Telcos costs rise by 233%, seek 40% tariff hike

BY EMEKA EJERE

Telecommunication companies in Nigeria have concluded plan for a 40 percent tariff increase as they await final nod of the Nigerian Communications Commission (NCC) to proceed as the only way of sustaining the quality of their services in the face of escalating cost of doing business in the country.

The cost of powering telecommunication services could hit N60bn per month and N720bn in one year if the cost of diesel reaches N1500/litre as recently hinted by marketers of the product.

According to industry data, mobile telecommunication operators use an average of 40 million litres of diesel per month to power telecom sites. This, therefore, means that telecoms firms may spend as much as N720bn in powering their services in 12 months.

The ‘2021 Subscriber/Network Data Annual Report’ by the NCC released last week revealed that the operating costs of telecommunication companies in Nigeria rose from N1.4tn in 2020 to N1.66tn in 2021, showing an increase of N265.25bn.

The report read in part, “Total operating cost for the mobile network operators increased from N1.4 trillion in 2020 to N1.6 trillion at the end of 2021. This illustrates an increase of 18.74 per cent from the figure reported in 2020.”

However, this cost is expected to rise further with the new challenges in diesel price arising from the Russia war in Ukraine.

In a recent letter to the NCC, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) lamented the high cost of providing telecom services in the nation, which it said had increased by 40 per cent, hinting at the need for a price review of these services to reflect prevailing market prices.

It said, “The telecommunication 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 in an increase in energy costs (which constitutes an appreciable 35 per cent of ALTON’s members’ operating expenses).

“Consequently, the cost of diesel required to power operators’ towers, base stations, and offices rose by a staggering 233 per cent from N225 per litre in January 2022 to over N750 per litre in March 2022.”

In the letter, ALTON suggested a 40 per cent upward review in the cost of calls, SMS, and data. This would have increased the floor price of calls from N6.4 to N8.95 and the price cap of SMS from N4 to N5.61.

Also in its 2021 industry report, the NCC disclosed that the total national outgoing calls in 2021 were put at 173.56 billion minutes, and with the price floor of calls at N6.4, Telco firms would have made at least N1.11tn from calls. If the price call increases to N8.95, revenue from calls will rise by N442.57bn to at least N1.55tn within one year.

In April this year, ALTON had asked the federal government for special interventions as a way of cushioning the negative impact of the rising cost of diesel on the operational costs of its members.

ALTON President, Mr. Gbenga Adebayo, who said the industry was worried about how the rising cost of diesel would further drive the high cost of business, stated that there was need for an intervention to save the sector, noting that operators might have no other choice but to begin a process of price review.

He said, “We will be approaching the government for some form of intervention. But we are mindful of the high cost of living, and the implication of this on the economy and citizens. And so, we are not going to talk about direct price increases.

“But we will be approaching the government for some kind of intervention to cushion the effect of these changes on us as an industry.”

Even before then, findings had revealed that telcos were considering a review of call tariff in selected states, to reflect the cost of doing business in the states. The move was said to have become necessary in view of the multiple taxes and levies imposed by government agencies in certain states on telecoms infrastructure.

It was learnt that a consultant would be engaged to carry out a cost-based study, which could lead to a higher call tariff on outgoing calls by residents.

Network operators have, overtime, raised the alarm over arbitrary taxes and levies imposed on the telecoms infrastructure in certain states and subsequent shutdown of Base Transceiver Stations over failure to comply.

In January this year, MTN reported the shutdown of its facilities in Kogi State over allegations that it had not met its tax obligations to the state government.

The company alleged that the state government was demanding immediate payment of social service contribution levy, employee development levy and annual rent for Right-of-Way on fibre optics cable, saying payment would amount to multiple taxes.

Also in 2018, ALTON complained of the sealing of hub telecoms stations of its members due to the failure of the operators to comply with the payment of about 36 statutory and non-statutory taxes and levies in Kogi State.

At a press conference in Lagos, Mr. Adebayo, had explained that members of the association had settled all statutory levies and taxes due to the Kogi State Government and had taken necessary steps to comply with local laws that governed business activities within the state.

He alleged that an attempt by the Kogi State Government to increase its internally generated revenue would lead to total communications blackout in state and parts of Abuja, Nasarawa, Benue, Enugu, Anambra, Edo, Ondo, Ekiti, Kwara, and Niger states.

“As a result of these actions by the state government, our members are unable to refuel power generators at these sites, a situation which has led to the outage of over 70 sites including hub sites across parts of Kogi State.

“Now, there is likely impact on nine states surrounding Kogi namely: Nasarawa, Benue, Enugu, Anambra, Edo, Ondo, Ekiti, Kwara, and Niger states. These are states sharing borders with Kogi State, and Abuja the FCT inclusive,” Adebayo had said.

In the same year, major base transceiver station sites of telecoms operators in Taraba State were shut over demands for the payment of environmental protection levy of N285m on each operator.

The Taraba Environmental Protection Agency requested for the registration of Environmental Impact Assessment for every telecom site in the state, verification of the EIA report and annual environmental monitoring on the site. Thereafter, each operator was expected to pay the N285m levy to the state Ministry of Environment.

However, in a letter written by ALTON at the time to the Taraba State Governor and copied to the Federal Ministries of Justice and Finance; NCC; State Commandant, Nigeria Security and Civil Defence Corps; and other security agencies, the association stated that a court ruling had directed states to desist from imposing fees outside those listed in the Taxes and Levies (Approved list of Collection) Act of 1998.

Meanwhile, the NCC is yet to shift from its position in May when it responded to the letter by the mobile network operators through a statement by its Director of Public Affairs, Ikechukwu Adinde.

The Commission had stated that there would be no tariff increase for calls and short messaging services by the telcos without cost-based and empirical studies and regulatory approval.

“For the avoidance of any doubt, and contrary to MNOs’ agitation to increase tariffs for voice and short messaging services by a certain percentage, the commission wishes to categorically inform telecoms subscribers and allay the fears of Nigerians that no tariff increase will be effected by the operators without due regulatory approval by the commission,” the statement had read in part.

In a telephone chat with Business Hallmark, Head of Operations of ALTON, Mr. Gbolahan Awonuga, said although the reality on ground is calling for tariff hike for the telcos to remain in business, “it is only the NCC that can determine the appropriate time for that (tariff hike) to happen.”

Efforts to get the position of NCC on the matter through voice call and SMS could not yield any result as at the time of filing this report.