- Subscribers thumb down renewed push for tariff hike
As Nigerians await tariff hike from telecommunication companies across the country following indications of approval by the Nigerian Communications Commission, FESTUS OKOROMADU, writes on the financial implication for all concern.
As Nigerians try to settle down after the festive spending in December, then the quick arrival of January with the reality of the weight of the financial strains, not many suspect that a hike in the price of an essential commodity such as telecommunication tariff will be on the table.
According to a report by Financial Derivatives Limited, most Nigerians are currently ‘brake’ even as they confront the elephant in the room, which is inflation.
Raising concerns over how inflation is expected to further drain the purse of Nigerians, the FDC report stated that, “Our Lagos retail market surveys and regression analysis indicate that inflation will climb to 35.30% from 34.60% in November. We also anticipate that core inflation (inflation less seasonalities) will rise to 29.25% from 28.75%. This reflects the persistence of underlying price pressures across key sectors, including housing, healthcare, and transportation.”
The highlight of the report which underlines price pressure across key sectors of the economy is to extend its reach to the telecommunication industry. This is coming on the heels of confirmation by Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, last Wednesday that telecommunication tariffs will soon increase.
Although the Minister assured that the tariff hike will not be as high as the 100 percent proposed by the telecom operators, the bottom-line is that consumers, especially the middle class and ordinary Nigerians are in for another crush on their already lean pocket.
“NATCOMS President, Adeolu Ogunbanjo, said the group plans to file a class-action lawsuit if the telecom operators proceed with the hike without first exploring alternative revenue-generating methods”
Speaking of the tariff hike expected to be announced anytime soon, the minister who spoke on the sideline of a stakeholders’ meeting with Mobile Network Operators in Abuja, said consultations and engagements were ongoing.
He added that the Nigerian Communications Commission would approve the new tariffs and announce them to the public in due course.
Demands for tariff hike by operators
The lobbying by telecom giants like MTN Nigeria, Airtel, and 9Mobile, who have called for price adjustments to reflect economic realities, dates back to over a decade. Despite soaring operational costs driven by headline inflation, telecom operators have been unable to raise prices for 11 years.
However, official records show that in May 2022, the telecoms proposed a 40 percent increase. Among other economic factors, the telecom firms point to high operational cost triggered by energy cost, devaluation of the local currency, the Naira as well as surging inflation as course for tariff hike, insisting that these factors mitigate their ability to maintain service levels.
Speaking on behalf of Dinesh Balsingh, the CEO of Airtel Nigeria, Airtel media spokesperson, Femi Adeniran, said the proposed tariff adjustments were necessary to offset rising operational and capital costs.
He emphasized that the adjustments were aimed at ensuring the long-term sustainability of the sector while delivering benefits to consumers.
“The economic realities of rising operational and capital costs necessitated the proposed tariff adjustments.
“This is aimed to ensure the long-term sustainability of the sector while unlocking significant benefits for Nigerian consumers,” he said.
MTN Nigeria has revealed that telecommunications companies are seeking a 100 per cent tariff increase, but it remains uncertain whether the Nigerian Communications Commission—the telecom regulator, will approve the proposal.
This was disclosed by the Chief Executive Officer of MTN Nigeria, Karl Toriola, who said that the proposed tariff hike is necessary for the sustainability of the industry, which has been facing significant financial pressures due to rising operational costs.
Also, the CEO of 9mobile, Obafemi Banigbe, while addressing the issue of telecoms industry sustainability and the call for tariff increase, during a recent online media interaction, said the telecoms industry has contributed immensely to Nigeria’s GDP and the entire digital economy of Nigeria over the last 20 years.
He, however, said every business must be in a position to generate revenue that can cover its cost and be able to reinvest back into the business.
FG strikes a balance
According to the ministry, operating costs for telecom companies have surged by more than 300 percent over the past 18 to 24 months. By implication their demand for tariff hike is germane, after all their counterparts in the energy (electricity) sector got government approval to jerk up tariff last year, while the petroleum industry has been fully deregulated with the consequences of rising cost of operations on telecoms.
However, the minister is not unaware of the numerous financial challenges the ordinary Nigerians now face as well as the importance of telecom services to their everyday life.
According to the minister, the government was focused on striking a balance between protecting Nigerians and ensuring that telecommunications companies could continue to invest significantly in the sector.
“You have seen over the past weeks that there has been agitation from some of these companies to increase tariffs. They are requesting a 100 per cent tariff increase. But it will not be 100 percent. We are still looking at that study and NCC will come up with a clear directive on how we will go about it.
“We want to strike the balance as a government to protect our people, but also protect and ensure that these companies can continue to invest significantly. We need to ensure that as a sector, we get our acts together, ensure that from the regulation side, we put the right regulations in place that can ensure the growth of this sector,” Tijani said.
NCC’s perspectives
Addressing journalists at the event, the Executive Vice-Chairman of the NCC, Aminu Maida, explained that operators had requested a 100 percent tariff increase, but insisted that it was unlikely to be approved.
“We have looked at all of these factors, and that is why, like the Minister said, it is not likely that we are going to approve a 100 per cent tariff increase.
“I know that Nigerians are agitated to hear the exact percentage approved. There are still some stakeholder engagements that we are going through, but you will hear from us within a week or two,” he said.
He explained that operators would now be required to simplify their pricing templates, allowing consumers to clearly understand charges for voice calls, SMS, and data.
A case of preferential treatment
While the telecom companies are battling for approval to increase tariff, niche market player and internet service provider Starlink late last year got NCC’s approval and increased its standard subscription prices to N75, 000. The new tariff is expected to kick-off this month.
Revealing the development to subscribers in an email to customers, the satellite internet provider stated that, “These changes reflect our commitment to investing in the infrastructure needed to support and improve your experience with Starlink.”
