Forex: Telecos Seek NCC Approval for Tariff Hike
Telecommunications operators in the country including MTN Nigeria and Globacom have asked for Federal Government approval through the Nigerian Communications Commission to raise their tariff.
The development came after foreign exchange losses and rising energy costs forced some of the operators to post losses last year.
The telcos’ proposal to raise their tariff came barely 24 hours after MultiChoice, a South African pay television company raised its tariff. Several companies including Discos and brewing companies have also raised their prices in recent times.
On Thursday, the telcos, under the aegis of the Association of Licensed Telecom Companies of Nigeria and the Association of Telecom Companies of Nigeria, issued a joint statement asking the government to expedite the approval.
The two bodies in their statement explained, “Despite the adverse economic headwinds, the telecommunications industry remains the only industry yet to review its general service pricing framework upward in the last 11 years, primarily due to regulatory constraints.
“For a fully liberalised and deregulated sector, the current price control mechanism, which is not aligned with economic realities, threatens the industry’s sustainability and can erode investors’ confidence.”
The associations called on the federal government to facilitate a constructive dialogue with industry stakeholders to address pricing challenges and establish a framework that balances consumers’ affordability with operators’ financial viability.
The telecom industry appears to be among a few sectors that have yet to review their prices despite the rising inflation in the country amid other economic challenges. They blamed this on the regulatory restraints that have been preventing them from pricing appropriately.
Efforts to reach the commission’s Director of Public Affairs, Reuben Mouka, on whether the request will be considered proved abortive as of press time on Thursday. There were no responses to calls, WhatsApp messages, and text messages sent to his line.
The NCC regulates prices in the telecom industry, and telecom operators are not allowed to implement any price changes without the regulator’s approval. The regulator has said a cost-based study is being conducted to determine if it would approve price increments for the operators.
The Chairman, Association of Licensed Telecoms Operators of Nigeria, Gbenga Adebayo, said in a publication on Thursday that cost reflective tariff was non-negotiable.
“We have seen the impact of price control in other segments of the economy, like power. If providers cannot operate sustainable business models, then they’ll stop investing. When that happens, the existing infrastructure starts to crumble.
“For power, a consumer can choose to take ownership of the solution by buying a generator, or a solar panel. For fuel, the government can step in as a provider of the last resort and manage a subsidy regime that mitigates the impact on the population. Those options are not available in the telecoms sector. There is no self-help solution,” he explained.
The industry has faced significant increases in operational costs occasioned by the scarcity of foreign exchange, network expansion, and upgrades, which have also negatively affected the bottom lines of the operators.
Investment in the sector has also dwindled to $134m in 2023 from $456.8m in the previous year, a decline of $322m, according to the National Bureau of Statistics.
The decline represented a decrease of approximately 70.5 per cent.
MTN Nigeria Plc has disclosed a substantial loss of N740.4bn for the fiscal year 2023, a notable surge from the N81.8bn loss reported in 2022, marking an alarming 804 per cent increase, equivalent to N658.6bn.
This drastic financial setback is primarily attributed to the effects of the foreign exchange market liberalisation that commenced in June of the previous year.
MTN clarified that it applied an official exchange rate of N907.11 per dollar, based on NAFEM (Nigerian Autonomous Foreign Exchange Market), as of December 31, 2023.
This implies that the reported loss might escalate further if the prevailing exchange rate between the naira and dollar remains unchanged by the end of March, coinciding with the publication of its Q1 results.
Meanwhile, Airtel Africa reported a 99.6 per cent decline in its post-tax profit to $2m at the end of the nine months ended December 2023 from $523m at the end of the same period in 2022.
The key driver behind these losses was the liberalization of the forex market in June 2023, which led to a 96.7 per cent devaluation of the naira from N461 per dollar in December 2022 to N907.1 per dollar by the end of 2023, MTN disclosed in its audited financial results for 2023.
