…lament rising operational costs, dwindling naira value
Teeming Nigerians, already hard-pressed by price surges in the cost of daily needs, including food, transport, medicament, house rents and electricity, may need to brace up for yet another financial slam.
This is as digital mobile telecom network operators, MTN, Airtel, Globacom and 9mobile, get set to take their requests for approval of tariff hikes for their voice and data services to high gear.
The operators are seeking to prompt the industry regulator, the Nigerian Communications Commission (NCC), to expedite action on the facilitation of tariff hikes.
The digital mobile network operators, under the aegis of the Association of Licensed Telecom Operators of Nigeria (ALTON), have been peppering the industry regulator for permission to raise tariffs, on the grounds of rising operational costs and the dwindling value of the local currency, the naira, against the benchmark US dollar.
Their calls have, however, got more strident in the last few months, following on the sharp decline in the value of the naira and the sharp rise in the cost of diesel fuel, on the back of the free float of the local currency and the removal of the fuel subsidy by the Federal Government in May last year.
The mobile operators are particularly irked by the fact that while players in other sectors of the Nigerian economy are free to raise their charges based on prevailing market forces, they (the mobile operators) are bound by regulation to confer, negotiate and receive approval from the NCC before they can push up tariffs.
They further add that they are currently operating on the brink and can no longer sustain their businesses competitively and profitably under the prevailing tariff regime.
Active mobile subscriptions in the country reached 220.7million as of August 2023, according to the NCC. The amount spent on airtime and data by Nigerian telecom subscribers rose to at least N2.59tn in the first nine months of 2023. This is according to the financial statements of MTN Nigeria and Airtel Africa. This was a 32.57 per cent increase from the N1.95trn both telcos recorded from both income sources in the corresponding period of 2022.
Mobile network operators claim that the prevailing economic situation in the country is glaring and wonder why the NCC is foot-dragging in approving tariff adjustments for them.
Usually reliable sources say that while the mobile operators would want tariff hikes upwards of 50 per cent, the NCC’s position is that it cannot take a position until an ongoing survey into the matter is concluded.
The NCC is said to be waiting for the recommendation of a cost-based study by KPMG, its consultants on tariff evaluations and projections.
Sources close to the mobile network operators say that their thinking is that the market situation in the country is glaring, particularly concerning the value of the naira and that as such, the NCC should be able act briskly on its own or prompt its consultants to speed up their findings.
Mr. Tony Izuagbe Emoekpere, president, Association of Telecommunications Companies of Nigeria (ATCON), told the Sun in a telephone interview that though all the operators in the industry wish to increase their prices because of the current market realities, they cannot go against the law.
The study aims to recommend the most appropriate pricing structure for the industry, based on its findings considering the economic variables of the operating environment.
Emoekpere said the operators are waiting for the regulator’s decision on price review but the current prices of calls, data, and other telecommunication services are no longer sustainable because of the key increase in the Capital Expenditures (CAPEX) and Operating Expenditures (OPEX) of operators.
He argued that since the operators cannot just increase the prices of their services, some incentives should be considered to ease some of the cost of production on them so as to sustain their businesses.
“For instance, diesel is a major requirement for operators. If there are some levies removed on that and some concession given for CAPEX expenses, the operators would be encouraged,” he said.
To ease the pressure on forex which is causing the inflation, he said it’s high time they looked at their cost element.
“The major cost element is power in terms of operations and from the CAPEX investment standpoint the major element is that, 90 per cent of all we utilise to provide our services are imported. In fact, not only the equipment are imported but also services,” he said.
The ATCON President therefore suggested that the operators on their own part should think of how to domesticate some of their services to strengthen the naira.
“Some of the services that are being done by international organisations should be done locally. Anything that can be done locally or denominated in naira should be encouraged, so that the effect on the dollar would be removed,” he said.
Earlier, Gbenga Adebayo, ALTON chairman, had voiced his concern on the current prices of calls, data, and other telecommunication services, stating they are no longer favourable to operators.
Adebayo explained that even though the conversation to review prices is hard, it must be taken for the industry to continue to deliver communication service in the country.
“We also must have one hard conversation, I know it is difficult, but it is one we must have. The current pricing regime of the industry is not sustainable. We are basically selling below cost. It is not easy to talk about, but we cannot continue like this. We must allow market forces to determine prices. On our end, we must look at a more realistic pricing offering because today’s pricing regime is not sustainable,” he said.
