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Tier 2 operators demand fair treatment from govt, bigger telcos

By Adeyemi Adepetun
01 March 2023   |   3:00 am
For increased contributions to Nigeria’s economy in 2023, operators in the telecoms sector, largely Tier 2 players, have asked for fair and better treatment from the bigger players, especially the mobile network operators (MNOs).


•Seek intervention of NCC, CBN in critical areas
For increased contributions to Nigeria’s economy in 2023, operators in the telecoms sector, largely Tier 2 players, have asked for fair and better treatment from the bigger players, especially the mobile network operators (MNOs).

Tier 2 operators include some Internet Service Providers (ISPs); International Data Access Service Providers; Value Added Service (VAS) providers, among others.

Data from the National Bureau of Statistics (NBS) revealed that activities from the ICT sector contributed 16.22 per cent to Nigeria’s real Gross Domestic Product (GDP) in Q4, 2022.

According to the NBS, the ICT sector is composed of four sub-sectors including telecommunications and Information services; Publishing; Motion Picture; Sound Recording and Music production and Broadcasting.

To the NBS, for 2022, ICT total contribution to the country’s GDP was 16.51 per cent as against 15.51 per cent of 2021.

Further analysis showed that the ICT sector’s real growth rate of 10.35 per cent, this was boosted by the activities in the telecommunications sub-sector, which added 13.35 per cent to the GDP in real terms.

Indeed, to sustain this growth, the operators said it requires collaboration among the players and support from the Federal Government.

However, they lamented there are still huge challenges, which need to be attended to as fast as possible.

Some of the operators, who spoke with The Guardian, while lamenting sharing formulas which they claimed were forced on them on some operations, urged the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) to intervene in some critical areas.

The Managing Director, Infratel Africa, Tunji Alabi, said the firm plays in the rural telephony/colocation market, and like others, are at a disadvantage due to the increased cost of deployment without any significant increase in the revenue sharing formula.

Alabi said in most cases the Tier 1 operators get a larger share of the revenue despite the minimal investment and risk acceptance by them.

He said an increase in the cost of diesel had a massive impact in the operations of the Tier 2 colocation operators as the MNO’s refused an increase in the pricing for collocation, stressing “most Tier 2 players have been forced to absorb this cost.”

He recalled that the greatest challenge Tier 2 telecoms firms had in 2022 were three folds, namely, “inaccessibility to foreign exchange (FOREX) through the commercial banks for capital expenditure as well as the instability of the parallel market.

Government-regulated voice and data tariff, which has not changed in over 15 years despite the increase in cost of money/cost of borrowing and increase in the cost of diesel without any increase in the pricing for colocation. This cost increase was absorbed by the Tier 2 operators.”

The Infratel Africa MD said in 2023, they expect that the CBN will harmonise its multiple forex rates into a rate that promotes investment; that forex will be available from commercial banks at the CBN rate and there will be an end the Ukraine/Russia war, which should lower the cost of diesel considerably.

Alabi equally appealed to NCC to review the voice and data tariffs and align it with the present reality. He urged the FG to see telecoms infrastructure as a critical asset and provide lower customs tariffs/incentives to promote investment in this sector and that it (FG) should increase its focus on broadband penetration, especially in unserved and underserved communities’ areas.

Another operator in the IDA sub-sector, who preferred anonymity, said the cost of doing business in Nigeria kept going up, while revenue remained very low. He stressed that without access to capital, there will be no growth.

He disclosed that the $0.10 (10 cent) fixed price for international termination rate (ITR) has not yielded profit to players in the space, “market is not responding adequately well to the fixed price and unfortunately, you can’t go below it. It is the big players that are still profiting hugely from this.”

He lamented that local content policy in the telecoms sector has been watered down “unlike in the oil and gas sector, where things are working and priority are given to indigenous players. Something must be done on this if the players must increase their contribution to the sector.”

Speaking on infrastructure build-out, he lamented the frustration caused by Right of Way (RoW) levies charged by state governments. He said states like Lagos and Abuja charged above the N145/linear meter agreed to by the Nigerian Governors Forum.

While also lamenting rise in vandalism of telecoms infrastructure and menace of street urchins called area boys, he said, “RoW charges are not consistent. Abuja, they claim to be charging N145 per linear meter, but investigations showed the offices charge as much as N1000. So, we can’t expand services because of this, Same plays out in Lagos.

You cannot say you want to do anything on federal roads, they will charge twice (state and federal). These issues need urgent attention for us to increase our economic contribution to the country.”

To telecoms expert, Kehinde Aluko, NCC should ensure fair competition and encourage the participation of Nigerians in the telecoms industry. He said the telecoms industry has moved with technology trends, since its inception, and that the successes recorded in the industry, was as a result of the combined efforts of both the big and small players that have continued to respond to technological innovations.

He said both the small and big operators had never played the catch-up game, because as new technologies evolve, operators adopt and invest in the technologies as they trend, adding that the smaller operators deserve to be protected in order to remain relevant in business.