Telcos’ planned 40% hike threatens digital inclusion drive

Nigeria’s digital inclusion is facing an imminent threat following a proposal by telecommunication operators to increase the price of data, SMS, and call services, according to a letter seen by BusinessDay.

The letter drafted by the Association of Licensed Telecommunication Operators of Nigeria (ALTON) and addressed to the Executive Vice Chairman of the Nigerian Communications Commission (NCC) is proposing a 40 percent hike in prices of the services.

The 40 percent hike implies the price floor of calls will become N8.95, up from N6.4, while the price cap for SMS increases to N5.61 from N4. For data, ALTON says it is recommending the NCC implements recommendations from the August 2020 KPMG Report on the Determination of Cost Based Pricing for Wholesale and Retail Broadband Services in Nigeria. But in implementing the said recommendations, the association said the 40 percent increase in the cost of doing business be factored in to arrive at a cost price per gigabyte in view of the current economic situation.

Gbolahan Awonuga, head of operations of ALTON, told BusinessDay that the review was long overdue, given that the last time telecom tariff was reviewed was between 2001 and 2003. Since then, the economic situation in the country has changed, necessitating hikes in the prices of other commodities but telecom operators have managed to pull through.

The letter noted that 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 cost, and 35 percent of the members’ operating costs comes from energy. The cost of diesel required to power operators’ towers, base stations and offices rose by 233 percent from N225 per litre in January 2022 to over N750 per litre in March 2022.

ALTON said its members are also pressured by new lines of fiscal obligations via the recent Excise Duty of 5 percent on telecommunications services which further exacerbates the burden of multiple taxes and levies in the sector.

“Our business is constantly on diesel, now N750 per litre from N250 and a lot of things in the economy have gone up even to the regulator, and if the government is reviewing their fee upwards, what is stopping us. We haven’t reviewed our tariff since 2003; we kept on absorbing it but the diesel increase is what we cannot put up with. And we do not want to lay off staff,” Awonuga said.

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The 40 percent proposal is an impediment to the country’s drive to include 80 percent Nigerian by 2025. In December 2021, Garba Umar Danbatta, executive vice-chairman of NCC said the number of digitally included Nigerians had increased by 62.5 percent, with over 20 million people digitally included. The commission also said the number of communities in the country without digital access dropped from 217 to 112.

However, experts say the increasing poverty rate and high inflation, which has seen the price of food and other basic commodities skyrocket, could be partly responsible for the drop in mobile and data subscriptions in recent times. Broadband penetration dropped to 40.9 percent in February 2022 from 41.61 percent in January. Growth has remained unstable since November 2020.

Data from the NCC has also shown less than five percent increase on the number of new subscribers across all telecom operators from August 2021 to February 2022. This is despite the lifting of the SIM registration ban.

Telecom operators such as MTN and 9Mobile have struggled to regain the data subscriber losses they suffered since November 2020. MTN’s financial report showed that mobile subscribers declined by 1.3 million, leaving it with 70.2 million subscribers. 9Mobile has yet to record new data subscribers since January 2020.

A tariff hike is as much a loss for Nigerians as it is for telecom operators and the government. A telecom stakeholder who wouldn’t want to be named said ALTON’s approach may not work with the current regulators who are not oblivious of the rise in cost of living and would not want to add more pressure on Nigerians.