Network providers in Nigeria has decried that the impact of the nation’s economy on their businesses, stating that the telecommunications sector has become a ‘painful’ destination for investment.
The telecommunication leaders disclosed this at the launch of Nigeria Digital Economy Report by GSMA, in Abuja on Thursday.
Karl Tariola, the Chief Executive Officer of MTN, in his remarks noted that the challenges bedeviling the sector were multifaceted, including insecurity, high operation cost, taxation among others.
These he said was fast eroding the gains in the sector and rending it less attractive for investors.
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“The return in the telecommunication sector is poor and there are no dividends for investors, but on the contrary other sectors are declaring bumper profit, we are continuously investing massive amounts on infrastructure.
We have been very successful in this industry, in Nigeria and the whole of Africa. The regulations are clear, the rules are clear on how you operate.
“Unfortunately when you see headlines of trillion naira revenues, you see the reaction from a lot of people and sometimes even policy makers is that these guys are making so much money.
But the reality is the return on capital invested in the telecoms industry is at the moment negative.
“If you take N100 million and put into banking, telecommunication and other services, telecoms has the lowest returns and that was pre-devaluation. You can look at the stock market dividend payout over the last 5 to 6 years. Prior to the devaluation issue, our dividend payout was between 5 to 6 percent and the devaluation has hit us. which means our returns are absolutely negative because of the cost of running services, and the cost of continuous expansion of the networks,” he said.
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He noted that the difference between the telecommunication industry and other industries is the need for continuous re-investment, adding that up to 20 percent of the capital expenditure were spent on maintaining infrastructure or to replace fiber that has been caught multiple times as well as invest into new technologies like 5G.
“So from being the poster child of investments across Africa, it’s now becoming a very, very painful destination for investments for foreigners and Nigerians as well.
“The industry is not sustainable, we need tariff hike, other other sectors increasing theirs, we are the only ones restricted and it is placing us in a very difficult space,” he said.
Noting the impact of the challenging macroeconomic situation across the globe, Toriola stressed on the need for deliberate effort towards reshaping the industry and making it an attractive destination for investments.
In his remarks, Adebayo Gbenga, Chairman of the Association of Licensed Telecom Operators of Nigeria, noted that contonous flow of investments was critical to the sustainability of the digital sector.
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He said, “The first point is the sustainability of the industry, the industry can only be sustained if we have a continuous flow of investments as we speak people are cautious to invest because of the very many challenges that we have had from currency devaluation to high cost of business, fossil fuel and the rest.
“The second point is the multiple regulations and taxation. Some states will say they have removed the cost of the right of way but other associated charges when you add them together defeat the objective of removing the right of way taxes. We have seen about 45 of such charges different from the right of way being charged by various tiers of government.
He also noted the issue of price review, which a cording to him was a simple regulatory process that should have been allowed to happen, “so even when the regulator granted that we could move within the approved price band, the policymaker insisted that we couldn’t do it and all of these has gained public debate and making the industry look like we are trying to extract money from the public or we are not sensitive to the people’s concern.
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He stressed that while the government is trying to provide incentives for the public on account of what has happened to the nation’s macro economy, the telecoms sector should not be used as a palliative to solve people’s problems. “We must price right to sustain the industry and to have the right investments.”
Commenting on the report, Angela Wamola, Head of Sub-Saharan Africa at the GSMA, said: “High-speed connectivity is the bedrock of any digital nation, and the Nigerian government recognises the mobile industry’s role in laying key foundations on which digital transformation is built.
She noted that future policies should be geared towards reducing the cost and complexity of infrastructure rollout to encourage investment and boost the adoption of mobile broadband. “The impact of such actions would go far beyond mobile, driving productivity gains across the economy and creating millions of new jobs in Nigeria.”
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In his remarks, Bosun Tijani, minister of communication, innovation and digital economy said that some of the challenges that are sector-based are not challenges are surmountable adding that increasing tariff was not the solution to the challenges in the sector.
“The solution to these pains will not come from one single thing, which is raising tariffs or increasing prices. That’s never going to be the solution. It’s never going to be the solution. There are tonnes of other things that we must do to ensure that the business environment is conducive for the investors in this space. And the government is active, including in the tariff conversation.
“The government may intentionally put out the right messages, the right policies and the right intentions. But if everything that is coming from the association on just one issue is extremely negative, investors will not come in.
“And I’m being open about this because we must, for once, and finally, agree to address these issues positively. Because they’re not just affecting the companies that you represent but they’re affecting the economy and the security of the nation as well. So we have to be extremely careful how we approach it and make sure we focus on solving it,” he said.
