Telecom sector faces threat, operators warn

High energy cost, spiralling inflation, multiple taxation and other factors are threatening the existence of the telecom sector, mobile network operators (MNOs) have warned.
Acting under the aegis of the Association of Licensed Telecoms Companies of Nigeria (ALTON), the MNOs say they hope Nigerians will not wake up one day and discover there are telecoms services.

Chairman of the group, Gbenga Adebayo, said the operators depend 70 per cent on diesel to power their base transceiver stations (BTS) the pump price which has continued to be on the rise and is expected to rise further when the Federal Government begins the implementation of the 7.5 per cent Value Added Tax (VAT) on the fuel that oils the engine of the telecommunications sector.
He said the MNOs also depend on the public transport system for the haulage of diesel to the various sites, adding that the removal of fuel subsidy has unwittingly increased the cost of haulage to BTS.

He said: “The availability of power supply (from the national grid) on the average daily is less than 30 per cent. It will be safe to say 70 per cent of time, for most hours of the day; we power the sites with alternative energy which in most cases is diesel.

“Other solutions such as solar and wind don’t even support one per cent of the time. So therefore, we are looking at saying the availability of power in the public space is up to 30 per cent, 70 per cent of the situation we power our sites with diesel. There are places where we don’t have stable electricity for a day but if we take a cumulative average, we could say there are places not having up to 30 per cent for every 100 hours if you take a national average. That is certainly not sustainable and if the cost of diesel goes up, VAT also goes up , haulage cost goes up because don’t forget that diesel is supplied to sites by road transport, so there is high cos of haulage, transporters have also increased their haulage cost.

“So if we add the landing cost to site it is quite significant, then we can only sustain the industry if we allow our prices to reflect our cost of production if you don’t want to wake up one day and discover that telecom services are not available. If operators cannot sustain the service, that will happen.”

Adebayo who is the Chairman and Group Chief Executive Officer of Communication Network Support Services Limited and CNSSL Contact Centre Limited, said the MNOs are engaging with the relevant stakeholders in the industry with a view to charting a way out of the challenges.

“We are engaging with all the relevant stakeholders, in particular, we are in contact with our regulator (the Nigerian Communications Commission). We are not unmindful of the challenges that people are going through, in particular, we are not unmindful of the high cost of living, but the reality is that we operate within the same ecosystem.

“The challenges that the public face are also what our industry face. We are not immune from the challenges; we don’t get any special supply of energy, we don’t have any special supply of diesel, we don’t travel on any special road to get to site, we don’t us special vehicle to deliver diesel to sites, we don’t have special salaries for workers; everybody is within the same ecosystem and as inflation increases, so also will our cost of production increase and so also shall our end user price increase otherwise the industry will not be sustainable,” he said.

Adebayo said all the policy changes, from fuel subsidy removal to 7.5 per cent VAT on diesel and now the proposed 40 per cent hike in electricity tariff would have had impacts on the telecom industry.

He said: “You know as an industry, these are parameters that affect the cost of the services we offer, I mean our production cost and when production costs go up, end user prices too would go up. So, if its gets to that stage, naturally we will also respond. Expectedly for the industry to be sustaining, prices have to reflect the cost of production. For the sustainability of the industry, the tariff we charge the consumers will reflect the cost of production, in this case the cost of energy, cost of fuel, cost of diesel and cost of transportation. So expectedly, prices are meant to go up. What we are doing at the moment is that we are working with the regulator to follow the guideline on price review.”

The telecommunications and information services sector has continued to serve as a buffer to the economy. According to the National Bureau of Statistics (NBS), the sector contributed N2.508 trillion in terms of financial value contribution to the nation’s gross domestic product (GDP) representing 14.13 per cent during the first quarter (Q1) of this year.

The sector recorded a 4.3per cent increase from its performance in the last quarter of 2022 when it recorded 13.55per cent. When compared on a year-on-year basis, the growth showed a positive progression from 12.94per cent in the first quarter of 2022 , to the 2023 figure of 14.13, which is an approximate growth of 9.19per cent.

The percentage of telecom contribution to GDP was calculated from 46 distinct sectors of the economy, which constitute telecom and information services baskets.

One of the key highlights of the telecom industry performance within the period under review was the generation of $820.8 million for the Federal Government from fifth generation (5G) technology spectrum licenses fees paid by three operators, MTN, MAFAB and Airtel.

Following the issuance of the licenses in December 2021 to MTN and MAFAB, both companies have launched 5G services. Airtel, which received its license in December 2022, has also launched services.