommunication giants are leveraging on the nation’s favorable demography charaterised by a large youthful population and accelerated mobile penetration that helped underpin earnings as demand for subscriptions continues to soar.

Also, growing use of digital channels for entertainment and social engagement and the continued investment made by industry players in improving internet infrastructure to accelerate 4G coverage across the country has led to consistent earnings growth.

According to a recent data on active voice and internet subscription for the first quarter (Q1) 2020 published by the National Bureau of Statistics (NBS), the total number of active voice subscription rose by 2.5 percent quarter on quarter (q/q) and 8.9 percent year on year (y/y) to 189.3 million.

With respect to internet subscription, subscriber base grew 8.03 percent q/q and 17.1 percent y/y to 136.2 million in Q1 2020, this implies mobile internet adoption rate of 68 percent, according to the statistics body.

During the global pandemic, there were surge in the use of communications technology such as Zoom, Microsoft Teams as well as digital channels, which supported internet adoption.

The current economic trend has shown that the telecommunications and banking sectors were the winners as other sectors capitulated to the coronvirus pandemic and its attendant lockdowns imposed by government to curb the spread of the virus.

The latest second quarter (Q2) 2020 GDP figure published by the National Bureau of Statistics (NBS) showed that despite the 6.1 percent contraction in the economy, the financial institutions and the telecoms sectors recorded +28.4 percent (+24.0 percent in Q1-20) and +18.1 percent (+9.7 percent in Q1-20) growth respectively in Q2-20.

Analysts at CSL Stock Brokers Limited in a recent note to clients said they expect the relaxation of the lockdown measures to spur recovery in Voice Revenue as activities in the economy begin to normalise.

“In addition, we expect the upbeat performance in Data Revenue to be sustained by the company’s efforts in deepening 4G coverage and attractive data offerings provided to customers,” said the analysts.

Indeed, telecommunications firms are thriving amid an economic downturn as the cumulative revenue of- MTN Nigeria and Airtel Africa- increased by 13.64 percent to N679.60 billion as at June 2020.

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