Last updated: November 2026 · Reading time: about 10 minutes
What this guide covers
Why “telephone service expansion” is the wrong frame
The phrasing — investment in telephone service expansion driving revenue, data adoption and ARPU — bundles three things that are moving in different directions.
Voice is not the growth engine. Legacy voice revenue per minute has been under pressure for years across the Nigerian market, squeezed by OTT substitution (WhatsApp, Telegram) and by regulatory limits on tariff increases. When an operator reports revenue growth, voice is rarely the driver. Data is.
Data adoption and ARPU are not the same variable. Adding subscribers in low-ARPU areas raises data volume and total revenue while lowering blended ARPU, because the new users spend less per month than the existing base. A coverage-led expansion can produce strong subscriber growth and a falling blended ARPU at the same time. Both numbers are correct.
“Capex” is not one thing. Spending on new rural coverage and spending on capacity densification in Lagos and Abuja have completely different ARPU economics. Coverage capex buys future subscribers at low near-term revenue. Capacity capex defends existing high-value subscribers against congestion. A single capex figure cannot distinguish between them.
That is why the honest version of the statement is narrower: capex is converting into data revenue, and data revenue is converting into naira ARPU, but not into dollar ARPU — and the gap between those two outcomes is where the investment case actually lives.
The ARPU problem: naira up, dollar down
This is the single most important thing to understand about Nigerian telecom results, and it is routinely flattened in coverage.
ARPU is revenue divided by subscribers. The numerator is in naira. If you convert that numerator to dollars to compare against a South African, Kenyan or Middle Eastern operator, the exchange rate is doing as much work as the operating performance. Between 2023 and 2025 the naira lost a large share of its value against the dollar. A tariff increase of 30–50% in naira can produce naira ARPU growth while still producing a lower dollar ARPU, because the currency fell further than the price rose.
Both statements are true at once:
- Naira ARPU rose — because tariffs were adjusted and because data revenue per user grew as subscribers moved from 3G to 4G and 5G.
- Dollar ARPU fell — because the same naira amount bought fewer dollars than it did the year before.
Where the capex actually goes
Both operators have been running high capex intensity — capex as a share of revenue — for several years. That is normal for a market still building coverage, but the composition matters more than the total.
| Capex category | What it buys | ARPU effect | Payback |
|---|---|---|---|
| Coverage capex (new rural and peri-urban sites) | Reach into areas with no or weak service | Raises subscriber count; lowers blended ARPU as low-spend users join | Long; depends on usage growth in the new area |
| Capacity capex (densification in Lagos, Abuja, Port Harcourt) | More throughput for existing dense traffic | Defends high-value subscribers; protects ARPU against churn and congestion | Short to medium |
| Spectrum and 5G | Licence fees plus the radio and backhaul to use them | Enables premium data tiers; raises data ARPU where handsets support it | Medium; handset penetration is the binding constraint |
| Fibre and transmission | Backbone capacity between sites and to the core | Indirect; reduces cost per gigabyte rather than raising price | Medium; shows up in margin, not ARPU |
The practical implication: a company that reports strong subscriber growth alongside flat or falling blended ARPU has probably been doing a lot of coverage capex. A company that reports flat subscribers and rising ARPU has probably been doing capacity capex and price repair. Neither is automatically better. They are different stages of the same strategy, and the market often misreads one as the other.
The four leaks between capex and earnings
Revenue growth that reaches the top line does not automatically reach earnings. Four costs sit between the two, and all four are structurally hostile in Nigeria.
1. Dollar-denominated tower leases
Both MTN Nigeria and Airtel Africa sold their tower portfolios to independent tower companies and now lease capacity back. This is a sensible asset-light move — it converts capex into opex and frees capital for spectrum and network. But the leases are typically denominated in or indexed to US dollars. When the naira depreciates, the naira cost of the same lease rises without any change in the service received. MTN Nigeria has reported substantial foreign exchange losses tied to these lease obligations in recent reporting periods. That is a currency exposure dressed as an operating cost.
2. Energy
Grid reliability in Nigeria means base station sites run on diesel for a meaningful share of the time. Diesel is priced in naira but tracks global oil, and it is one of the largest single opex lines for any Nigerian operator. A site that is added for coverage reasons in a low-ARPU area carries the same energy cost as a site in Lagos — which means the new site can be loss-making at the site level for a long time before usage grows into it.
3. Right-of-way and multiple taxation
Laying fibre requires right-of-way approval, and the cost and speed of that approval varies by state. Layer on permits, levies and informal charges from state and local governments, and the effective cost of a kilometre of fibre in Nigeria is materially higher than the engineering cost. This is a well-documented industry complaint and a genuine constraint on how fast transmission capex converts into capacity.
4. Imported equipment
Base stations, radios, routers and handsets are imported and priced in dollars. When the naira falls, the naira cost of the same network build rises. A capex budget expressed in naira therefore buys fewer sites after a devaluation, which is one reason capex intensity can stay high while the physical rollout slows.
MTN Nigeria vs Airtel Africa: different exposure
The two are often discussed as a pair, but they are structurally different businesses with different risk profiles.
| Dimension | MTN Nigeria | Airtel Africa |
|---|---|---|
| Footprint | Nigeria-dominant; listed on the NGX with a large domestic shareholder base | Pan-African; Nigeria is the largest single market but the group spans multiple countries and currencies |
| Currency exposure | Concentrated in naira — a single devaluation hits the whole reported result | Diversified across several African currencies; naira weakness is diluted by other markets |
| Reported ARPU | Primarily a naira number; dollar translation is a reporting overlay | Reported in dollars at group level, which makes the naira translation effect visible in the group ARPU trend |
| Growth engine | Data, plus fintech and digital services through the MoMo structure | Data and mobile money; mobile money is a larger share of the group story |
| Key vulnerability | Single-market concentration and dollar-linked lease costs against naira revenue | Multi-currency complexity and country-specific regulatory and tax risk |
The comparison matters for one reason: an investor or analyst reading Airtel Africa's dollar ARPU and MTN Nigeria's naira ARPU is not comparing like with like. The group-level dollar figure already contains the currency translation that the Nigerian figure does not. Treating them as a single “Nigerian telecom ARPU” data point is the most common error in commentary on this sector.
