In this note, we examine the potential implications of the recently announced tariff adjustment on telecom operators. On 20 January 2025, the Nigerian Communications Commission (NCC) approved a maximum tariff hike of 50.0% for telecom operators, significantly lower than the 100.0% increase proposed by the industry. This adjustment will mark the first tariff increase since 2013, breaking a decade-long freeze on tariff rates.
The NCC emphasised that the increase is essential to sustaining infrastructure investments and fostering innovation, ultimately improving service quality, network reliability, and coverage for consumers. Based on a projected maximum tariff hike (50.0%) for our coverage (MTNN and AIRTELAFRI), we forecast stronger revenue growth, EBITDA margin expansion and enhanced earnings performance. Thus, we revise our target prices (TP) upward to NGN271.19/s for MTNN (Prev.: NGN234.32/s) and NGN2,657.04/s for AIRTELAFRI (Prev.: NGN2,396.55).
Reassessing Mobile Tariffs
Since the last mobile tariff adjustment in 2013, the economic landscape has shifted significantly. Inflation has surged from 8.00% in 2013 to 34.80% as of December 2024. Energy costs have also risen sharply – diesel prices have risen from c. NGN230.00 per litre in 2013 to NGN1,367.89 per litre – substantially increasing the expenses for powering network infrastructure. Additionally, the naira has depreciated markedly, with the exchange rate moving from NGN155.27/USD on 31 December 2013 to NGN1,538.25/USD as of 31 December 2024, inflating the costs of imported equipment, operating leases, and maintenance. Despite these challenges, mobile tariff rates have remained unchanged at an average of NGN11.00 per minute (0.20k/s), failing to align with prevailing economic conditions.
Furthermore, when compared to West African peers, Nigeria’s mobile tariff rates remain significantly lower, averaging USD0.0077 per minute. In contrast, rates in Ethiopia, Kenya and South Africa are considerably higher, averaging USD0.013, USD0.0331 and USD0.062 per minute, respectively.
Data Pricing: A Relative Discount
Data from the International Telecommunication Union (ITU) indicates that Nigeria’s data rates are amongst the most affordable globally and the lowest in West Africa, averaging USD0.38 per gigabyte. In comparison, Kenya averages USD0.59 per gigabyte, Ethiopia USD0.68 per gigabyte, and South Africa USD1.77 per gigabyte. This reflects a relative discount in data pricing, highlighting the regulatory constraints on price adjustments despite the challenges operators face in balancing rising operational costs with sustaining profitability.
The confluence of these cost pressures and the non-market reflective pricing puts sector investments at risk and poses a serious threat to service quality and operational efficiency, potentially resulting in network disruptions. Thus, a tariff adjustment that aligns with the current economic realities is imperative in our view.
Robust Revenue Expansion in Sight
The tariff increase is expected to drive significant revenue growth for operators, with a corresponding positive impact on earnings. Based on our projection of a 50.0% increase, we estimate revenue growth of 42.1% for MTNN, driven by a 32.9% increase in voice revenue and a 48.8% rise in data revenue.
For AIRTELAFRI, we project revenue growth of 25.3%, driven by a 23.5% increase in voice revenue and a 34.6% surge in data revenue. Furthermore, Nigeria’s operations contribution to overall revenue is expected to rise to 37.0% (H1-25: 20.6%), reflecting revenue growth of 71.4%, supported by expansions in voice (+67.6%) and data (+75.2%) segments. We note that the marked revenue growth differential for the 50.0% tariff hike scenario for AIRTELAFRI, compared to MTNN (as shown in Figure 3), highlights the expected impact of the tariff hike on AIRTELAFRI’s Nigeria revenue in Q4-25E (January to March). This increase will elevate the group’s 2025E revenue, creating a high base that subsequently constrains the y/y growth rate for 2026E.
For both operators, data revenue is expected to account for the majority of the growth, contributing 49.5% of total revenue for MTNN (5-yr historical average: 31.2%) and 37.6% for AIRTELAFRI (5-yr historical average: 30.4%), reflecting the increasing contribution of data services to revenues. This growth trajectory is expected to be sustained in the coming years, driven by favourable demographic factors and evolving digital ecosystems.
EBITDA Margins and Earnings to Recover
MTNN’s EBITDA margin is now projected to expand substantially, reaching 48.8% in 2025E (9M-24: 36.3%). This will be driven by the improved pricing structure and the company’s ongoing cost-saving initiatives, which include network optimisation, in-house solution development, and cost localisation. For AIRTELAFRI, we project an EBITDA margin increase to 47.3% in 2026E (H1-25: 45.8%), reflecting the tariff hike impact and further supported by the company’s cost optimisation initiatives focused on reducing energy expenses through renewable solutions like solar-powered sites.
The sector’s inherent operating leverage suggests that incremental revenues from the price adjustment will significantly enhance earnings growth. This anticipated growth in earnings will be further supported by expectations of subdued FX losses in 2025E (MTNN: -69.7% y/y | AIRTELAFRI: -61.7% y/y), underpinned by our expectation of improved naira stability relative to 2024. As a result, we project an EPS of NGN30.75 for MTNN in 2025E (previously: NGN7.12). Meanwhile for AIRTELAFRI, we project an EPS of USD0.29 in 2026E (previously: USD0.22).
MTNN: Dividend Comeback Likely Sooner Than Expected
We believe the anticipated tariff hike will serve as a catalyst for MTNN’s financial recovery in 2025E, marking a turning point in the company’s performance trajectory. Our estimates indicate a robust PAT of NGN645.69 billion, which is expected to bolster MTNN’s financial position, resulting in a positive equity balance of NGN211.26 billion and retained earnings of NGN44.09 billion.
Consequently, we hold the view that a resumption of dividend payments is likely for 2025FY, as opposed to our previous expectation of a resumption in 2026FY. This will be spurred by the strengthened financial position, which we believe will provide the flexibility to prioritise shareholder returns.
Tariff Hike Drives Upward Valuation
Overall, we anticipate a positive market reaction to the tariff increase as investors adjust expectations to reflect the enhanced revenue and earnings prospects. Factoring in a 50.0% tariff increase, our preliminary estimates indicate a revised fair value of NGN271.19/s for MTNN (previously: NGN234.32/s). Similarly, for AIRTELAFRI, we revised our fair value estimate to NGN2,657.04/s (previously: NGN2,396.55). These revisions highlight the expected revenue uplift, which is balanced against ongoing macroeconomic dynamics and operational considerations.
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