GSMA joins calls for telecom deregulation in Nigeria
International telecom body GSMA has added its voice to the growing call for deregulation of Nigeria’s telecom industry as the likes of MTN lobby for higher mobile tariffs in the hope of increasing revenue and pushing investment in network infrastructure.
Nigeria is Africa’s biggest telecom market, and the sector accounted for 13.5% of the West African nation’s GDP in 2023.
But even with that level of economic contribution, GSMA says mobile operators face a series of challenges “hindering the growth and development of the telecommunications industry and the crucial role of the mobile sector in Nigeria’s economic development”.
A part of this effort is increasing tariffs to boost revenues and offset some of the declines that operators have experienced as a result of a sharp devaluation of the naira.
Tariffs have remained unchanged for 11 years in Nigeria. In 2019 call tariffs stood at about 3.3 US cents, dropping to about 1c at present. Over the same period, mobile telecom revenue in Nigeria is seen falling to about $3.05bn this year from $6.39bn in 2019.
The Nigerian Communications Commission oversees prices for the telecom industry, with operators not allowed to make changes without the regulator’s permission.
In its latest report “The role of mobile technology in driving the digital economy in Nigeria”, the GSMA urges the commission to rather focus on regulating wholesale prices and leave operators to set retail prices as is done worldwide.
“In the mobile sector globally, it is not standard practice to regulate retail tariffs. This is because the level of competition and the dynamic nature of the market means that prices are determined by market forces,” the body said.
RETAIL PRICES
In this context, “regulators focus on the wholesale tariffs that operators charge each other for services such as call termination, which are usually set at cost-orientated rates.
“Periodic reviews of wholesale tariffs ensure they reflect the cost of delivering these network services. This arrangement allows operators to set retail prices in a way that reflects both costs and market forces.”
“Wholesale” refers to the business of physical infrastructure such as fibreoptic cables, cell towers and switching stations. Operators sell access to this infrastructure in bulk to other companies.
The body noted that in a lowinflation environment, “costbased and/or price-cap-regulated rates aren’t likely to change dramatically”. However, when the costs of inputs such as fuel, salaries and externally purchased items such as network equipment change significantly from one period to the next, the cost of delivering mobile services will also change.
“If regulated tariffs do not reflect these changes, the financial sustainability of the industry will likely be threatened,” GSMA said.
In addition to adjusting tariff policies, the body has also noted other challenges facing operators. They includes complex and costly processes of securing permission to build infrastructure from local authorities — known as rights of way — which increases the time and costs in rolling out infrastructure.
Additionally, Nigeria has a complex tax environment, providing for high and increasing costs of tax compliance, an issue well familiar to MTN.
Rising costs are also making it difficult to invest. The main drivers are increases in the cost of power for sites due to fuel price hikes, higher government fees and levies, increased demand for foreign exchange, and tower contracts that are denominated in dollars.
“High-speed connectivity is the bedrock of any digital nation, and the Nigerian government recognises the mobile industry’s role in laying key foundations on which digital transformation is built,” said Angela Wamola, head of Sub-Saharan Africa at GSMA.
“Future policies should be geared towards reducing the cost and complexity of infrastructure rollout to encourage investment and boost the adoption of mobile broadband. The impact of such actions would go far beyond mobile, driving productivity gains across the economy and creating millions of new jobs in Nigeria,” she said.
MTN has stepped up calls for higher mobile tariffs in Nigeria, joining other cellphone operators in the West African country in lobbying for such measures.
Like many other companies operating in Africa’s largest economy, MTN has been a casualty of the devastation caused by the naira plunging more than 90% in value relative to the dollar since mid-2023. MTN Nigeria reported a loss after tax of $87m (137-billion naira) for the 12 months to end-December compared with a restated profit after tax of $221m a year earlier.
“Net loss for the year has resulted in a depletion of our retained earnings and shareholders’ fund to negative 208billion naira and 40.8-billion naira, respectively,” MTN Nigeria said in its annual financial statements.
The company recently convened an emergency shareholders’ meeting and discussed lobbying for regulated tariff increases. The company said it was engaging with the authorities through an industry body.