Telcos tariff hike: Between market-led tariffs and business sustenance

The recent tariff hike by telecommunications companies (telcos) in Nigeria has sparked intense debate among stakeholders.

The Nigerian Communications Commission (NCC) had on January 20 announced that it had approved a 50 percent tariff adjustment for telecom operators, citing rising operational costs and the need to sustain the industry.

While telcos argue that the 50 percent hike approved by the NCC is necessary to sustain their businesses. Consumers on the other hand are crying foul, citing the burden of increased costs.

As the debate rages on, it’s essential to examine the factors driving the tariff hike and the implications for both telcos and Nigeria subscribers.

Operators have argued that the NCC approved tariff hike is a market-led decision, driven by the need to reflect the current economic realities. They point to the rising costs of operation, including increased taxes, regulatory fees, and inflation.

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Telcos also argue that the 50 percent hike is necessary to invest in network upgrades and expansion, which will ultimately benefit subscribers.

According to Reuben Muoka, NCC’s director of public affairs, the decision underlines the Commission’s regulatory role under Section 108 of the Nigerian Communications Act, 2003.

However, the National Association of Telecommunications Subscribers (NATCOMS) has threatened to challenge the approved tariff hike in court.

Similarly, Consumer Assembly said the hike is insensitive given the current economic hardships faced by many Nigerians.

The Assembly maintained that it is important to take into consideration the impact of the 50 percent hike on consumers who are already grappling with economic challenges.

“While the tariff adjustment seeks to ensure the sustainability of the telecommunications industry amidst rising operational costs; the situation underscores the need for a balanced approach that considers both the financial health of telecom operators and the economic well-being of Nigerian citizens,” Godwin Ayebe, convener, Consumer Assembly, told BusinessDay.

Moses Lawal, a Lagos-based telecoms subscriber, told BusinessDay that the last time there was any upward review of tariffs by the Telcos was in 2013/14. “If we are to separate sentiments and emotions from logical reasoning, that increment can be justified.”

Lawal said further that between when the last hike was implemented and now; cost of goods and services in the country have increased about 100 percent on the back of inflationary pressure.

“Also factor in the fact that some of the equipment they use is imported; meaning the exchange rate would have significantly impacted their operating cost.”

Similarly, Gbenga Adebayo, chairman Association of Licensed Telecommunications Companies of Nigeria (ALTON), disclosed recently that the hike will help operators improve on their services.

Speaking at the recent Telecoms CEOs forum, Adebayo said that efforts will be made to ensure that Nigerians start seeing improvements within the three-month timeline given by the regulator.

“But if the extraneous factors are not resolved, I am sorry to say, we’ll have another conversation in three months.

“If the frequency of fibre cuts continues, if people continue to steal batteries from base stations; if people continue to steal diesel from the sites, I think in three months we’ll have a different conversation,” he said.

Corroborating Adebayo’s position, Tobe Okigbo, MTN’s chief corporate services and sustainability officer, said operators have already begun the process of ordering new equipment to boost capacity.

“From NCC’s estimation, they expect that in three months, we should be seeing an uplift in service quality, but we will try to make it shorter,” he said.

According to him, service providers are at a loss each time there is a drop call on any of the networks. “Every time you drop a call, we lose money; every time you’re unable to browse, we lose money,” Okigbo stated.

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However, the Consumer Assembly has urged the government and the NCC to reverse the decision and engage with stakeholders—including consumer rights organizations—to explore fairer alternatives that balance industry sustainability with consumer affordability.

“If this unjust hike is not reversed, Consumers Assembly will mobilize public campaigns, petitions, and legal actions to protect the interests of Nigerian consumers. We stand firm in our commitment to advocating for policies that prioritize the rights and welfare of the people,” the Assembly said.

Calls for business sustenance

While calls for reasonable tariff hikes by concerned consumers and subscribers are highly justified on the back of the current inflationary pressure.

The 50 percent hike in tariff approved by the NCC is also a call for a market-led tariff plan in ensuring that the telcos remain in business.

The telecoms industry is highly capital-intensive, requiring significant investments in infrastructure and technology.

On the other hand, telcos are also facing significant challenges in sustaining their businesses. With declining revenues and increasing costs, telcos are struggling to maintain profitability. Hence, the tariff hike is seen as a necessary measure to ensure the sustainability of their businesses.

“If we are to separate sentiments and emotions from logical reasoning, that increment can be justified,” Lawal said.

He posits that there is a need to factor in the increasing cost of powering each base station with public electricity/diesel between what it was in 2014 and today. “This is aside having to grapple with incessant vandalism of their facilities.”

Femi Adeniran, Airtel’s director of corporate communications and CSR, while seeking subscribers’ understanding on the recently approved 50 percent tariff hike during the CEOs forum, said telcos had customers in mind in reaching out to the government for price increments.

“We want to be able to serve our customers. Today there are over 100 million Nigerians connected to voice. And when you talk about voice, you’re talking about the lowest of the lowest,” he said, disclosing the hike was to ensure sustainability and availability of telecommunications to millions of Nigerians.

However, the Consumer Assembly kicked against any hike in telecom service, saying imposing such a steep tariff hike will disproportionately hurt low-income consumers, small businesses, and students who rely on affordable telecom services.

“While we acknowledge the challenges faced by telecom operators, the solution should not come at the expense of the Nigerian consumer,” Consumer Assembly posits.

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Where is the bottom-line?

While the 50 percent tariff hike may be necessary for telcos, it’s undeniable that it will have a significant impact on consumers.

Many Nigerians rely heavily on telecommunications services for their daily lives, including communication, education, and commerce.

The increased costs will likely lead to reduced consumption, particularly among low-income households.

While telcos need to sustain their businesses, consumers must be protected from excessive costs.

Hence, the 50 percent tariff hike approved by the NCC is a complex issue, with valid arguments on both sides.

By engaging in constructive dialogue and finding a balance between market-led tariffs and business sustenance, stakeholders can ensure that the telecommunications industry remains vibrant and beneficial to all.

“As a subscriber, while this increment will inevitably be painful and erode more of my income, I have to be realistic and know that for the companies to remain in business the upward review is inevitable,” Lawal said.

He said further that it behooves on subscribers to have a more stringent control on their usage of telecoms services and cut off guzzlers of their data/airtime.

“The expectation is that in turn, the Telcos should improve on their services, and general users’ experience,” Lawal said.

However, to strike a balance between market-led tariffs and business sustenance, stakeholders must engage in constructive dialogue.

Telcos must be transparent about their costs and investments, while regulators must ensure that the tariff hike is fair and reasonable.

Accordingly, subscribers must also be protected from exploitative practices, while being educated on the need for sustainable telecommunications services.

“At a time when digital connectivity is essential for economic activities, education, and communication; this decision is not only insensitive but also unjustifiable in the face of worsening economic hardships experienced by millions of Nigerians,” Consumer Assembly posits.