This month, the price of diesel, a critical commodity that powers the operations of the telecom industry, has continued on an upward trajectory at N750 per litre, according to the Nigerian Association of Road Transport Owners (NARTO).
Members of NARTO are asking the government to review the freight rate for Premium Motor Spirit (PMS), which will have dire consequences for industries such as telecom.
The implication of the galloping price of diesel is that if a telecommunication company needed 1,000 litres of diesel to run their operations at a price of N200,000 in early 2021, the same telco will now need to pay N750,000 to buy the same amount of diesel.
The price of diesel was at N225 in January 2022.
Industry data show that mobile telecommunication operators use an average of 40 million litres of diesel per month to power telecom sites. Going by the diesel consumption figure and the current price of diesel, the cost of powering telecoms services will be about N30 billion monthly and N360 billion annually.
Nevertheless, the biggest issue telcos face is not just the cost of the diesel; it is also the rampant theft of the product.
Adewale Adetugbo, chief technology officer at Telnet Nigeria, a company that has worked with different telecom companies, said from recent conversations, diesel theft continues to be a big problem for most organisations.
“In the private sector, if last year, you spent N1 billion on diesel, this year you will spend N5 billion. In the past, you knew N300 million was going into private pockets and you did not care. Now, you do,” he noted on a Twitter thread.
The over 53,000 base stations that power the telecom needs of about 201 million subscribers in Nigeria run on 24 hours power, provided mostly by diesel-guzzling generators. As of 2015, the Association of Licenced Telecommunication Operators of Nigeria (ALTON) claimed that there were over 50,000 generators powering about 25,000 base stations. Given that the number of base stations has more than doubled to 53,000 since December 2021, it means there may be twice the number of generators from 2015 now powering the base stations.
The crisis between Russia and Ukraine has contributed largely to the rise in the price of diesel as the global prices are increasing as both countries suspend production activities. Russia is an oil-producing country, while refined petroleum products come from Ukraine and other Western European countries. The invasion of Ukraine by Russia has distorted global financial and energy markets, causing oil prices to soar above $100 per barrel, the highest since 2014.
Adetugbo says the rising prices are not sustainable, especially for the telecom industry. ALTON was in the news lately asking the telecom industry regulators to approve a tariff review of the services of their members on the basis that diesel prices have gone up.
While they wait for a very reluctant government and regulators ready to maintain the status quo to save their plum jobs, telcos are exploring alternatives. One of such ways is the use of hybrid power systems.
Hybrid energy systems refer to the integration of several types of energy generation equipment such as electrical energy generators, electrical energy storage systems, and renewable energy sources. Essentially, it brings together different generation, storage, and consumption technologies in a single system, improving the overall benefits compared to a system that depends on a single source like the Nigerian grid system.
Sources close to the industry say hybrid has become even more necessary as a result of the high level of theft going on in the industry. A former worker of one of the telcos who would like to be identified as Eric K said he spent eight years in the industry and the biggest problem was theft, with diesel being the sweet spot.
“In the early days, it wasn’t a problem. Call tariffs were ridiculous; MTN was dropping 5,000 litres monthly in every base station. The market was flush with cash. Nobody cared,” he said. “Later, proper diesel management systems started springing up, but the problem remained.”
As the problem persisted, some of the telcos started to restructure teams to place diesel accountability on one person, but this measure also yielded little results.
“At its peak, MTN was spending over N1 billion monthly on diesel, before the introduction of hybrid power systems,” he said.
At a recent press conference, MTN said it had outsourced its base station needs to IHS; hence, it is no longer saddled with power problems. IHS now operates 9,000 MTN towers, representing more than 50 percent of its total assets in Nigeria at 16,522. Last week, IHS signed a deal to buy over 5,700 towers from MTN South Africa, making the company the third-largest tower asset holder in the world.
During an interview in January, Sam Darwish, IHS founder and CEO, said the company planned to fully run its operations, especially in Nigeria, on hybrid energy systems – a journey that began in 2016.
Apart from hybrid energy systems, operators are also using new technologies such as DFM fuel flow meters to monitor actual diesel consumption. DFM fuel flow meter is designed for fuel consumption measurement of vehicles and stationary machines, and for monitoring machinery operation hours in different engine working modes. The fuel monitoring system gives the telcos the possibility to know about generator power, battery voltage, and revolutions per minute. It is possible to set up email notifications about any rapid changes.
