Telecommunication companies would be able to address a funding gap of at least N551.23 billion ($360 million) required for 4G infrastructure rollout following the approval of a 50 percent hike in telecom service tariffs, GSMA, the global body for telcos, has disclosed.
In its newly released report, titled “Sub-Saharan Africa 2024 Year in Review,” the body highlighted that Nigeria needs $360 million to achieve 98 percent 4G coverage. It noted that the country achieved 84 percent 4G coverage in 2024, up from 41 percent in 2019. However, it is still 48 percent in rural areas.
It emphasised that removing specific taxes on telecoms infrastructure and reviewing tariff prices would unlock N244.99 billion ($160 million) in investments, reducing the funding gap for 4G infrastructure by 44 percent.
Read also: Telecoms tariff hike: Be fair in your service delivery to customers – Nigerians urge telcos
“Policy reforms to remove sector-specific taxation on infrastructure and remove retail price regulation would reduce the investment gap by 44 percent to $200 million,” GSMA said.
Currently, 4G is the dominant network in Nigeria, accounting for 46.27 percent of the total mobile subscription base of 157.32 million as of October 2024. Expanding 4G coverage is critical to improving telecom services in a country where mobile connection is king. Closing this gap will lead to higher 4G adoption and raise telecom companies’ average revenue per user, allowing them to compete with their African peers.
Despite the importance of 4G and other network infrastructure, telecom operators have had to scale back investments in recent months in the face of mounting challenges. Between January and September 2024, MTN Nigeria’s core capital expenditure (capex) dropped 27.79 percent to N217.64 billion, while Airtel’s capex fell 36.59 percent to $149 million.
Karl Toriola, MTNN’s chief executive officer, warned in 2024 that telcos would face a choice between shutting down operations or sustaining significant losses without tariff adjustments. Operators, who stated that their operating costs had gone up by about 300 percent, were lobbying the Nigerian Communications Commission (NCC) for a 100 percent tariff hike.
After months of consultations and studies, the NCC recently approved a 50 percent increase in the prices of calls, SMS, and data, citing the need to ensure the sustainability of the telecom sector.
“The approved adjustment is aimed at addressing the significant gap between operational costs and current tariffs while ensuring that the delivery of services to consumers is not compromised,” the NCC said.
This hike, the first in a decade, raises the floor price (minimum acceptable price) of calls to N9.6 per minute from N6.40, the cost of SMS to N6 from N4, and the cost of 1GB of data to N431.25 from N287.5. The average price of calls will rise to N16.5 per minute from N11.
A BusinessDay analysis suggests that the hike could increase telcos’ revenues to at least N6.59 trillion from N4.39 trillion, returning them to profitability and sustainability after a turbulent period.
However, the NCC said that infrastructure upgrades were a key driver in agreeing to tariff adjustments.
“These adjustments will support the ability of operators to continue investing in infrastructure and innovation, ultimately benefiting consumers through improved services and connectivity, including better network quality, enhanced customer service, and greater coverage,” the NCC explained.
“It will enable us to maintain the critical investments required to deliver reliable,” Toriola of MTN said.
Dinesh Balsingh, CEO of Airtel Nigeria, noted, “The price increase which was highly needed for the survival and continued growth of the industry, will enable us to continue investing in network infrastructure, expanding coverage, and delivering improved products and services that meet the evolving needs of our customers.”
Read also: 50% telecom tariff hike is only a start — Edun
Telcos need to invest at least $1 billion annually to meet the growing demand for their services, and according to Wale Edun, the minister of Finance, the recently approved 50 percent tariff increase is only a start if the nation is to get the quality of service that it needs to thrive.
“We want the telcos to operate efficiently, providing quality services, and contributing to GDP growth… We don’t want dropped calls. We want good quality services from them… This 50 percent increase is a start… There will continue to be review, consultation, and discussion in this area,” he said.
Despite its anticipated benefits for network quality, the tariff hike has drawn criticism amid record high inflation rate of 34.8 percent as of December 2024. While the National Association of Telecoms Subscribers (NATCOMS) has threatened legal action against the NCC, calling the hike “against the public interest,” the Nigerian Labour Congress has called for a boycott of telecom services if the decision is not reversed.
Join BusinessDay whatsapp Channel, to stay up to date
Open In Whatsapp
