…backed by experts, industry statistics
Another weight seems set to be added to the escalating financial burdens on the shoulders of Nigerians, as the nation’s four GSM networks MTN, Airtel, Glo-mobile, and 9-Mobile step up the tenor of their demands for an upward review in call, SMS and data tariffs.
The networks’ pleas this time are backed by further statistics and expert voices, and they add that they are on the brink of an operational collapse and will be forced to shut down before long, unless there is a marked upward review in tariffs.
The GSM networks have been making strident demands for a tariff hike from the industry regulator, the Nigerian Communications Commission (NCC) over the months, on claims that the recent downward slide in the value of the naira and the rising price of diesel oil for their power generators currently make their operations financially unsustainable.
This scenario presents a daunting challenge for teeming Nigerians already besieged by a numbing upward spiral in the cost of living, on the back of government’s removal of the vexed subsidy on petrol and the placement of the local currency, the naira, on a free float, moves a consensus of experts say will bring repair to the economy in the long run but come with severe short-term pains.
On this score, the prices of food, petrol, transport, electricity and others have trended upwards, with the price of cooking gas providing a small respite with a N100 dip per kilogramme, from N1,300 to N1,200 in many parts of the country in the past weeks.
Notably, telecom services occupy a special space, providing a respite to the high cost of other goods and services, particularly transport, as they enable quite a number of people to work from their homes and other remote locations via the internet, thereby bypassing exorbitant transport costs. They further enable cost savings on transportation by creating a channel for information by way of call services, which can avert futile or needless commuting. They also enable remote, real time effective financial transactions from hand held portals that further eliminate the cost of transport to banks and merchants.
They further provide access to Voice over Internet Protocol (VoIP) calls that come almost free.
Gbenga Adebayo, Chairman, Association of Licensed Telecom Operators of Nigeria (ALTON), an industry cooperative driving the push for stepped up tariffs, presented the case of the GSM operators on an interview programme on Channels Television at the weekend.
He listed their challenges as including cost of energy, the declining value of the naira, equipment vandalism, multiple and overlapping taxes, lack of investment and high cost of operations.
Adebayo said: “We are only saying that we have a price window within which we want regulatory approval for. We are asking the regulator to allow us to move within that price band while a cost study is being conducted. What a cost study will do is actually to analyse what is the cost of providing services and what is the reasonable tariff when they look at the elements that make up the cost and that’s where we are.”
Asked about their desired new tariff, Adebayo skirted the question, saying, “Without going too academic about it, the numbers don’t lie so we need to be guided by what the figures say. We have a price window today of minimum of N6.40 per call. We can move within that price band, based on previous regulator approval.
“That’s what we are asking the regulator to do: a cost study on the actual cost of providing services. While that is ongoing, allow us to move within the current price window which is between N6.40 and N6.90 per call thereabout.”
According to Adebayo, the marked losses posted by MTN Nigeria, which is a publicly quoted company with published financials, indicate the severity of the current challenges of Nigeria’s telecom industry.
MTN Nigeria reported a pre-tax loss of N575.69 billion in its operations for the first quarter of 2024, citing inflation and naira devaluation for the poor showing.
The figure marks a sharp decline from the N162.9 billion profit posted in the same period in 2023.
Informed sources close to the industry said in 2022, when the naira was much stronger and attendant costs were remarkably lower, the GSM operators had asked for a 40 percent increase in tariffs that was not granted.
Our source added that the value of the naira had marked down steeply since then and that the price of petrol as a benchmark had multiplied by more than three-fold. He said based on that calculation, it would not be far-fetched to estimate that the operators might make a demand in the realm of 120 percent hike in tariff.
Supporting a tariff hike for the GSM operators, Bismark Rewane, an economist and CEO of Financial Derivatives Company, said in an interview on Channels Television weekend, that the telecom sector has become critical to a cross section of industries, from the financial to even electoral processes.
Rewane said quality of service in the telecom industry will decline if investments there decline, and that this will have a negative impact across sectors.
He observed that the last time there was a tariff review in the telecom industry was 11 years ago, in 2013, and that at that time the naira exchanged at N157 to the US dollar as against N1,400 to the US dollar at present.
He noted that although telecom contributes just 10 percent to Nigeria’s Gross Domestic Product (GDP), the sector is a critical component of the country’s social infrastructure.
