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Telcos profit margins increase to 17%

2022-12-12  Edgar Brandt

Telcos profit margins increase to 17%

Edgar Brandt

Despite Namibian telecommunications generating less money in 2021 compared to 2016, their financial gain has actually increased over the same period. Also, voice and SMS revenues are declining while data revenue is growing, with the share of data revenue having increased from 33.6% in 2016 to 59.3% in 2021.

Measured in United States Dollar terms, the revenue generated by local telecommunications companies declined by 4% between 2016 and 2021 but their profits increased by 31% and their profit margins grew from 12% to 17%.

Net profit margins vary by industry. According to the Corporate Finance Institute (GFI) 20%  is considered a good profit margin, 10% is considered average or standard and 5% is considered low or poor.

Good profit margins allow companies to cover their costs and generate a return on their investment. The latest local profit figures emanate from a Market Report for 2021 produced by the Communications Regulatory Authority of Namibia (CRAN).

The report considers the financial health and performance of the Namibian telecommunications sector, consumer price developments, and changes in the competitive landscape. The first report was released in 2016 and formed the basis of the comparative analysis. The report, released last week, shows local telecommunications company’s shareholder’s equity increased from US$95 million to US$152 million during the period.

According to the CRAN report, Telecom Namibia managed a modest profit in 2021 and investment increased by 21% between 2016 and 2021. The return on equity for 2021 stood at 6.3%. Mobile Telecommunications Limited’s (MTC’s) revenue continues to grow annually, and its shareholders’ equity in US Dollar terms increased by 50%, whereas net profit increased by 9% since 2016.  Overall, service revenues increased by 14% from 2016 to 2021.

Mobile revenue contributed to 74% of all data revenues in Namibia in 2021. Asymmetric Digital Subscriber Line (ADSL) dropped to only 13.5% of total data revenue, and Fiber-to-the-Home (FTTH) increased to 5.5% market share in 2021.

“This clearly demonstrates that Universal Access and Service for broadband can only be achieved using mobile. Fixed broadband is complementary for the high-income segment of the Namibian population,” stated, CRAN CEO Emilia Nghikembua.

The CRAN report notes that MTC invested in infrastructure to provide new services such as Fibre to the Home while their EBITDA (Earnings before interest, taxes and amortisation) margin of 51% and its return on equity of 33% makes MTC a good investment. The authority further noted that while Paratus is growing rapidly, it is doing so from a low base as in 2021, despite a tenfold increase in shareholder’s equity and a quadrupling of assets, it still accounted only for 7% of sector revenues and 9% of sector assets.

Meanwhile, the report showed that the State controls 89.4% of Information and Communication Technology (ICT) sector assets and 84.8% of ICT sector revenues. The private sector, while owning 10.6% of the assets, was responsible for 15.2% of the revenues in 2021.


SIM card increase

The total number of SIM cards increased by 10% over the same period. Out of 2.9 million mobile SIM cards currently in Namibia, 1.9 million (66%) used data.

“The share of mobile broadband SIM cards increased from 61% in 2016 to 66% in 2021. This points to structural obstacles to cracking the 70% mark, such as lack of digital skills and high prices for mobile data and smartphones,” Nghikembua remarked.

“Additionally, the use of Voice-over-Internet-Protocol (VoIP) and Over-the-Top (OTT) applications, such as Skype, WhatsApp and FaceTime, to make voice calls, has gained popularity globally over the past years. Therefore, fixed voice revenues continue to experience a downward trend as more customers are changing to mobile and VoIP services.

“Consequently, SMS and landline traffic declined. This indicates the fading of landline relevance for consumers and a replacement of SMS by OTT applications,” Nghikembua added.

On the rollout of network infrastructure, population coverage for Namibia is 85% for 4G. Seven out of 14 regions have 4G population coverage of below 80%.

Kunene has less than 50% 4G population coverage. MTC owns 73% of all Radio Access Network (RAN) sites, Telecom Namibia 24% and Paratus 3%.

MTC and Telecom Namibia have extensive network coverage in all of Namibia’s regions, which contributes to coverage, but there remains room to increase the footprint to ensure 100% population coverage.

“As we prepare for 2023, the regulator will do more work around the promotion of technological innovation, improved quality of service and customer experience. We shall also issue more spectrum for the deployment of digital infrastructure, and to ensure that the cost to customers for services and devices are just, reasonable, and affordable.

“We are also preparing to issue spectrum for 5G in March 2023, which will be accompanied by a consumer awareness campaign to address myths and misconceptions and misinformation around 5G.

“There remain great opportunities for private sector investment and local participation in last-mile connectivity, most notably mobile 4G broadband, especially in underserved communities such as Kunene, Oshikoto, Kavango West, Zambezi, Omaheke, Otjozondjupa and Hardap regions,” Nghikembua concluded.


Photo: CRAN


2022-12-12  Edgar Brandt

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