Telecom firms threaten to reduce subscribers over high operation costs

Telecom firms threaten to reduce subscribers over high operation costs

In a surprising turn of events, Nigeria’s telecommunications sector is facing potential disruptions as leading telecom operators threaten to implement load shedding measures in response to the Nigerian Communications Commission’s (NCC) reluctance to address their demands for a tariff hike.

Telecom operators, citing the rising cost of operations, including the increased prices of diesel, infrastructure maintenance, and a depreciating naira, have called on the NCC to approve a tariff increase to help mitigate their financial burdens.

For instance, MTN, with a subscriber base of 79.7 million as of December 2023, reported a first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange in 2023. The telco incurred FX losses of N740 billion ($815.79 million at N907.1/$)

Airtel Africa, which had 50.9 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi. It lost $1.26 billion to derivative and FX exposures, with $770 million attributed to the naira’s devaluation.

This has led to dwindled investment in the telecoms sector, the chief executive officer of Airtel Nigeria, Carl Cruz stated, adding that, “The devaluation of the Naira moving from N420/dollar to N760/dollar in a month’s time, to about N1500/dollar today, had indeed affected telecoms industry who rely heavily on importation of infrastructure to grow the sector.’

In the same vein, the CEO, MTN Nigeria, Karl Toriola, said operators are reluctant to invest, simply because of the high operating cost and the devaluation of naira, among other issues that have marred the growth of the sector.

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According to him, “the telecoms sector in Nigeria is now in an intensive care unit (ICU) gasping for breath, while calling on the government to intervene. The sector is facing a lot of challenges of which if urgent action is not taken, it will dry up. The truth is that investors are not going to come to invest in the sector if the fundamental issues are not addressed. To rescue the sector from collapsing, there is a need to increase prices of telecom services.”

Despite repeated pleas, the regulatory body has remained silent on the issue, causing frustration and uncertainty among industry players.

The situation has escalated, with telecom operators warning that if the tariff hike is not granted, they may be forced to adopt load shedding—a strategy that would involve rationing network availability during certain periods. This could lead to disruptions in mobile and internet services, affecting millions of Nigerians who rely on these services for communication, business, and access to essential information.

“With the high operating cost and the delay on the part of the government to allow operators to increase prices of telecoms services, operators may adopt the method of load shedding in the sector.

“We may decide to give network to some areas, while others may not have network, just to cut down operating cost for survival of the industry,” chairman, Association of Licensed Telecom Operators of Nigeria (ALTON), Engr. Gbenga Adebayo told LEADERSHIP.

Meanwhile, the NCC has yet to release an official statement addressing the operators’ demands or the looming threat of service disruptions. A source in the Commission, told our correspondent, that NCC do not want to comment on the issue.

The reason for NCC’s silence is not far-fetched, the chief executive officer, Jidaw Systems Limited, Jide Awe, told LEADERSHIP, adding that “There are no easy answers. It’s essentially a dilemma that requires a balancing act to resolve. Nigeria’s telecom sector is really facing challenging times. The sector’s players are obviously grappling with increasing operational costs. On the other hand, consumers will be hard hit if NCC throws in the towel.

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“The operators argue with good reason that without increased tariffs, they may find it difficult to maintain service quality, sustain their infrastructure, invest in new technologies, or even remain financially viable.

“On the other hand, Nigerians are already under considerable financial strain due to the rising cost of living. Any increase in telecom tariffs could worsen this situation, making it more difficult for individuals and businesses to afford essential communication services.”

He therefore stated that while the cry of telecom operators is clear, it is equally essential to carefully consider the socio-economic impact on citizens, suggesting that the NCC must balance these two concerns – the needs of the telecom sector for continued growth and sustainability with the economic realities faced by Nigerian consumers.

For the meantime, the Nigerian Communications Satellite (NIGCOMSAT) Limited said it is seeking to partner with operators to ease the burden of dollars in securing infrastructure.

The head, marketing and stakeholders’ engagement, NIGCOMSAT, Olufunke Fagbeja, disclosed this, during an interview with journalists, at the KA-band VSAT Installation training in Lagos.

“We are taking steps to ensure or to foster this partnership. For example, we have been having talks with some operators in terms of strategic partnerships. So, this is something we’re working on and we believe it will bear fruit and we will see the value with regards to services.”

Speaking on easy access to telecom equipment, Fagbeja said, though NIGCOMSAT is not an Original Equipment Manufacturer (OEM) as it does not manufacture equipment, it has entered into partnership with manufacturers of some of the equipment needed in the telecom industry.

“We partner with these manufacturers and we purchase our equipment directly from them. What this means is that we can get the equipment at a better rate, at a discounted rate, to give to our customers like operators. So we can assist operators to get the equipment (at a much reduced price) needed to expand their operation in the country.

“We are also looking at producing some of the equipment locally, by empowering startups through the Accelerator programme. The programme is aimed at propelling advancements in satellite technology and bolster Nigeria’s position in the global tech arena,” she added.

Telecom firms threaten to reduce subscribers over high operation costs