No to Telcom Price Hike
Within the space of a few months the country’s telecommunications sector is abuzz again with pressure from the operating companies who are demanding a 100% price hike for voice and data calls. According to reports, the telecommunication operators (telcos) have been pressuring the Nigerian Communications Commission (NCC) to approve the price increase since the first quarter of this year, as they belly-ached over the rising cost of operations. The series of cost-driven challenges include the rising price of the dollar which has inflated the cost of expanding their capacity as well as network.
That factor has also resonated with the dwindling revenues from decreasing levels of patronage by subscribers. Experts said due to rapidly declining average revenue per user for voice calls, which since 2004 has decreased from just over $15 per month per subscriber to a new low of $4 due to the current economic crisis, telcos have been finding it increasingly difficult to make ends meet. In fact, experts say that in the last 10 years, a drastic reduction had been recorded in call and data tariffs. To accentuate the challenge is the situation whereby On-Net and Off-Net per minute tariffs which now stand at N12.01k and N12.64 respectively used to be N24 and N75.30k.
In the light of the foregoing, observers contend that if the NCC accedes to the demand of the telcos, the implications would be far-reaching. In the first place, the consumers of their services would be put under pressure as the charge for calls and data would double. For instance, it would cost at least N24.00 per minute of call and N2,000.00 per gigabyte of data. Besides, given the slow growth of fresh subscription and low internet penetration, the economy may be worse off for it as a price hike would discourage increase in demand of telecommunication services.
This newspaper is inclined to identify with the anti-price hike lobby for now, given the fact that a rapid resort to price increase at any instance of finance related operational challenge to the telcos, is hardly a sustainable practice. We are inclined to appreciate that the telecommunications sector in Nigeria is still needy of expansion and deeper penetration which the telcos are yet to exploit to the maximum. Rather than increase the prices the issue before them is a matter of market development.
Telecommunication business is a volume-driven enterprise, hence a better approach should be a resort to expanding the market to the rural population to most of whom telecommunication service is still utopian. According to available evidence, of the country’s teledensity over 70% are urban and semi-urban subscribers. Meanwhile the urban population is less than 30% of the country’s total population of about 200 million. This is just as internet penetration in the country is still very low. The implication is therefore clear that there is so much for the telcos to benefit from increased attention to the rural populace.
The foregoing is not to discount the glaring challenges that are associated with running big business in rural Nigeria. What with the almost non-existent power supply in the rural areas and the issue of security among others, any contemplation of telcos expanding operations to the rural areas may on the surface look unrealistic. However when it is considered that the Nigerian economy is mostly a rural-driven one the primacy of the rural environment becomes clearer. Hence, the motivation of juicy returns from investing in a willing and ready market like rural Nigeria is more than enough incentive for telcos to direct their gaze in that direction instead of skinning their current mostly urban-based consumers to the bone.