Telcos sought increase in tariff to reflect cost of providing services, granted 50% review-Adebayo

Engr. Gbenga Adebayo, Chairman, Association of Licensed Telecommunication Operators of Nigeria (ALTON) appeared during an interview on Tuesday morning on Arise TV’s Global Business Report and spoke on the recent 50% telecom tariff hike in Nigeria and other sundry issues in the telecommunication sector. Excerpts: 

The 50% telecom tariff hike in Nigeria

The fact is that we face significantly higher economic headwinds, like other sectors of the economy, and what we have done is to approach government rates that are sustainable and that are commensurate with the cost of providing services. So, if someone is coming to say it is arbitrary, I don’t know the basis on which they are saying that this is unconstitutional. I don’t know how that’s come about, because we haven’t done anything against the provisions of the Communications Act, three, we followed all processes and procedures laid down to seek authority review.

And I must add that the government doesn’t determine prices. Our regulator doesn’t determine prices. They only regulate based on market forces and based on what we present to them. What we have done is to approach our regulator showing them more current economic indices, factors of cost and production with us. We sought an increase in tariff to reflect our cost of providing services, and graciously, they granted a 50% review, and that’s where we are. Now, I don’t know what is the illegality in that, and I don’t know what is the basis for the arbitrary nature of a review that someone is talking about.

The Minister of Finance, statement that the 50% tariff is a start

Of course, the government has to buy to moderate the upper and the lower limit, but the government doesn’t fix our prices, and they don’t control prices. Prices are left to market forces to determine when we approach the regulator of price review, normally, they will manage the upper and the lower level. So when I use the word “they do not regulate price,” I mean the area of price control. They don’t control our prices. Of course, by way of management. They need to manage and regulate how we charge up and lower, but they don’t fix our prices. That’s what I mean in that regard. So if it’s 50% in 2025, it is a start.

What we have requested is based on current market indicators. There are indices of price. There are indexes that determine price and cost of providing services, and our request at this time is based on the dynamics of current market forces. If those dynamics change tomorrow, we are going to have a different conversation. So what we have said is that in 12 years, we haven’t had a review of our prices. In the last two years, all other costs have gone up. Cost of diesel has gone up. Cost of energy has gone up, even domestic items have gone up because of inflation. And we came to a point where the rate we were charging was no longer sustainable. We had to approach the government to say, if something is not done about allowing us to charge market reflective tariffs, the industry might collapse and to salvage that, the government has basically granted 50%.

Again, if those indicators and dynamics change tomorrow, we will again present the same argument to the government showing reflective market forces and saying to them, this is not where we should be.

What will change after this 50% tariff hike

Part of the obligation on us is now to improve the quality of services. Unfortunately, because we have left it for a bit too long, many things have gone a bit bad on the various networks. So, operators now have to commence the process of ordering system changes, system upgrade, system improvement, and deploying services that will optimize the networks. We haven’t been able to attract investment in the last two years. Now that work has begun, first, we are starting with the transparency of our Tariff. Government has mandated that we must make the tariff friendlier, more flexible and easier to understand. So, we are doing what we call tariff simplification, that’s in the first season. And then we are also addressing the quick win areas where we can tweak here and there to improve on service quality. We agree now that the major step will be when you have new systems injected into the networks to improve on the service delivery that we offer to people, but I will say that we are committed to making things better. It’s a very good start. We have better days ahead of us, and the assurance for the public is that this will get better and better. If something was not done before now, and there are consequences for the inaction, but we thank God our government has done something now to enable us to look forward. And looking forward is to do what is right, to optimize the various networks with the support of subscribers and other stakeholders.

Quality of Service

We do hope for stability in the foreign exchange market. That is important. Because what we are also seeing is that some of the obligations that are overdue that were now in service, where their services procured at the old exchange rate, have to be paid at the previous exchange rate system. I mean contracts that we committed to years ago, they were committed to at the old exchange rate, which has now to be serviced at the current exchange rate. So we are hoping that the currency market will be stable. We have been hoping that the exchange rate will be stable so we can have some form of stability in our obligation. That’s in the first instance.

The second is that a lot more will be done in terms of network optimization. We couldn’t have done much under the circumstances we face, because we came to a point where the industry was really, really going south. And unfortunately, when we look at the performance of the sector, we seem to be looking at the performance of a few big players. We have other smaller players who may actually be victims of the situation that we have been in. Some of them may actually not come out of the problems that we have been in because of the huge debt profile that they have, both within the industry and outside of the industry. So it’s a combination of many factors.

We need a lot more to make things better. And the conclusion, as directed also by the government, is we must do a lot more in terms of network improvement and optimization. That’s what we set out to do. The work has begun, and people will begin to see improvement and changes.

Message to Nigerians

What is fair, is fair. I ask everyone, what hasn’t gone up in the last 24 months? What hasn’t gone up? These are not our makings. These are a function of the entire global economic recession, and function of our economic situation as a country and as an industry. We are not able to absorb the impact of that on our operations. If we do so, it will weigh us down, we will not even be able to provide the basic services today. We are the infrastructure that supports other infrastructures. Anything happening in the telecom sector, will affect other sectors, commerce, banking, health, education and the rest of it, and we can’t afford that to happen.

As you know, we’ve made some good progress in terms of network infrastructure and deployment and availability. We can only build on that and make things better. We can’t allow things to go south by not doing the right investment and to mitigate against that. That’s why we’ve approached the government. Government set out to do that, and certainly in the Outlook, things will get better. Things are getting better, and they will get better.

I think we are in a better place than we were in the previous years. Outlook is right now, we’ll expect to attract more investment, particularly foreign direct investment. No one will invest in the sector that is said to be collapsing. So now that we have some light at the end of the tunnel, we’ll expect to attract more investment. We’ll optimize our networks, like I’ve said again and again, we provide better quality of services. And looking at the role that we play in driving the economy, we think that not only are we going to attract more foreign direct investment, we do more job creation, and we’ll also have a positive impact on other sectors that are dependent on our services.

Recorded and edited by Rommy Imah of Digital TimesNG