Nigeria’s Telcos Fixed the Revenue Problem. Now Comes the Cost Problem
BlackCircle Research Desk
Research
# Executive Take
Nigeria’s telecom operators are no longer telling a survival story. The worst of the 2024 earnings shock has passed for the largest players, helped by tariff relief, a less disorderly currency market and tighter commercial discipline. The harder question is what survives once the recovery is stripped of its temporary support from higher prices, calmer FX and renegotiated contracts.
> Our view: The sector has moved from crisis repair to cost control. Demand is strong and tariffs have helped, but the next test is whether operators can convert data growth into cash flow after paying for power, tower leases, spectrum and network expansion.
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Key Market Signals
| Signal | Relevance |
|---|---|
| MTN Nigeria | Q1 2026 EBITDA margin reached 55.3%, but diesel at ₦2,000 per litre in H2 2026 could reduce full-year EBITDA margin by 1.8 to 2.0 percentage points. |
| Tariff reset | The NCC’s approval of tariff increases of up to 50% repaired part of the revenue model, but it also made service quality, transparency and affordability more politically important. |
| Airtel Africa (Nigeria mobile services) | For the year ended 31 March 2026, Nigeria mobile services revenue was $1.598 billion, underlying EBITDA was $924 million and EBITDA margin reached 57.8%, supported by revenue growth, cost efficiency and stable fuel prices. |
| IHS Towers (Nigeria segment) | Q4 2025 revenue was $269.1 million and segment adjusted EBITDA was $169.7 million. IHS’s organic revenue fell as some FX and diesel-linked revenue resets moved against it, even though lower power costs helped the cost line. |
| MTN/IHS proposed transaction | MTN Group’s proposed acquisition of IHS Towers moves the story from external tower-cost exposure to infrastructure ownership, cost predictability and control of critical assets. |
| Network sharing & policy response | MTN’s network-sharing agreement with Airtel in Nigeria and Uganda, its roaming partnership with 9Mobile, and Nigeria’s renewable-power push for telecom sites all point to reducing duplication, improving infrastructure use, and lowering the cost of coverage. |
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MTN Nigeria: The Clearest Read on the Tension
MTN Nigeria’s Q1 2026 earnings release gave the market the clearest version of the sector’s central tension.
- Total revenue: ₦1.498 trillion (vs. ₦1.058 trillion in Q1 2025)
- EBITDA: ₦828.3 billion (vs. ₦492.7 billion in Q1 2025)
- Profit after tax: ₦355.5 billion (vs. ₦133.7 billion in Q1 2025)
- Data revenue: +56.2%
- Fintech revenue: +77.9%
- Active data users: +9.5% to 55 million
- EBITDA margin: 55.3%
On the face of it, this was a powerful recovery buoyed by stronger usage, improved pricing and a sharp rebound in earnings. But the cost disclosure was more important than the headline profit numbers. MTN said the energy component of its tower lease costs is linked to the prior quarter’s average Lagos ex-depot diesel price. If diesel averages ₦2,000 per litre in the second half of 2026, the company estimates full-year EBITDA margin could be reduced by 1.8 to 2.0 percentage points. In a business now showing strong operating margins, that is not an accounting footnote — it is a reminder that part of Nigeria’s telecom recovery still depends on the price of keeping thousands of dispersed sites powered.
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What’s Behind the Recovery
Diesel is not the whole story. Several forces are repairing sector economics at once:
- The Nigerian Communications Commission’s January 2025 tariff adjustment changed the revenue base after years in which prices had lagged inflation, currency depreciation and energy costs.
- MTN has pointed to revised IHS lease terms, relative currency stability, and efficiency measures as part of the improvement in cost pressure in its H1 2025 results.
Diesel remains the most visible swing factor, but the real investment issue is broader: how much of the new revenue can operators keep after power, leases, spectrum, capex and service-quality demands have been paid for?
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Airtel Africa: The Other Side of the Ledger
Airtel Africa’s audited results for the year ended 31 March 2026 show why the sector should not be read as a one-way diesel squeeze.
