Operators consider tariff hike to hedge rising OpEx

Going by the lull in the economy, occasioned by several economic headwinds with various sectors finding ways to remain afloat, the telecoms sector is also making efforts to weather the storm. Parts of these move is possible increase in the cost of telecoms services. ADEYEMI ADEPETUN writes

Going by current happenings in the economy, which has affected virtually all the sectors, from manufacturing to FMCG, among others, it is no longer a matter of ‘if’ but ‘when’ an upward review of the current prices for telecommunications services in the country would happen.

For a fact, the telecoms regulator, the Nigerian Communications Commission (NCC) cannot fix tariffs for operators, because like most other regulators in the world, it must operate within its own rules and regulations. This is in line with the provisions of Sections 4, 90, and 92 of the Nigerian Communications Act (NCA) 2003

As such, the NCC has contracted a consultant, KPMG to conduct a cost-based study on possible tariff hike for the sector. The Guardian learnt the study has neared completion and should be up for major discussion this quarter. The purpose of the study, among other things is to recommend the most appropriate pricing structure for the industry based on its findings considering the economic variables of the operating environment.

NCC carries out a price determination, which sets a Price Cap and a Price Floor. For over a decade, the Price Cap has remained at N50 – call tariffs must remain below N50 – while the Price Floor is N4 and above – this is the rate at which operators interconnect each other.

It is worthy on note that the telecoms sector’s worth is put at $76 billion and has contributed over 16 per cent to the country’s Gross Domestic Product (GDP). Operators, especially the quartet of MTN, Airtel, Globacom and 9mobile have connected 318 million telephone lines from paltry 400,000 NITEL lines in the last 23 years, of which about 220 million have been active.

Sector faces challenges
The call for review of cost of telecoms services, both voice and data have reverberated in the last two years. This has been championed by the Association of Licensed Telecoms Operators of Nigeria (ALTON). The body called for the review to be in line with the current economic realities in the country.

The recent electricity tariff hike of about 231 per cent, whose announcement by the Nigerian Electricity Regulatory Commission (NERC), shocked the entire nation due to the fact that the electricity is hardly seen amidst constant grid collapse in the country, has further exercerbate calls for review of prices of goods and services, including telephony operations in the country.

In a letter by the ALTON, signed by its chairman, Gbenga Adebayo, dated November 24, 2023, addressed to the Executive Vice Chairman of the NCC (then Prof. Umar Danbatta) titled: ‘State of the Nigerian Telecommunications – Repositioning the Industry for Sustainable Growth and Development,’ the telcos detailed some of the challenges in the industry and proffered solutions to leading the industry back to sustainable growth, including rise in the cost of diesel, vandalism, fibre cuts, multiple taxation to the tune of about 50 different taxes and levies, among other challenges.

A columnist, Okoh Aihe, in one his articles, chronicled some of the concerns raised, saying, “When the letter was written, inflation was 27.33 per cent; it has jumped to 33.2 per cent. The Naira was trading for N777 to a Dollar, which value now stands at N1, 300, climbing from an all time high of N1, 850 to the Dollar, while Diesel which sold at N250 a litre now sells for N1, 500. These metrics equally affect telecoms operators.”

The industry also observed in the letter that the power sector had, since December 2022, been allowed an 18.5 per cent increase in tariff plus other increases that were granted.

Based on the foregoing and other reasons listed in the letter, the CEOs of the mobile companies appealed to the regulator to adopt a new regulatory approach that could enable them to increase tariffs without unnecessary hurdles.

Telcos target
INDEED, during a meeting with the Minister of Communications, Innovation, and Digital Economy, Dr. Bosun Tijani Adebayo argued that the tariffs set by the regulator are insufficient in light of escalating operational expenses.

He pointed out that, unlike the telecoms sector, other heavily regulated industries like power and insurance have seen price increases to reflect macroeconomic changes and the increased cost burden on operators.

While noting that the current price of services as pegged by the NCC is unsustainable, the ALTON Chairman said: “Insurance prices have risen 200 per cent with power raising prices by over 40 per cent. Telecommunications is the only sector that has not experienced a pricing regulatory framework review raising prices notwithstanding local and global macroeconomic realities.

“Not only has this impaired investor confidence and depleted available investible funds necessary to optimise infrastructure for improved service delivery, but it also threatens the very sustainability of our members’ operations.”

Former Minister turned down tariff hike
AIHE, a former staff of NCC, through his weekly column, informed that he was reminded that in the final days of the previous administration, the NCC gave an approval which was flatly cancelled by former Minister of Communications and Digital Economy, Dr. Isa Pantami.

“An NCC source explained that the minister didn’t have the right to do so, wondering why the industry did not go to court to test the provision of the Nigerian Communications Act 2003.”

The stronghold of Pantami on NCC and other agencies under the ministry was evident, which ordinarily shouldn’t be. The former minister’s era was largely characterized by deep regulatory capture, which actually slowed down reforms..

Subscribers want marginal hike
SPEAKING with The Guardian, the President, National Association of Telecoms Subscribers of Nigeria (NATCOMs) Chief Deolu Ogunbanjo, said the telecoms sector is a perfect example of privatisation and apparently, there has not been any subsidy.

He said lots of telecoms equipment are dollar or Euro-based, “and we want good quality service. Only last week when the dollar came down to around N1,100, today it is about N980, however, they run their BTS on diesel and the price is still up, slightly going down. Beyond that, is the fact that the industry should atleast do a marginal upward review. We do agree for hike because of cost of operations, I mean the opex is more now, though diesel, three weeks ago was up, but last week, it is coming down.

“However, because of the operating environment, a marginal hike, so as not to stifle the industry that has brought a perfect privatisation model, which has always been referred to. Look at what is happening in the power sector, subsidies and all that, no subsidies in the telecoms sector because it is totally privatized. As an industrystakeholder, we wouldn’t want anything that would hamper good quality of service in the sector. So, a marginal increase may be considered.”

According to him, there should still be the coming together of the industry stakeholders to deliberate and sensistise the public about the need for the hike.
Ogunbanjo, who said conveying a stakeholder meeting, would mean a lot, stressed that any hike should be done within the second quarter.