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'Why mobile tariff hike is inevitable in Nigeria'

According to the source who craved anonymity, while the operating cost has continued to go up, profitability has kept shrinking, adding that current economic realities have shrunk the average revenue per user (ARPU) of the average telecom consumers across the country.

“I can assure you that if nothing is done to review upwards, current tariff in the telecom space, some operators will close shops. Cost of energy, transportation, security of infrastructure and others have continued to go up. The only sector that has not increased the cost of its final product is the telecoms sector. Other sectors including aviation, transportation, food and automobiles have gone upwards. So, to run the business sustainably, remember some us have shareholders and boards which we report to, the Nigerian Communications Commission (NCC) would need to accede to the demand of the industry for upward tariff review,” the source said.

The Nigerian telecom market has been adjudged to be one with the lowest and affordable mobile market across the world, a development that has helped the industry grow a huge subscriber base which has stopped translating into huge financial gains, no thanks to emerging economic realities.

The telecom industry’s return on investment (RoI) remains low with the former Executive Vice Chairman of the NCC, Prof Umar Danbatta declaring last year that for the first time, the mobile network operators (MNOs) posted loss in their balance sheets.

With aggressive investments in acquiring the fifth generation (5G) spectrum licence and network deployments with no real monetisation in sight, operators are looking towards increasing mobile data tariffs. From the sale of 5G spectrum licence to MTN Nigeria, Mafab Communications Ltd and Airtel Nigeria, the NCC has generated over $847.8 million for the Federal Government. The cost of deploying the technology too is not cheap.

It would be recalled the MNOs, acting under the aegis of Association of Licensed Telecoms Operators of Nigeria (ALTON) had via a letter dated April 25, 2022, addressed to the CEO of the NCC entitled: “Impact of the Economic and Security Issues on the Telecommunications Sector,” sought for a 40 per cent hike in voice call, data and short message services (SMS).

The letter containing about a dozen other requests was written when the world had the aftershocks of COVID-19 and the outbreak of the Ukraine/Russian war. It was written before the eventual removal of fuel subsidy which had seen the pump price kissing the skies.

Co-signed by Gbenga Adebayo and Gbolahan Awonuga, chairman and Head, Operations respectively, the letter read in part: “The telecommunications industry has been heavily financially impacted following Nigeria’s economic recession in 2020 and the effect of the ongoing Ukraine/Russia crisis. This has resulted to an increase in energy cost (which constitutes appreciable 35 per cent of ALTON members’ operating expenses). Consequently, the cost of diesel required to power our towers base stations and offices rose by a staggering 233per cent from N225 per litre in January to 2022 to over N780 per litre in March 2022.

“As the Commission may be aware, the power sector under the supervision of the Nigerian Electricity Regulatory Commission (NERC) of the power sector in November 2020 undertook a review of electricity tariffs to cater for the economic headwinds.

“In view of the foregoing, ALTON considers it expedient for the telecoms sector to undergo periodic cost adjustments through the Commission’s intervention in order to minimise the impact of the challenges economic issues faced by our members.”

The MNOs made nine demands which included an upward review of the price determination of voice, data and SMS.

“Given the state of the economy and circa 40 per cent increase in the cost of doing business, we wish to request for an interim administrative review of the Mobile (Voice) Termination Rate  (MTR) for voice, administrative data floor price and cost of SMS as reflected in the extant instruments. With respect to voice and SMS cot, ALTON respectfully requests the Commission to consider a mark-up approach to address the upward price adjustments desirable for the industry. For data services, we wish to request that the Commission implement the recommendations in the August 2020 KPMG Report on the Determination of Cost Based Pricing for Wholesale and Retail Broadband Services in Nigeria. In implementing the said recommendations, however, we recommend that the 40 per cent increase in cost of doing business be factored in to arrive at a cost price per GB (gigabyte) in view of the current economic situation,” ALTON concluded.

According to a document prepared by the Subscriber/Network Data   Annual Report  prepared by the Policy Competition and Economic Analysis Department of the NCC, capital expenditure (capex) reported was N 785,771,028,960.36 as at December 2022 while operating cost (opex) reported was N 2,092,815,085,166.00 as at December, 2022.

Revenue recorded during the period under review was N 3,856,026,156,380.29.

Opex was N1,720,547,371,856.01 as at December 2021 while CAPEX stood at ?1,128,557,869,498.36.

According to the National Bureau of Statistics (NBS), the average retail price of Automotive Gas Oil (AGO) or diesel which is the major fuel of the MNOs rose by 37.76per cent in one year.

Its document entitled: “Automotive Gas Oil (Diesel Price Watch (December 2023),” said the price soared from N817.86/litre in December 2022 to N1126.69/litre in December 2023.

It was N780 per litre in March 2022 when the MNOs pushed for tariff hike.

NBS said: “The average retail price of Automotive Gas Oil (Diesel) paid by consumers increased by 37.76per cent on a year-on-year basis from a lower cost of N817.86 per litre recorded in the corresponding month of last year to a higher cost of N1126.69 per litre in December 2023.”

The document further noted that on a month-on-month basis, an increase of 6.74per cent was recorded from N1055.57 in the preceding month of November 2023 to an average of N1126.69 in December 2023.

In the period under review, said NBS, looking at the variations in the State prices, the top three States with the highest average price of the product, include Sokoto State (N1300.00), Kebbi/Yobe State (N1250.00) and Jigawa State (N1229.09).

NBS added that the top three lowest prices were recorded in the following States namely, Rivers State (N897.89), Bayelsa State (N935.00) and Bauchi State (N985.00).

The data explained that the Zonal representation of the average price of Automotive Gas Oil (Diesel) shows that the North West Zone has the highest price of N1227.31 while the South South Zone has the lowest price of N1039.90 when compared with other Zones.

In its “Premium Motor Spirit (Petrol Price Watch) December 2023,” NBS said the average retail price paid by consumers for Premium Motor Spirit (petrol) for December 2023 was N671.86, indicating a 225.85per cent increase when compared to the value recorded in December 2022 (N206.19).

It noted that likewise, comparing the average price value with the previous month (.i.e. November 2023), the average retail price increased by 3.53per cent from N648.93.

On state by state analysis, Ogun State had the highest average retail price for petrol at N776.54, Taraba and Adamawa states were next, with N760.00 and N745.71 respectively.

On the other side, Kano, Lagos and Borno states had the lowest average retail prices for petrol at N602.78, N612.72 and N622.71 respectively.

On Zonal analysis, the Northeast had the highest average retail price of N699.82, while the Northcentral had the lowest price of N657.69.

 Globally, the average price of mobile data and voice continues to fall, with high consumption of data and voices estimated to cost about $25. However, the report confirmed that broadband services can still be too expensive for the poorest consumers.

Nigeria has been ranked 48 out of 233 nations whose cost per gigabit (GB) was determined, making it one of the least expensive places to purchase mobile data. The nation is ranked sixth in Africa, below Algeria, Libya, Ghana, Somalia, and Morocco.

According to the ranking and evaluation by Cable.co.uk, the average cost of a GB of data in Nigeria is less than $0.71, which is approximately ?632.30 going by current exchange rate figures.

Despite the increasing cost of doing business in the country, the country still ranks cheaper than most countries like Egypt and South Africa.