- Nigeria mobile services revenue: $1.598 billion (vs. $1.045 billion in the year ended 31 March 2025)
- Underlying EBITDA: $924 million (vs. $522 million)
- EBITDA margin: 57.8% (up from 50.0%)
- Data revenue growth (constant currency): 63.6%
- Data usage per customer: 11.0GB/month (up from 8.4GB)
- Smartphone penetration: 54.9%
Airtel attributed Nigeria’s stronger margin performance to revenue growth, cost efficiency and stable fuel prices. These figures are not a contradiction of MTN’s diesel warning — they show the other side of it. When fuel stabilizes, higher tariffs and stronger data usage flow through more cleanly. When fuel rises sharply, the same network economics can absorb part of the benefit. The risk is not simply that diesel is high; it is that fuel, FX and tower costs can take back operating leverage just as subscriber demand is improving.
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The Tower Layer: Where the Story Gets Strategic
Operators own the customer relationship, but much of the physical network sits inside an infrastructure system of towers, power equipment, leases and service-level commitments. In Nigeria, that system is not only carrying telecom equipment — it is managing power reliability in a weak-grid economy.
IHS Holding’s fourth-quarter and full-year 2025 results explain how those costs move through the sector:
- Nigeria segment Q4 2025 revenue: $269.1 million
- Segment adjusted EBITDA: $169.7 million
IHS said organic revenue in Nigeria declined largely because revenues linked to foreign-exchange resets and diesel prices fell as the naira appreciated. In plain terms, some tower contracts include mechanisms that adjust revenues for currency movements and diesel costs — mechanisms that can lift IHS’s organic revenue when naira weakness or higher diesel prices trigger contractual resets, and reduce it when the naira strengthens or diesel-linked revenues fall. The same quarter also benefited from lower diesel and electricity costs. Energy and FX are therefore not static risks; they are built into tower contracts and can move reported earnings in both directions.
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MTN’s Bid to Own the Infrastructure
MTN Group’s proposed acquisition of IHS Towers brings the tower question to the centre of the investment case. Announced in February 2026, the transaction would increase MTN’s ownership of IHS to 100%, subject to shareholder and regulatory approvals. MTN said the deal would let it internalize margins currently paid to IHS, improve cost predictability, and benefit from third-party tower revenues — the clearest sign yet that the sector’s response has moved beyond tariff increases and diesel management toward reducing the number of critical cost variables operators do not control.
The Federal Ministry of Communications, Innovation and Digital Economy has said it will assess the proposed transaction, including its implications for consumers, competition, investment and sustainability. That regulatory interest is justified: if a major operator owns a large tower platform, the key public-interest questions are whether rival operators continue to receive fair access, whether network quality improves, and whether infrastructure control leads to lower long-term costs rather than merely shifting value within a corporate group.
For investors in MTN Nigeria, one distinction matters: the proposed buyer is MTN Group, not the listed Nigerian operating company. The tower upside should not be treated as an automatic transfer to MTN Nigeria minority shareholders. The narrower, more important question is whether future Nigerian tower lease terms, power-cost pass-throughs, or related-party arrangements change in ways that improve MTN Nigeria’s cash flow — public disclosures do not yet answer that. But the strategic direction is clear: the sector is moving from cost pass-through to cost control.
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Sharing, Leasing, Owning: The New Playbook
The same cost-control logic is visible elsewhere in the sector:
- MTN–Airtel network-sharing agreement in Nigeria and Uganda, designed to reduce duplicated investment and improve returns on expensive network assets.
- In 2025, the NCC approved a three-year national roaming agreement between MTN Nigeria and Emerging Markets Telecommunications Services Limited — then trading as 9mobile and now T2 Mobile — allowing 9mobile subscribers to roam on MTN Nigeria’s network. For 9mobile/T2, the arrangement improves coverage without a costly parallel network rollout; for MTN, it monetizes the scale of its infrastructure and deepens its role as a wholesale network platform.
