Moody’s: Long term growth for SSA telecos robust despite difficult condition

Moody’s ratings firm has highlighted the impact of currency depreciation and sovereign risk on Sub-Saharan African telecom operators. In a recent interview with CNBC Africa, Lisa Jaeger, Vice President-Senior Analyst at Moody’s, delved into the findings of their report. Jaeger pointed out that despite the challenges faced by operators in the region, long-term growth prospects remain robust, driven by key factors unique to Sub-Saharan Africa. The region has witnessed significant growth in the telecom sector over the past decade, with mobile phone usage doubling. However, there is still ample room for expansion as less than half of the population has access to mobile phones. Three main drivers support this growth: a young and fast-growing population with a median age of 18, increasing affordability of mobile devices, and the shift towards smartphone adoption and data services. Challenges such as economic downturns and currency fluctuations have impacted operators, particularly in countries like Nigeria and Ghana where currency devaluation has been significant. Despite these hurdles, Jaeger remains optimistic about the long-term outlook for telecom companies in the region. Nigeria stands out as a key market given its large population and low penetration rates. Investment in infrastructure and competition among operators to connect rural areas are key drivers of growth in the country. However, high interest rates and inflation have led to cuts in capital expenditure by operators to manage cash flows. While this may temporarily impact growth, the fundamentals for long-term expansion remain strong. As for currency risks, Moody’s forecasts more stability in the coming year as interest rates normalize. Central bank reforms and improved dollar availability in Nigeria are expected to have a positive impact on international telco operators. When comparing Sub-Saharan African telecoms to higher-income regions, the region shines due to its untapped market potential. Unlike North America and Europe where growth is limited by saturation and competition, Sub-Saharan Africa offers significant room for expansion driven by population growth and increasing demand for data services. Despite the challenges posed by currency fluctuations and sovereign risk, the telecom sector in Sub-Saharan Africa is poised for continued growth and investment. Moody's report underscores the resilience of operators in the face of economic uncertainties and sets the stage for a promising future in the region's telecom industry.