As the Federal Government approves the first telecom tariff hike in over a decade, Nigerians are demanding that mobile network operators justify the increase by delivering substantial improvements in service quality.
For years, subscribers have called for better network quality, citing frequent call drops and slow data speeds.
They argue that if telecom companies are to benefit from higher tariffs, consumers should experience a tangible improvement in the services they are paying for.
However, telecom giants, including MTN Nigeria and Airtel, have defended the hike as essential to address economic challenges such as inflation, foreign exchange instability, and rising diesel prices.
The operators, which contribute nearly 20 per cent to Nigeria’s economy and serve over 150 million subscribers, have consistently emphasised the need to overhaul infrastructure, citing insufficient investments as a major obstacle.
DECENCY GLOBAL NEWS gathered that the sector is set to settle for a 40-50 per cent hike, with the Nigerian Communications Commission, the country’s telecom regulator, expected to make a public announcement soon.
Initially, telecom operators proposed a 100 per cent tariff increase.
However, Minister of Communications and Digital Economy, Dr Bosun Tijani, clarified after a stakeholders’ meeting with major operators in Abuja that while an increase is inevitable, it will not reach the proposed 100 per cent.
Had the government approved the telecom operators’ initial request for a 100 per cent tariff hike, subscribers would have faced a steep rise in costs—voice calls increasing from N11.00 to N22.00 per minute, SMS charges doubling from N4.00 to N8.00 per message, and the price of a 1GB data bundle skyrocketing from N1,000 to N2,000.
He argued that such a hike would have further strain on Nigerians already grappling with a declining purchasing power over the past two years.
The minister, who is currently leading Nigeria’s 90,000-kilometre fibre-optic broadband project in collaboration with the World Bank, stated that the Nigerian Communications Commission, a consumer-focused regulator, would issue comprehensive guidelines for implementing the adjusted tariffs.
On Thursday, the regulator convened a meeting in Abuja with consumer advocacy groups, including the President of the National Association of Telecommunications Subscribers, Adeolu Ogungbanjo, a long-time critic, who had previously threatened legal action if the NCC approved the tariff hike.
Meanwhile, telecom operators have stated that they are working towards fully implementing the new tariff before the end of the first quarter of this year.
“The tariff hike is a welcome development for the telecom industry, as it is something we have been advocating,” said Tony Emoekpere, President of the Association of Telecommunications Companies of Nigeria.
“It is expected that consumers will begin paying the new tariff before the end of Q1, and the process should be concluded and implemented by then.”
The Director of Publicity at the NCC, Reuben Mouka, declined to provide details on when the commission would make a public statement.
However, he stated via a telephone conversation, “The management will communicate when it’s time for it to do so.”
Subscribers’ demand
Speaking with DECENCY GLOBAL NEWS, NATCOMS President, Ogungbanjo, called for greater accountability and improved service standards from telecom operators.
He emphasised that a 40 per cent increase in tariff prices would not harm subscribers. Instead, it would enable operators to sustain their services and invest in necessary infrastructure upgrades.
Earlier, the subscriber group advocate had threatened court action, arguing that the proposed hike would disproportionately affect low-income subscribers and could hinder access to essential communication services.
The Secretary General of the Private Telecommunications and Communications Senior Staff Association, Okonu Abdullah, said the subpar network performance among telcos was primarily due to insufficient investment in the sector.
He argued that the issue had been exacerbated by the devaluation of the naira and removal of subsidies by the Federal Government in June 2023, further straining the industry’s capacity to deliver quality services.
“With the tariff hike, one would expect telcos to invest in upgrading their networks to meet consumer expectations, which, in many cases, they currently fall short of,” he stated.
“However, the reality is that these operators face frequent disruptions due to numerous fibre cuts. My advice is that telecom operators must remain vigilant and work closely with road contractors to prevent damage to critical infrastructure, such as underground cables.”
Telecos in 2023 suffered frequent fibre-optic cable cuts, leading to losses estimated at N35.4bn.
Industry reports revealed an alarming average of 43 cuts daily, with Airtel Nigeria alone recording 7,742 incidents within just six months.
To address these disruptions, President Bola Tinubu approved a critical infrastructure protection bill that criminalises the vandalism of telecom assets.
The President of the Consumer Advocacy Foundation of Nigeria, Sola Ajulo, called for significant improvements in network quality before any tariff increase is implemented.
Speaking on Arise TV on Wednesday, he stressed that while the economic changes in Nigeria might justify an adjustment in the cost of running telecom services, the core issue lied in the quality of service consumers hadbeen receiving.
The consumer advocate pointed out that even before the current economic shifts, Nigerians were already experiencing poor services, including frequent dropped calls and unreliable data connections.
“What quality of service were consumers actually benefiting from?” she asked. “People were paying for data they didn’t receive and voice calls they didn’t use. If tariffs increase based on this same substandard service, it will be double jeopardy for the average Nigerian consumer.”
Ajulo noted that before approving any tariff hike, the NCC must ensure there were substantial improvements in service quality.
“We need to hear what the NCC is doing to ensure that the value consumers receive justifies any potential tariff increases,” she added.
