Tariff Review Looms as Telecoms Firms Struggle with Economic Challenges

As indications emerged last week that the Nigerian Communications Commission (NCC) may have begun consultations with relevant stakeholders on the proposed tariff increase in the telecoms sector, there is a need to be thorough in the deliberations so that the outcome will be acceptable to both the operators and subscribers once and for all, writes Festus Akanbi

F

rom the outset, it was very obvious that the recent unilateral review of tariffs by Starlink, the satellite internet service owned by Elon Musk’s SpaceX, was going to ruffle feathers in the Nigerian telecoms industry.

The audacious price increase, according to industry analysts, was the climax of the subtle move by industry operators to bend the hand of the regulators to accede to the demand for tariff increase in the face of the rising cost of operations and the unabated damage to telecoms facilities in the country.

In Nigeria, increases in the prices of goods and services are largely affected by political and economic considerations, given the economic situation, which has increased the tension in the country.

For a nation that just experienced some mass protests against the high cost of living, analysts said it would have been suicidal for the government to ignore Starlink’s action although they believed the time had come for a review of tariffs in the telecoms sector. Again, they argued that Starlink’s action amounted to jumping the gun since the issue of upward review of tariffs for telecoms services is still being discussed by the regulators.

Although the Nigerian Communications Commission (NCC) promptly intervened to overrule the unilateral tariff increase, other stakeholders, including the Association of Telecommunications Companies of Nigeria (ATCAN) and the Association of Telecoms Operators of Nigeria (ATCON) have continued with a groundswell of campaign for a new tariff regime which they said will reflect the current economic realities in Nigeria.

Starlink had on the last day of September announced a 97 per cent price increase for its monthly subscription from N38,000 to N75,000. For new users, the company also increased the Starlink kits (hardware) by 34 per cent from N440,000 to N590,000.

The company in a message to its customers in Nigeria cited “excessive inflation” as the reason for the increment.

The announcement sparked controversy in the Nigerian telecoms sector as local operators accused the NCC of a double standard for allowing Starlink to increase prices, which they are not allowed to do so despite years of appeals to the regulator.

The NCC, however, responded saying it did not approve Starlink’s price increment. The telecoms regulator pointed out that Starlink’s action contravened Sections 108 and 111 of the Nigerian Communications Act, 2003, and its license conditions regarding tariffs.

NCC’s Director of Public Affairs, Dr Reuben Muoka, later announced that the commission had commenced pre-enforcement actions against Starlink for implementing price increments without the approval of the regulator.

Muoka was quoted as saying “The proposed increase is still under discussion with relevant agencies. He said it would be premature to determine what exactly the percentage increase would be. “I know that discussions are still ongoing as regards tariffs,” he was quoted as saying.

“The decision by Starlink to unilaterally review its subscription packages upwards did not receive the approval of the Nigerian Communications Commission,” Muoka said.

He explained that the commission was “surprised” when the company announced the price changes, despite having filed a request with the NCC for a price adjustment, which the regulator had yet to approve.

He added, “The action of the company appears to be a contravention of Sections 108 and 111 of the Nigerian Communications Act (NCA) 2003, and Starlink’s Licence Conditions regarding tariffs.

 Agitation for Tariff Increase

As predicted by some analysts, the development has triggered a fresh wave of calls for a review of internet data tariff, voice calls, and short message services (SMS) by some stakeholders comprising ATCON and ALTON, who argued that the current economic realities do not favour the retention of the current tariff regime.

On the other hand, subscribers’ associations like the Association of Telephones, Cable TV and Internet Subscribers of Nigeria, (ATCIS), insist that telecoms operators do not have any justification to propose a tariff hike, owing to the current economic realities.

Stakeholders in the telecommunications sector represented by ATCON, and ALTON, insist that the telecoms sector may not survive if the NCC, the sector’s regulatory body, fails to approve a new tariff regime.

They argued that rising operational costs, weakening naira, and increasing energy and infrastructure maintenance prices have severely affected telecom companies.

According to them, no other illustration can capture the severity of the operating environment than the negative financial performance of telecom operators in recent times. For instance, the telecom giant, MTN, in its first half (H1, 2024) financial statement, reported an after-tax loss of N519.1billion, driven by forex volatility and inflationary pressures.

Its closest rival, Airtel Africa, Nigeria’s second-largest telecom operator by market share, also reported after-tax losses to the tune of $89million for its full year ended March 2024.

To make matters worse, incessant vandalism, fibre cuts, and theft of equipment already cost telecoms operators billions of naira to replace, in addition to the service disruption the concerns trigger.

While internet data prices have remained relatively stable in the past decade, calls for an upward review by telecoms operators may change the status quo.

Suspending New Orders

With the rebuttal from the telecoms regulator, Starlink suspended the announced increment with a warning that “without these approvals, our ability to continue delivering service is at risk.” The company noted that while it is committed to providing high-speed internet in Nigeria, it would need regulatory support to make the improvements necessary for a better customer experience.

The company reportedly suspended orders for its residential kits in five major cities including Lagos, Abuja, Port-Harcourt, Benin City, and Warri because it was at capacity in those areas with a note that the suspension would be lifted after securing approval from the NCC for its recently announced price increment.

The company, however, allows orders for its high-end Business Plan, in which it is allowed to charge N159,000 for a monthly subscription compared with the Residential Plan, which costs N38,000 per month.

New Service to Guarantee Quality Service

Meanwhile, the ATCON President, Tony Emoekpere argued that the current tariff structure is no longer tenable and a price increase has become imperative to guarantee quality service delivery.

“These tariffs have been frozen for such a long time and to keep them stagnant is unrealistic,” Emoekpere said.

“We understand the fact that any price increase will have an effect but what the tariff hike will provide is better quality of service to subscribers.”

Emoekpere said in its talks with the NCC, the regulatory body urged telecom operators and companies to focus on improving the quality of their services and explore other measures rather than a tariff hike. He however expressed confidence that approval is imminent.

“I don’t think there will be a rejection; I think the worst-case scenario is that the NCC may approve a lesser percentage of what is being requested,” he added.

Subscribers Kick

The President of the Association of Telephones, Cable TV and Internet Subscribers of Nigeria, (ATCIS), Sina Bilesanmi, condemned the proposed tariff hike, especially in the face of Nigeria’s current economic decline.

He believed there is a need for telecoms operators to consult the subscribers and other stakeholders if there would be any upward increase in tariff.  He said telecoms operators should call for a proper stakeholders’ meeting, where details of the proposed tariff hike can be discussed with consumers. “They cannot do it alone, all stakeholders must agree,” he said.

People are struggling to make a living and you now expect these same people that you are offering bad services to meet up with the new tariff. It makes absolutely no sense,” she said.

Meanwhile, the president of the National Association of Telecommunications Subscribers (NATCOMS), Adeolu Ogunbanjo,  disclosed that his organisation proposed an increase of 10 per cent as a better alternative to loading shedding.

Load shedding happens when telecom operators shut down some cell sites and rotate connectivity.

He said the tariff hike would boost the telco’s profitability and, in turn, help improve the quality of service to endusers.

“Rather than allowing the telecoms industry to be killed, we should allow an increase of no more than 10 per cent so that they can survive,” he said.