- MTN Nigeria has also disclosed NCC approval to lease spectrum from T2 Mobile, supporting traffic management and customer experience without relying only on new spectrum acquisition.
These are not isolated technical arrangements. They point to a more concentrated industry playbook: share where duplication destroys returns, lease where asset access is more efficient than ownership, and own where control of the cost base is strategically valuable.
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Regulation: The Other Constraint
The 2025 tariff reset repaired part of the sector’s economics, but it also raised the political visibility of telecom pricing. Consumers are paying more, and regulators will therefore be more sensitive to service quality, transparent pricing, and the distribution of benefits from infrastructure consolidation or sharing. Higher tariffs can support investment, but they are not a blank cheque — the sector has been given more room to earn, and it will be expected to show that room is translating into better service and wider coverage.
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Diesel: Still the Biggest Swing Factor
- AFC-linked estimates cited by Nairametrics put Nigerian telecom diesel consumption at more than 40 million litres per month, costing the industry more than $350 million annually.
- That figure explains why diesel remains central even after the tariff reset. The Nigerian Communications Commission and the Rural Electrification Agency have consequently moved renewable power for telecom infrastructure onto the policy agenda — a sensible direction, especially for rural and semi-urban sites where power economics are weakest. But announcements will not change the margin story unless they translate into funded deployments, reliable site-level power, and lower diesel intensity.
- Domestic refining does not automatically remove the risk either. Policy support for local refining may improve supply security over time, but diesel pricing can still be shaped by crude allocation, FX, import policy and distribution costs. For operators and tower companies, the issue is not only whether diesel is available — it is whether the cost of diesel is stable enough to plan network expansion, tariffs and lease economics with confidence.
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Sector Timeline: From Tariff Repair to Cost Control
- Jan–Mar 2025: NCC approves telecom tariff increases of up to 50%; CBN launches the Nigeria FX code.
- May–Jul 2025: IHS says Nigeria revenue benefited from FX resets and diesel pricing; agrees to a Rwanda sale.
- Sep–Oct 2025: MTN leases spectrum from T2 Mobile, effective October 2025.
- Feb–Mar 2026: MTN announces its proposed acquisition of IHS Towers; the ministry signals a review.
- Apr–May 2026: MTN quantifies the diesel downside at 1.8 to 2.0 percentage points of profit margin.
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What Investors Should Watch
| Variable | Investor Application |
|---|---|
| Energy intensity | How quickly operators and tower partners can reduce diesel dependence through grid power, gas, batteries, solar hybrids and better site management. |
| Tower economics | If lease resets, infrastructure sharing and potential ownership changes reduce long-term costs, or simply shift them within the group structure. |
| Pricing power | If tariffs can support continued investments without triggering service-quality backlash or affordability pressure. |
| Capex quality | If new investments are adding useful capacity and coverage, or merely absorbing the cost of power, FX and legacy infrastructure stress. |
| Regulatory posture | Whether regulators allow efficiency-driven consolidation and sharing while preserving fair access, competition and consumer protection. |
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Bottom Line
This is the next test of the telecom recovery story. The winners will not simply be the companies with the fastest subscriber growth or the largest data traffic — they will be the operators that can turn data growth into cash flow after paying for power, leases, spectrum, capex and customer service. In a market where the grid remains weak and consumer pricing is politically sensitive, the quality of earnings will come from operational control as much as from revenue growth.
MTN’s diesel sensitivity analysis should be read as a sector signal, not the whole story. Airtel shows how fuel stability can support margin expansion. IHS shows the complex process through which energy and FX pricing move through the tower layer. MTN’s proposed acquisition of IHS shows that ownership of infrastructure has become a strategic lever. The MTN/9mobile roaming arrangement points in the same direction: in a high-cost market, coverage can no longer depend only on each operator building and powering a parallel network. Nigeria’s telecom recovery is real, but it is not a clean digital-growth story. It is a pricing, power and infrastructure-control story, and the durability of the boom will depend on how well the sector manages all three.