Tariff hike justifications
Africa’s fourth-largest economy has continued to wither, with many large companies, including telcos, reporting losses due to the lingering macroeconomic conditions.
The situation has worsened in the past 18 months following President Bola Tinubu’s decision to float the naira and remove fuel subsidies, with the former being a major blow to the telcos.
The local currency is now among the worst-performing currencies in sub-Saharan Africa in 2024, according to the World Bank’s latest Africa’s Pulse report.
For the nine months ending September 2024, MTN Nigeria, the country’s biggest operator with almost 70 million subscribers, recorded a significant loss after tax of N514.9bn, primarily due to substantial foreign exchange losses.
While the second-biggest telco, Airtel Nigeria, has yet to release its third-quarter 2024 results, its second-quarter report revealed a $31m profit after tax, tempered by $80m in forex and derivative losses.
Beyond inflation, which surged to 34.60 per cent in November, according to the National Bureau of Statistics, telcos are bearing the brunt of escalating energy costs.
Diesel costs, which account for approximately 30 per cent of their operating costs, are significantly eroding profit margins.
Telecom operators estimate that more than 50 million litres of diesel are consumed each month to power their infrastructure, with the situation further exacerbated by the soaring costs of importing essential equipment, such as fibre-optic cables and batteries.
DECENCY GLOBAL NEWS analysis showed that telcos spent approximately N71.3bn monthly on diesel, amounting to N570bn in total expenses between January and August.
Airtel Nigeria in September said diesel prices pushed the company’s fuel costs to a staggering N28bn monthly.
A former Chief Economist of Zenith Bank, Marcel Okeke, in an interview with our correspondent, said, “The energy costs associated with maintaining telecom infrastructure, whether using PMS or other sources, are enormous.”
He argued that inflationary pressures and rising input costs leave operators with little choice but to raise tariffs to remain viable.
The economist also cast doubt on government projections of inflation dropping from 34 per cent to 15 per cent by 2025, calling them unrealistic.
Okeke argued that the telecom sector is not alone in facing these challenges, noting that price adjustments are inevitable across industries as input costs rise.
“It’s just like any other sector—when the cost of your input goes up, you are justified in adjusting prices,” he stated.
Now, operators are exploring innovative solutions to cut costs, including shifting towards renewable energy sources and satellite technology.
A developmental economist, Aliyu Ilias, stressed that the combination of heavy taxation, rising fuel prices, and high energy costs underscore the need for a price adjustment to ensure sustainability.
“The telecom sector is essential for the economy—whether it’s communication, financial transactions, or business operations. Given these macroeconomic challenges, a tariff increase is justified,” he told DECENCY GLOBAL NEWS.
In a note shared with our correspondent, Airtel Nigeria’s Chief Executive Officer, Dinesh Balsingh, stated that rising operational costs, which have surged by over 300 per cent in the last 18 to 24 months, have made tariff adjustments necessary for the long-term sustainability of the telecom sector.
He explained that the proposed tariff adjustments are crucial for ensuring the sector’s long-term sustainability while delivering substantial benefits to Nigerian consumers.
“To maintain high-quality services and meet the increasing demand for digital connectivity, it has become essential to align our pricing structure with the current economic realities,” Balsingh wrote.
The Chief Executive Officer of Financial Derivatives, Bismarck Rewane, stated that the proposed telecom tariff hike had the potential to boost productivity and help moderate inflation in the economy.
“Any increase in productivity and output is likely to allow inflation to moderate, which is the goal,” he told Channels TV on Thursday.
Two weeks ago, the Association of Licensed Telecommunications Operators of Nigeria described the sector as “under siege,” noting that tariffs have remained stagnant despite inflation and other pressures.
ALTON’s chairman, Gbenga Adebayo, previously warned that without an increase, operators might resort to “service shedding,” reducing network availability in certain areas to cut costs.
Network upgrade
Saturday PUNCH understands that telecom companies have now agreed to channel the revenue generated from the proposed tariff increase directly into substantial upgrades to their network infrastructure and service quality.
This commitment to improving infrastructure is one of the key conditions as they await final approval for the tariff hike.
The NCC, as part of this agreement, will closely monitor telecom operators to ensure they adhere to their promises of upgrading the network.
The aim is that the tariff increase will not only lead to higher prices for consumers but also result in noticeable improvements in service quality.
MTN Nigeria’s Chief Executive Officer, Karl Toriola, in a column published on BusinessDay on Monday, explained that the proposed price hike in telecom tariffs will not just increase consumer costs.
He stated that it will come with a guarantee that telecom operators will reinvest the additional revenue into improving their infrastructure.
“The discussions between the industry and government have been deliberate and focused on finding the right balance while aligning with pricing in other markets.
“It is why the proposed tariff increases will surely be capped, and definitely much lower than the price increases that have been imposed in other sectors like power/energy and oil, and ensuring that prices remain below our contemporaries.
“So not only will increases be capped well below the levels the industry has requested, but they are linked to a requirement to invest in network upgrades and service improvements, which will be overseen by the NCC to ensure compliance,” MTN Nigeria’s CEO stated.
