Karl Toriola, CEO of MTN Nigeria, has issued a warning about the future of Nigeria’s telecommunications sector, stating “We’re in a deep crisis.”
Pointing to the severe sustainability challenges currently facing telecoms operators across the country, Toriola said this at the Telecoms Industry 2.0: The Next Investment Frontier in Nigeria, organised by Financial Derivatives Company (FDC) in Lagos today, with emphasis on: Two Decades After: What’s Next for the Telecoms Industry?
Despite the growth over the past two decades of liberalisation, the sector is now threatened by rising costs and unsustainable pricing.
Toriola noted his perspective about the viability of continued investment in the telecoms sector. He highlighted a fundamental issue which is the financial returns expected from the industry are now so low that they threaten its very survival.
“Nobody is going to put in $1 with the expected return of 60 cents on the dollar,” Toriola noted, pointing to the reality that without apt changes, the flow of new investment into the sector could dry up entirely.
One of the disturbing factors driving this crisis is the current pricing model, which has remained largely unchanged for over 11 years despite inflation and currency devaluation.
Toriola stressed that this static pricing is no longer tenable. “There’s no way under the surface of the earth, in the kind of inflationary environment and forex devaluation that we’ve seen, that an industry can maintain prices the same for 11 years,” he explained.
The telecoms sector has faced escalating costs across the board — from the cost of capital to the soaring expenses of maintaining infrastructure like base stations and diesel generators. Without adjustments to pricing, Toriola warned, the industry’s ability to function and attract investment is in jeopardy.
While acknowledging recent progress in discussions with regulatory authorities, Toriola made it clear that the situation remains critical. He indicated that stakeholders are beginning to understand the depth of the crisis and are considering necessary interventions, including price increases and concessions.
However, he also cautioned that time is of the essence. “Qualitative action needs to be swift and decisive to prevent the collapse of this industry,” Toriola urged.
Comments 1