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Weak consumer purchasing power, government policies drag telecoms sector in Q3

By Adeyemi Adepetun
05 January 2022   |   4:21 am
Telecommunications sector’s contribution to Nigeria’s Gross Domestic Product (GDP) fell by 2.48 per cent in the third quarter of 2021.

Telecom

…Sector’s contribution to GDP drops by 2.48% in Q3 2021

Telecommunications sector’s contribution to Nigeria’s Gross Domestic Product (GDP) fell by 2.48 per cent in the third quarter of 2021.

Statistics from the Nigerian Communications Commission (NCC) showed that the figure dropped from 14.42 per cent in Q2, 2021 to 11.94 per cent in Q3, 2021. Checks showed that within the same period in 2020, the contribution was 11.20 per cent

Industry analysts hinged the drop on several factors including the Federal Government NIN-SIM policy; Twitter ban, weak consumer purchasing power and the Average Revenue Per User (ARPU).

Precisely, the NIN-SIM mandatory exercise, which started in December 2020 and whose deadline has been shifted for about eight times now, with the newest now March 31, cuts over 15 million telephone lines from the network. This affected revenues of telecom operators and their contributions to the economy.

An analyst, who pleaded anonymity, said the slide in the sector’s GDP contribution within the quarter, reflected investors’ concerns on the state of affairs in the country, as well as the uncertainties surrounding policy issues in the sector.

According to him, there is a need for people-centred policies that would assure investors that the industry is safe and reliable.

He pointed out that already, there are challenges related to End User Certificates (EUC), multiple taxes, and illegal shutdown of towers housing these base transceiver stations, security and protection of facilities and a lack of power, “all these compound the problems in the sector.”

According to him, all telecom facilities must be treated as a Critical National Infrastructure (CNI) with immediate effect “before we can be serious about developing a Digital Economy in its true sense.”

From his perspectives, the Nigerian Coordinator, Alliance for Affordable Internet (A4AI), Olusola Teniola said the impact of the NIN-SIM policy rippled through into the Q3 2021 numbers and still being felt in conjunction with a suppressed consumer spending due to job losses and unemployment and the impact of COVID-19 delta variant.

Essentially, he said the trend has flatlined Y-o-Y and remains in a slowing down of growth witnessed on the Q-on-Q numbers for 2021.

He told The Guardian that the Average Revenue Per User (ARPU) remains steady, stressing that the minutes used per subscriber and subscriber numbers have tapered.

According to him, the top end of the market has a mix of Over The Top (OTT) usage against the steady voice market, so data usage is the determinant for revenue stability across the market, “otherwise, the trend is flat to negative as expected.”

Teniola, a former president, Association of Telecommunications Companies of Nigeria (ATCON), said the Q4 2021 numbers are sensitive to FG policies. “It needs Twitter, other digital services and apps to provide an uptick in consumer usage on the back of 5G deployment circa Q2 2022 onwards. FG needs to adopt a light hand regulatory approach to ensure that any potential momentum in the market is not severely depressed.”

On the OTT challenge, Airtel once told investors that young Nigerians, estimated at over 100 million, have taken to the Internet for leisure and education in recent years. The telecommunications firm stressed that these digital natives will re-define the telecoms market with their preferences for Internet calls over regular phone calls.

Already, a report has it that over 300 million voice and video meetings are held on Zoom daily. Users on WhatsApp and Facebook Messenger engage in over 700 million calls every day. 400 million people are sending billions of texts using Telegram.

The report noted that globally, these services are wiping billions of dollars in revenue for telecoms companies while thriving on telecoms infrastructure.

On this, another telecoms expert, Kehinde Aluko, said unlike telcos, digital communication platforms do not face significant regulatory challenges. He said using WhatsApp for cross-border communication does not incur additional charges nor does it require WhatsApp to develop any special infrastructure in each country.

“Telcos face a different reality. Companies need to acquire a licence to operate in any country. They incur new licence and costs to operate different broadband, spectrum and develop their infrastructure for each country they operate in,” he stated.

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