Nigeria’s telecommunications industry has been awash with news about imminent tariff increase calls by operators due to the economic challenges in the country. This current situation has seen stakeholders conflicted on balancing affordability and sustainability. In this interview with journalists, Femi Banigbe, chief executive officer of 9Mobile, shares his assessment of this situation and the best approach to adopt. He also discussed his company’s plans to recapture its market share as a competing force in the industry, among other related issues. PIUS DUKOR brings the Excerpts:
Amid concerns about the sustainability of Nigeria’s telecoms sector due to ongoing economic challenges prompting calls by several operators for appropriate tariff adjustments. How can the industry navigate this path?
The telecom industry has been a major contributor to the GDP of Nigeria and has been a bedrock of the entire digital economy of Nigeria over the last 20 years. This was possible because the industry was experiencing impressive growth as service penetration and adoption were increasing, which allowed the industry to scale.
The level of growth experienced by the industry did encourage a lot of inflow of capital, both from foreign and local investors. These investments were channelled to extend coverage into underserved areas, extend capacity expansion and overall quality of service improvement.
However, the recent macroeconomy challenges facing the nation, which are fueled by inflation and currency devaluation, have been a major challenge as both capital investment costs and operational costs have skyrocketed massively because they are mostly denominated in foreign currency or indexed against foreign currency, whereas revenues are in local currency.
A lot of the equipment that telecom operators buy is indexed against the dollar. What has happened is that when this current foreign exchange devaluation happened, the cost went up. So even though the industry is growing in its top-line revenues, the rate of growth of local revenue and local currency is not commensurate with the rate of growth of the cost base that we have.
So when we speak about industry sustainability, what we are saying is that every business must be in a position to generate revenues that can cover its costs and it will also allow it to be able to reinvest back into the business. So if we do not generate enough revenues to cover our costs, we will have to resort to borrowing either from shareholders or from the capital market.
In the last two years, this is what most telecoms operators had to do. This is not sustainable because, at some point, it would be impossible to continue to borrow without having any line of sight to pay back what we have borrowed.
So when it comes to the issue of tariff increases, the industry recognises that telecom services are essential to daily living, and we strive to balance this whole affordability with sustainability.
However, for any business to be made a growing concern, we have to be able to cover our costs and the cash flows that allow us to continue to invest and deliver quality service to the end users.
I believe that at the end of the day, it is really about balancing affordability with sustainability and making sure that the industry will be in the position to remain as going concerned, where we can generate cash flows that are enough to cover our costs and also help us to reinvest into the market.
The push for a tariff hike has been speculative with news making the round that the telcos want a 100-percent increase while others say it should be around 40 percent. What is the appropriate pricing structure that should follow?
I would say rather than being fixated on the percentage of price increases, I think we should start talking about the whole concept of market-reflective pricing. At face value, a telecom business is facing a cost increase in the range of 100 percent to 300 percent on some of its cost lines, the rationale thing to do would be to try to push for a pricing regime that can put the business in a position to adjust its pricing to generate incremental revenue that is higher than its blended cost.
Affordability will then remain a concern in defining how we put up a price point that is market-reflective, and also able to allow us to generate enough cash flow to cover our costs and to reinvest in the business.
From the policymaker’s point of view as well, I am sure they are also considering the concept, the whole idea of affordability. I am sure that is one of the reasons why the government has dragged its foot in being able to address this whole conversation around tariff increases.
I would not necessarily focus on what percentage is better, the most important thing is that we need to look at the pricing regime where we are in. We need to start thinking around the whole concept of market-reflective tariff, which is reflecting the realities on the ground, which will balance the need for sustainability with the concern for affordability that our customers out there are concerned about.
We are confident that the regulator will do the right thing and approve the most appropriate tariff that takes into consideration the need for the fact that customers must be able to afford the services we are offering. At the same time, the industry has to survive because if the industry doesn’t survive, the customers will not get the service that they desire.
You have been 9Mobile’s CEO for over six months. What are the company’s most critical challenges, and how are you addressing them?
It’s a privilege to lead 9Mobile during its transformation. Since Etisalat’s exit, the company has faced multi-dimensional challenges, including infrastructure issues, declining revenue and subscriber base, and rising costs.
Our recovery plan is phased. The stabilisation phase focused on maintaining network stability, managing costs, and boosting employee morale. We have been revamping our internal processes to ensure business continuity.
The modernisation phase involves refreshing our radio and core networks, transmission infrastructure, billing, charging, and ERP systems. This requires significant investment in a modern, digital service delivery platform to reposition us as an innovative brand. We have secured shareholder and investor commitment for this investment.
In 2025, we will increase brand visibility and pursue growth objectives, including recovering our subscriber base and market position. Past underinvestment has hindered our participation in industry growth. With new investment, we aim to become a competitive force again.
How do you intend to reform 9Mobile market share and subscriber base judging by its current state in the telco industry?
To recapture the lost market share, we are going to reposition ourselves as a service organisation. To do that, we will refresh our entire infrastructure to make it a telecom network that works.
We have secured investment from new investors to be able to power all the investments we need to make in the market. We are also looking at opportunities to take advantage of fibre infrastructure sharing because we are not going to be able to build every single fibre, every single base station by ourselves, given that we are far away in the market.
To reclaim our position in the market, we would need to make multiple investments at the same time. This is going to be the bedrock of our recovery.
Once we have the network service out there, then we are going to go back into our win-back subscriber acquisition campaign. This will require us to engage the customers in such a way as to reintroduce ourselves back in the market. We have to be able to refresh our brand. We have to be able to re-engage the trade to show that we are still a credible partner to deal with.
To achieve this, we need to fix the basics by ensuring that we have a network that works and a service portfolio that is more appealing to the demography we are positioning ourselves to be able to attract.
Young people are still the majority from the point of view of demography as far as the Nigerian population is concerned. So there is still a chance for us to be able to recapture our lost ground.
We must revamp our customer touch-point across the country from our shop, through our digital interfaces, to how the customer interacts with our product.
What is the future of the telecommunications industry in Nigeria?
The future of the Nigerian telecom industry is bright. The industry has grown tremendously. Nigeria’s growing population, projected to reach 400 million over the next 20-25 years will require robust communication infrastructure to support the digital economy. We see huge opportunities in broadband data and digital services.
9Mobile aims to capitalise on these opportunities. Our committed shareholders and investors support our transformation journey. Despite recent challenges, we believe in the Nigerian market’s strength. We want to be the digital lifestyle partner of choice and reclaim our position as a youth-friendly, tech-friendly, startup-friendly, nationalistic brand powering innovation and the creative economy.
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