What would actually move ARPU
If the goal is genuine ARPU growth rather than nominal growth, the levers are narrower than the capex headline implies.
- Handset affordability and smartphone penetration. A 5G network with a 4G handset base does not produce 5G ARPU. Subsidised device financing, instalment plans and local assembly all matter more to data ARPU than another thousand base stations. This is why device financing partnerships have become a bigger part of both operators' strategy than spectrum purchases.
- Usage depth, not user count. Moving a prepaid user from 2GB to 8GB per month raises ARPU without adding a subscriber. Bundled data-plus-content offers and night-time data pricing do more for this than headline tariff increases.
- Price repair without volume loss. Tariff increases raise naira ARPU, but if they trigger SIM abandonment or multi-SIM consolidation, the revenue gain is offset by subscriber loss. The 2024–2025 tariff adjustments and their effect on active subscriber counts are the test case to watch.
- Cost per gigabyte. This does not raise ARPU, but it is what makes a given ARPU profitable. Fibre backhaul, energy efficiency at sites and tower lease renegotiation all improve the margin on the same revenue.
- Adjacent services. Mobile money, airtime credit, insurance micro-products and B2B connectivity add revenue per user that is not captured in the traditional voice-and-data ARPU definition. Both operators have been building these deliberately.
What to watch in the next 12 months
| Indicator | Why it matters |
|---|---|
| Naira vs dollar ARPU, reported side by side | The gap between them is the currency story. If the gap narrows, dollar ARPU is recovering. |
| Capex intensity trend | Falling intensity with stable revenue means the network build is maturing. Rising intensity with flat revenue means the spend is not converting. |
| Active subscriber count vs registered | Tariff increases show up as churn in active numbers before they show up in revenue. |
| Data revenue as a share of service revenue | The clearest signal that the mix has shifted away from voice. |
| Tower lease and energy cost lines | Where the currency and diesel exposure lands. These determine whether revenue growth reaches earnings. |
| Right-of-way and tax developments at state level | Fibre cost per kilometre is a policy variable, not an engineering one. |
The sector's investment case is not in dispute. Nigeria remains under-penetrated on fixed broadband and 5G, and both operators are the primary channel through which that gap will close. What is in dispute is the assumption embedded in the headline — that capex automatically becomes ARPU, and that ARPU automatically becomes a dollar return. The first is conditional on handset penetration and usage depth. The second is conditional on the exchange rate. Neither is guaranteed by the size of the investment.
Frequently asked questions
Are MTN Nigeria and Airtel Africa really investing heavily in network expansion?
Yes. Both have run high capex intensity for several years, covering new base stations, fibre transmission, spectrum and 5G rollout. The investment is real and is the main reason data adoption has grown. The question is not whether the capex is happening but how efficiently it converts into naira ARPU and, separately, into dollar returns.
Why can ARPU rise in naira but fall in dollars?
Because ARPU is a revenue figure divided by subscribers, and the revenue is in naira. If the naira loses more value against the dollar than tariffs rise, the dollar value of the same naira ARPU falls even though the naira figure went up. Since 2023, this gap has been large enough that the two measures have told opposite stories in the same reporting period.
Does adding subscribers always raise ARPU?
No. Adding subscribers in lower-income or rural areas raises total revenue and data volume but lowers blended ARPU, because new users typically spend less per month than the existing base. Coverage-led expansion and ARPU growth are often in tension. This is why operators report subscriber growth and ARPU movement separately rather than as one number.
What is capex intensity and why does it matter?
Capex intensity is capital expenditure as a percentage of revenue. A high ratio means the company is investing heavily relative to what it earns — normal in a market still building coverage. A falling ratio with stable revenue suggests the network build is maturing. A rising ratio with flat revenue suggests the spend is not converting into revenue, which is the signal to watch.
Why are tower leases a problem if selling towers was meant to reduce capex?
Selling tower portfolios converts capex into opex and frees capital, which is genuinely useful. But the resulting lease obligations are typically denominated in or indexed to US dollars. When the naira depreciates, the naira cost of the same lease rises without any improvement in service. MTN Nigeria has reported material foreign exchange losses connected to these obligations, which is a currency exposure sitting inside an operating cost line.
Is MTN Nigeria or Airtel Africa the better proxy for Nigerian telecom growth?
They measure different things. MTN Nigeria is close to a pure Nigerian exposure, so its results track the naira and the Nigerian operating environment directly. Airtel Africa reports at group level across multiple African markets and currencies, so Nigerian performance is diluted by other countries. For a clean read on Nigeria, MTN Nigeria is the more direct signal; for a diversified African telecom exposure, Airtel Africa is the broader one.
What would actually raise ARPU sustainably?
Deeper usage per existing user rather than more users. That means smartphone affordability and device financing, bundled data and content offers, migration from 4G to 5G where handsets allow, and adjacent services like mobile money and insurance micro-products. Price increases raise naira ARPU in the short term but risk active subscriber loss if they outrun household budgets.
Related reading on Dedon Tech: the case for accelerated tech infrastructure investment in Nigeria and Africa · NCC *315#: how to check if your phone is approved in Nigeria · why trust precedes transactions in the Nigerian market · full site map
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