In the midst of economic upheaval, there is a tale of remarkable progress emerging from Nigeria’s telecom landscape. It’s a story that should be celebrated, for it signifies a beacon of hope in a time of widespread despair.
Flashback to 2001 when the first GSM call was made in Nigeria. How many of us would have envisaged the digital world that we live in today?
The pace of growth and the rate of adoption of telecoms solutions in Nigeria has been revolutionary.
Since the advent of GSM and the expansion of broadband infrastructure, Nigeria’s telecom sector has attracted a staggering $77 billion in investment.
The numbers tell a compelling story.
Moreover, the sector now contributes a substantial 16.06 percent to the nation’s Gross Domestic Product (GDP) during Q2 2023, a remarkable increase from the eight percent it contributed in 2015.
This meteoric rise in the telecom sector reflects the surging demand for telecommunications services across various sectors of the Nigerian economy, from agriculture and commerce to education.
It’s a testament to the resilience and adaptability of the industry, which weathered global challenges like the COVID-19 pandemic and economic recessions while maintaining its bullish stance.
Now, if you look at the 13.50 per cent the sector contributed to the GDP in Q3 2023, it shows there is a distress.
No wonder the players under the umbrellas of the Association of Licensed Telecommunication Operators of Nigeria (ALTON) and the Association of Telecommunication Companies of Nigeria (ATCON) jointly issued a statement during the week in which they clearly stated that telecoms is probably the only sector that has yet to adjust its rates in the past eleven years!
What are the reasons these telcos are calling for upwards adjustment of telecom rates?
In his article for TECHECONOMY titled: ‘Defending the foundations for connectivity’, Engineer Gbenga Adebayo, the chairman of ALTON, enumerated these challenges. Let’s reflect on them again:
1. Infrastructure
During one of those interviews, I was told that it costs telecom operators about $300 million to build a cell site. That was about two years ago.
You can imagine how much that costs now with the currency fluctuations in the country. And if you argue that most, if not all, mobile network operators (MNOs) in Nigeria have outsourced the tower/base station to third parties. Well, the costs are still being passed on them.
In the telecoms world, system downtime is increasingly disruptive and offline manual redundancies are often in the advanced stages of being phased out. The pace of this transition is not slowing down. The telcos need to deploy latest technologies to meet increasingly demand!
“With the core infrastructure in place, innovation is driving the exponential growth of services that ride on it. From the fully adopted social media that has changed the way we interact, to the emerging Artificial Intelligence (AI) revolution.
“While this innovation is enabling exciting new possibilities, there is a tendency to focus on those opportunities, to the detriment of the core infrastructure on which it rides.
“It is imperative that we retain a focus on the optimisation of that infrastructure and enable continued investment in its development. We have seen how the transition from 2G, through to 3G, 4G and 5G have each enabled the development of more and more sophisticated solutions”, Adebayo argued.
2. Impact of FX Fluctuations
The continued development of core infrastructure has to be sustainable, and over the last few months we have begun to see the challenges that the operators that provide it are facing.
Both MTN and Airtel have declared significant foreign exchange (FX) losses in Nigeria, and the stress is not linked to them alone.
The entire ecosystem is battling with a range of challenges that must be addressed.
Adebayo continued:
“If we fail to do so, the downstream impact on innovation will be severe. Telecoms infrastructure requires a base level of investment to maintain its current capabilities, and significant additional investment to expand and grow. It is capital intensive and that capital has to be generated through sustainable business models”.
3. Rising Costs of Delivering Services
At the heart of the challenge the industry faces is the issue of rising costs.
Recent financial losses are directly linked to the cost of operating towers that rely on inputs like diesel, which have increased significantly as the Naira has depreciated.
How much was a litre of diesel 11 years ago compared to today?
The provisions large telecom companies have had to make, and the consequent losses and impact on their reserves is a red flag.
And like the ALTON chairman said, “It tells us that business as usual is not sustainable”.
“If we continue as we are, then those companies will struggle to continue to invest in and maintain existing services.
4. Vandalisation
Please, what has happened to the Critical National Infrastructure (CNI) Bill?
The quest for a reliable telecommunications infrastructure for the players in the Nigeria to deliver essential services and products in an interdependent ecosystem requires the protection of the critical national infrastructure.
On 20 November 2019, President Ramaphosa signed South Africa’s Critical Infrastructure Protection Bill into law. What is the Nigerian parliament waiting for?
More so, general cost inflation, multiple-taxation, regular and damaging vandalisation of infrastructure and the costs associated with regulatory compliance all help contribute to the high cost of operations.
“We cannot continue to follow a path that asks those companies to simply accept those rising costs.
“It is no longer sustainable, and we have reached an inflection point.
“This is a critical moment for the industry. How we approach and resolve it will define the future of Nigeria’s digital economy. If you want to be able to enjoy the benefits that digitisation brings. If we want the infrastructure that enables AI and helps us drive growth, then we must take action now”.
5. Cost-reflective tariffs
He said that the industry players are asking the regulator – the Nigerian Communications Commission (NCC) to implement ‘cost-reflective tariffs’, “like it or not, are simply non-negotiable”.
I want to believe the operators have the listening ears of the Presidency too? You will recall that a Minister in this country once ‘ordered’ the telcos to reduce their prices.
But, we have also seen the impact of price controls in other segments of the economy, like power.
“If providers cannot operate sustainable business models, then they stop investing.
“When that happens, the existing infrastructure starts to crumble. For power, a consumer can choose to take ownership of the solution by buying a generator, or a solar panel. For fuel, the government can step in as the provider of last resort and manage a subsidy regime that mitigates the impact on the population.
“Those options are not available in the telecoms sector. There is no self-help solution.
“We fully understand and appreciate the financial stress that Nigerians are experiencing today.
“The cost of living is the single most significant factor in most people’s daily lives. But those people are still able to enjoy the benefits that connectivity brings, at the price they paid before these challenges became so acute. Imagine a future in which the gains of the last twenty years are reversed. Nigeria, and Nigerians simply cannot afford it. The pain that we would feel under those circumstances would be exponentially worse.
“We need to find a long-term, sustainable and manageable solution to this problem.
“Prices will need to rise, but action needs to be taken in a measured way, through sustainable conversations and partnership with the government. It is time to address this head on”, Adebayo said.
What is your view on this: Should NCC approve for price adjustments by telecom operators or Not?
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