The statement “The telecom industry is in an intensive care unit stage” has been frequently used by Karl Toriola, the CEO of MTN Nigeria. This stark comment highlights just how serious the challenges are facing Nigeria’s telecom sector right now.
MTN Nigeria, which is the largest telecom company in the country with about 77 million subscribers, recently released its report for the first nine months of 2024. The numbers are alarming: the company reported a loss of ₦514 billion after taxes. To put that into perspective, this is a massive jump from a much smaller loss of ₦14 billion reported during the same period last year in 2023.
At a recent meeting with media fellows in Lagos, Toriola was very open about the situation of the company, saying, “We are running the business with our savings.” This reveals how dire the financial state is for MTN Nigeria and possibly for the entire telecom sector.
Just like many other industries in Nigeria, telecom companies are struggling with huge losses. They are dealing with issues such as high inflation, the fall in the value of the Nigerian currency, and rising costs of running their operations. In particular, the costs of energy have skyrocketed, which is especially troubling since the telecom industry is crucial for keeping people connected and for the overall economy. In the last quarter of 2024, telecommunications made up 16.36% of Nigeria’s Gross Domestic Product (GDP), making it the third-largest contributor after agriculture and trade.
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Given these many pressures, there is an important question: will telecom companies need to raise their prices, also known as tariffs, in order to stay afloat? Toriola answered this with clarity: “The tariff needs to go up.” Other sectors, like electricity and transportation, have already experienced significant price hikes because of rising costs. However, any increase in telecom fees must first be approved by the Nigerian Communications Commission (NCC). For example, Starlink, another telecom provider, recently tried to raise its subscription fees without getting the necessary approval and faced threats of penalties from the NCC, which caused them to backtrack on the fee increase.
Quality of Service and Operational Costs
In early October, the National Association of Telecommunications Subscribers (NATCOMS) suggested a modest increase of 10% in tariffs to help the telecom companies manage their heavy costs. As of March 2023, the cost for telecom companies to operate each base station had reached about ₦33.47 billion monthly, up from ₦21.57 billion a year earlier. This increase was driven largely by diesel prices rising by over 55% in just one year.
Adeolu Ogunbanjo, the President of NATCOMS, pointed out a key issue: the poor quality of service now being provided by telecom companies, stating, “When you now look at the quality of service the telecoms companies are rendering these days, it is very poor, and they are also complaining.” He explained that the cost of running their networks is increasing because of the rising prices of essential resources like petrol and diesel.
If the NCC does not approve an increase in tariffs, telecom companies may need to cut costs further by reducing power to their base stations, especially in areas that do not generate much revenue. This could mean that instead of providing services to rural areas like Kuru in northern Nigeria, telecom companies may focus only on wealthier cities like Lagos, Abuja, Port Harcourt, and Kano. Such a strategy could have serious consequences, hindering the country’s goals for internet access and financial inclusion.
Financial inclusion in Nigeria is already fragile. Telecom companies are owed over ₦250 billion by banks due to fees related to USSD services used by bank customers. If these debts remain unpaid, it may lead to a disconnection from crucial USSD banking services. Although the local regulator has tried to address this issue multiple times, little progress has been made.
Challenges Beyond Debt
Telecom companies are not just struggling with debts; there are also practical issues like frequent cuts to fiber optic cables, vandalism, and theft of equipment, which have all cost them billions. For instance, in 2023, MTN Nigeria faced around 6,000 cases of fiber cable cuts. The company had to relocate 2,500 kilometers of vulnerable fiber cables in the last two years, spending over ₦11 billion on the effort—enough to lay down 870 kilometers of new fiber lines in poorly served areas. Airtel, another telecom competitor, also reported about 1,000 fiber cut cases each month.
In light of these persistent issues, the Nigerian government recently recognized telecom infrastructure as “Critical National Information Infrastructure.” Bosun Tijani, Nigeria’s Minister for Communications, Innovation, and Digital Economy, stated that this designation makes it illegal to intentionally damage critical facilities like telecommunications towers and fiber optic cables.
Tax Burden on the Industry
On top of everything else, the Nigerian government announced plans in October to bring back a 12.5% excise duty on telecom companies. Telecom operators argue that they are already facing an overwhelming tax burden, with more than 50 different taxes imposed by various government bodies. NATCOMS has previously taken legal action against such taxes and is prepared to challenge the government again if it pushes ahead with the excise duty.
In some extreme cases, local authorities in different states, such as Kogi State, have even shut down telecom facilities because of tax disputes, making it harder for telecom operators to function.
Former NCC Executive Commissioner Sunday Dare explained that while imposing heavy taxes and charges on telecoms might seem like a quick way for states to earn more revenue, it ultimately discourages investment in the industry.
The Situation Moving Forward
As Nigeria’s major telecom companies are considering the need to raise their tariffs to survive, the final decision on whether in increase can happen lies with the regulators. Regardless of whether prices go up, how the industry deals with these challenges will have a significant impact on the availability and affordability of digital services for millions of people in Nigeria.