Under the new pricing structure, the lowest subscription tier (standard) will now cost N75, 000 from N38, 000. Mobile global roaming service will now cost N717, 000 monthly, and mobile regional roaming will cost N167, 000.
According to the company the new hike is expected to help them in delivering its kits across the country after pausing orders in November.
“We’re committed to providing high-speed internet in Nigeria and are working closely with regulators to make adjustments that will improve the customer experience. Until these changes are approved, we are placing new residential orders on hold,” the company said in November.
The Chairman of ALTON and spokesman for telecoms operators, Gbenga Adebayo, said, “I must say it again with even greater urgency that we are in the last days for the survival of this sector.
“If nothing is done, we might begin to see in the new year, grim consequences unfolding, such as service shedding; and operators may not be able to provide services in some areas and at some times of the day leaving millions disconnected. There will be significant economic fallout, because businesses will suffer from a lack of connectivity, stalling growth and innovation.”
Consumers raise opposition
Meanwhile, the National Association of Telecoms Subscribers has raised a stiff opposition against the government’s proposed increase in telecoms tariffs, describing the plan as “insensitive” and a further burden on consumers already grappling with economic hardship.
NATCOMS President, Adeolu Ogunbanjo, said the group plans to file a class-action lawsuit if the telecom operators proceed with the hike without first exploring alternative revenue-generating methods.
Ogunbanjo criticised the proposed 100 per cent tariff hike as excessive and unsustainable, urging the NCC to deny the operators’ request.
On her part, the President of the Consumer Advocacy Foundation of Nigeria, Sola Ajulo, insisted on further discussion on the proposed price increase.
“It’s crucial that all stakeholders are present and agree on the terms, as this will determine whether the government will approve a price increase and under what conditions,” she stated.
Ajulo noted that a price increase may be inevitable, given the economic challenges facing the sector. However, she stressed that it is essential to ensure that the terms of any increase are measured and conducive to the welfare of consumers, especially in light of Nigeria’s current economic difficulties.
“A 100 percent or even a 40 per cent increase may be too steep. Easing the tariff increase with measurable conditions could be a more reasonable solution,” Ajulo suggested.
Similarly, some Nigerians said there was no justification for the increase.
A businesswoman, Esther Ocha, vehemently kicked against the planned hike.
She said, “Why would they want to increase data and call tariffs, for what? What is the reason they want to increase it? Is it that inflation is affecting them or what exactly? There is certainly no justification for tariff increment in this challenging time.”
Another respondent, who preferred not to be named, said, “Telcos are extorting us, you buy data and it’s not even up to the time or the longevity of the time it’s supposed to be. You don’t even maximise this data as it should. Anything that they want to do now that will make them increase their tariff is extortion, they were already extorting us in the past, but now this is the extreme.”
For financial expert and consultant at Lagos Business School, Leo Edorgor, telecom operators should explore capital market funding instead of implementing a proposed tariff hike of up to 100 per cent.
Citing the financial strain such increases would impose on consumers; he described capital market options, such as Initial Public Offerings, as “more sustainable solutions” for addressing rising operational costs.
He argued that these measures would prevent burdening subscribers, especially low-income users. He pointed to MTN Nigeria’s successful stock market listing as a model, urging other operators, including Glo and Airtel, to consider similar approaches.
“They can go to the capital market to raise funds. Nigerians will buy their shares, and I am confident it will be oversubscribed. MTN has already done this successfully; other operators like Glo and Airtel should follow suit.
“An IPO, which involves a company offering its shares to the public for the first time through the stock exchange, allows firms to raise capital by selling ownership stakes to investors.
“Funds raised this way could help telecom companies finance infrastructure upgrades, regulatory compliance, and technology investments without resorting to tariff increases,” he said.
“Investors will not come if the pricing is not right. And if people are not sure of having a return on their investment, they will not invest in the sector”
The Association of Telephones, Cable TV, and Internet Subscribers has also kicked against the request for the planned tariff hike.
ATCIS President, Sina Bilesanmi, said that telecoms subscribers were not getting value for their money and that ATCIS would continue to oppose such planned tariff hikes until telecoms operators fix their networks and offer quality service.
Financial experts propose 50% hike
Commenting on the telecom tariff hike debate, the Chief Executive Officer of Financial Derivatives, Bismarck Rewane, said an increase of between 40 and 50 percent is rational.
According to him, a price hike of that rate is not a “bad deal” for both telecom companies and consumers.
Speaking of his expectations as it concerns the minister’s statement, he stated, “Will they get 100%? No, they will definitely not. We suspect that we are going to likely see something between 40 and 50% which is fair after so many years of static changes.”
Rewane, who bared his mind while speaking on a live television programme on Thursday, said the move would make the sector more sustainable.
“Yesterday, the price of MTN shares went up by 10% to 220. The investors have already factored that in and are expecting a lot of good goodies.
“But more important to think about is the fact that because of an increase in tariff and an increase in investment to make the industry sustainable, they’re going to see an increase in productivity, not directly but indirectly.
“Any increase in productivity and output is likely to allow inflation to moderate, which is the goal. So, we heard from the policymaker, Bosun Tijani, who was very clear that we want a sustainable sector. But we also heard from the regulator saying that we will hold these guys to quality of service.”
Worried about the opposing forces that do not seem to understand the pain points of telecoms operators, the operators have said such continuous opposition coupled with the delay in the approval for upward review of the current tariff plan, largely contributed to the low investment in the telecoms sector last year.
“Investors will not come if the pricing is not right. And if people are not sure of having a return on their investment, they will not invest in the sector. The regulator therefore needs to respond to the issue of industry sustainability to boost investors’ confidence,” the operators advised.
