Telecommunications operators, including MTN Nigeria and Globacom, have submitted a request to the Nigerian Communications Commission (NCC) seeking approval from the Federal Government to raise their tariffs. The move comes as the operators grapple with foreign exchange losses and escalating energy costs that resulted in losses for some companies last year.
The proposal to increase tariffs by the telcos comes shortly after MultiChoice, a South African pay television company, raised its prices. Other sectors, including electricity distribution companies and brewing companies, have also adjusted their prices recently.
In a joint statement issued by the Association of Licensed Telecom Companies of Nigeria and the Association of Telecom Companies of Nigeria, the telecommunications industry expressed the urgent need for a review of the pricing framework. They highlighted that the industry has not adjusted its general service pricing upward in the past 11 years due to regulatory constraints.
The associations emphasized that the current price control mechanism, which does not align with economic realities, poses a threat to the industry’s sustainability and undermines investor confidence. They called on the federal government to engage in constructive dialogue with industry stakeholders to address pricing challenges and establish a framework that balances consumer affordability with operators’ financial viability.
The telecom industry stands out as one of the few sectors yet to revise its prices despite the country’s rising inflation and other economic challenges. The operators attribute this to regulatory restraints that prevent them from pricing services appropriately.
Efforts to reach the Director of Public Affairs at the NCC, Reuben Mouka, for comment on the tariff request were unsuccessful at the time of reporting. The NCC regulates pricing in the telecom industry, and any price changes by operators must receive the regulator’s approval. The NCC has stated that it is conducting a cost-based study to determine whether to approve the proposed price increments.
Gbenga Adebayo, Chairman of the Association of Licensed Telecoms Operators of Nigeria, emphasized that a cost-reflective tariff is crucial. He cited examples from other sectors, such as power, where price control has had negative consequences on infrastructure and investments. In the telecom sector, self-help solutions are not available, making a tariff adjustment essential.
The telecom industry has been facing significant operational cost increases due to foreign exchange scarcity, network expansion, and infrastructure upgrades, resulting in negative impacts on the operators’ financial performance. According to the National Bureau of Statistics, investment in the sector dropped from $456.8 million in the previous year to $134 million in 2023, a decline of approximately 70.5%.
MTN Nigeria Plc has reported a substantial loss of N740.4 billion for the fiscal year 2023, a significant increase from the N81.8 billion loss reported in 2022. The company attributes this alarming financial setback to the effects of the foreign exchange market liberalization that began in June of the previous year.
Airtel Africa also experienced a 99.6% decline in post-tax profit, falling to $2 million in the nine months ended December 2023 from $523 million in the same period in 2022. The liberalization of the forex market in June 2023, which led to a significant devaluation of the naira, contributed to these losses.
Telecom operators have expressed concern over their financial viability and warned that without tariff adjustments, they may not survive the year. They cited rising operational costs, particularly the high price of diesel used to power base stations, as a significant burden. The industry spent approximately N429.43 billion on diesel for base stations in 2023, a 34.57% increase from the previous year.
Subscribers and economists have voiced support for the telcos’ request to increase tariffs, understanding the need to offset rising operational expenses and maintain service quality. Adeolu Ogunbanjo, President of the National Association of Telecommunications Subscribers, called for a marginal increase in tariffs to assist operators in covering their costs and investing in infrastructure.
As the industry awaits the regulatory decision on tariff adjustments, the telecom operators continue to highlight the challenges they face and the importance of sustaining their operations to provide essential communication services to Nigerians.
Telecommunication operators have called for a slight increase in tariff prices, emphasizing that such a move would not adversely affect subscribers. According to industry experts, this adjustment would enable operators to continue providing quality services and invest in essential infrastructure.
Ogunbanjo, a representative of the telecom operators, stressed the importance of a modest tariff increase to sustain their operations. He explained that it would facilitate service improvement and infrastructure deployment, both of which are vital for the industry’s growth. Ogunbanjo further noted that recent challenges, such as issues with undersea cables, have compounded the operators’ difficulties.
Professor Sheriffdeen Tella, an Economics expert from Olabisi Onabanjo University, expressed his belief that the tariff adjustment was long overdue. He highlighted the significant increase in the cost of operation for telecom operators, making it increasingly challenging for them to sustain their businesses. Tella emphasized that while the operators have refrained from raising charges for services like text messaging, the rising operational costs necessitate government intervention in reducing energy costs, interest rates, and other economic indicators.
Tella also pointed out the need for subscribers to understand the new economic realities and recognize that operators cannot operate at a loss indefinitely. He cautioned that if the situation remains unaddressed, more companies may be forced to exit the market, which would have negative consequences for the overall economy.
Economist Aliyu Ilias supported the proposed tariff adjustment, commending both the telecommunication companies and the Nigerian Communications Commission (NCC) for their responsible approach to the issue. Ilias acknowledged the challenging business environment faced by the operators and urged the government to collaborate closely with them to determine the appropriate percentage increase in tariffs.
The call for a slight tariff increase has sparked a debate on balancing the operators’ sustainability with subscribers’ interests. As discussions continue, stakeholders anticipate a collaborative effort between the government and the telecom industry to find a viable solution that ensures the continued provision of quality services while addressing the operators’ operational challenges.
