It is unlikely that the last week’s decision of the Nigerian Communications Commission to disapprove the planned tariff increase by the nation’s telecoms operators will calm the frayed nerves in the sector until the demands of the operators are given a second look, given the realities in the operating environment, writes Emma Okonji
In what can be described as a landmark decision, the Nigerian Communications Commission (NCC) last week halted the planned increase in tariffs for voice and Short Messaging Services (SMS) by a certain percentage by telecoms operators (telcos) under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON).
In the letter notifying the regulatory commission of their plan to increase the charges, the telcos had cited the high cost of running their operations as the major reason for their proposed tariff hike.
However, in throwing away the request contained in ALTON’s letter, the NCC assured subscribers that telcos cannot collectively or unilaterally increase the cost of telecoms services without due process. The commission explained that it ensures its regulatory activities are guided by regular cost-based and empirical studies to determine the appropriate cost (upper and floor price) within which service providers are allowed to charge their subscribers for services delivered.
Telecoms industry watchers believed the NCC action was largely political, explaining that it would be politically suicidal for any government agency to approve a fresh tariff increase on the eve of a general election.
They explained that given the current rising cost of goods and services, with the attendant frustration and complaints of members of the public, approving a new tariff regime for the telcos will exacerbate the current economic tension. However, they argued that Nigerians have to choose between paying for better services with a reasonable tariff hike or maintaining the status quo in the price regime with its attendant unreliable services.
In a statement issued by NCC and signed by its Director of Public Affairs, Dr. Ikechukwu Adinde, NCC allayed subscribers’ fears over the planned hike of the voice call, SMS, and data service costs by 40 per cent.
According to the statement, “For the avoidance of any doubt, and contrary to MNOs’ agitation to increase tariffs for voice and Short Messaging Services (SMS) by a certain percentage, the commission wishes to categorically inform telecoms subscribers and allay the fears of Nigerians that no tariff increase will be effected by the operators without due regulatory approval by the commission.”
The statement read: “The demand being made by MNOs under the auspices of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), citing the high cost of running their operations as the major reason for their proposed tariff hike, is contained in a letter to the commission.
“Consistent with international best practice and established regulatory procedures, the NCC ensures its regulatory activities are guided by regular cost-based and empirical studies to determine the appropriate cost (upper and floor price) within which service providers are allowed to charge their subscribers for services delivered.
“The commission ensures that any cost determined, as an outcome of such transparent studies is fair enough as to enhance healthy competition among operators, provide wider choices for the subscribers as well as ensure the sustainability of the Nigerian telecoms industry.”
NCC noted that tariff regulations and determinations were made by the commission in line with the provisions of Sections 4, 90, and 92 of the Nigerian Communications Act (NCA) 2003, which entrusts the commission with the protection and promotion of the interests of subscribers against unfair practices including but not limited to; matters relating to tariffs and charges.
NCC said the current tariff regime administered by the service providers was a product of NCC’s determination both for voice and SMS in the past.
The Planned 40% Hike
In the ALTON’s letter to the NCC, the telcos called for an upward review of the cost of SMS from N4 to N5.61k and voice call termination rate from N6.40k per minute to N8.95k per minute. The operators said the move to increase the cost of telecom services became necessary due to the high cost of delivering telecom services across networks, coupled with the harsh business environment and the continuous rise in the cost of various items in various sectors of the Nigeria economy.
They expressed their worries over the negative impact of the economic and security issues on the Nigerian telecommunications industry, which they said had adversely affected the cost of telecom service delivery across networks.
The telcos had noted that the telecommunication industry is heavily financially impacted following Nigeria’s economic recession in 2020 and the effect of the ongoing Ukraine/ Russia crisis. According to the letter to the NCC, “This has resulted in an increase in energy costs, which constitutes an appreciable 35 per cent of ALTON’s members’ operating expenses.
“Consequently, the cost of diesel required to power operators’ Towers, Base Stations, and offices rose by a staggering 233 per cent from N225 per litre in January 2022 to over N750 per litre in March 2022. Additionally, the introduction of new lines of fiscal obligations via the recent Excise Duty of five per cent on telecommunications services further exacerbates the burden of multiple taxes and levies in the sector. As the commission may be aware, the power sector, under the supervision of the Nigerian Electricity Regulatory Commission (“NERC”), in November 2020 undertook a review of electricity tariffs to cater to the economic headwinds reported above.”
The letter further said: “Given the foregoing, ALTON considers it expedient for the telecommunications sector to undergo periodic cost adjustments through the commission’s intervention to minimise the impact of the challenging economic issues faced by our members.”
According to them, “Given the state of the economy and the circa 40 per cent increase in the cost of doing business, we wish to request for an interim administrative review of the Mobile (Voice) Termination Rate (MTR) for Voice; Administrative Data floor price and cost of SMS as reflected in extant instruments. Concerning Voice and SMS cost, ALTON respectfully requests the commission to consider a mark-up approach to address the upward price adjustment desirable for the industry.”
For data services, they asked the commission to implement the recommendations in the August 2020 KPMG Report on the Determination of Cost-Based Pricing for Wholesale and Retail Broadband Services in Nigeria.
They also called for the suspension of punitive monetary sanctions; extension of the payment timeline of relevant regulatory levies/fees in compliance with the commission’s mandate by at least three months from the stipulated date of fulfillment.
They also want the commission to prevail on the federal government to sign the Executive Order declaring telecommunications infrastructure as a Critical National Infrastructure for the due protection of the infrastructure and to mitigate cost expended towards replacing the damaged/stolen infrastructure and other amenities.
They want reduction or waiver of duties, taxes, and other charges and suspension or reduction of sector fees and other levies. As a way of ameliorating the impact of the tough operating environment, we respectfully request that the proposed upward review of the Frequency Pricing Regulations and current administrative fees regime for services such as numbering fees, type approval fees, promotion fees, and tariff modification/revalidation fees be suspended, the operators said.
“We expect that the above-mentioned proposals will support our members and ameliorate the challenging economic situation facing the telecommunications industry,” ALTON added.
Telcos’ Initial Complaints
Some industry players have continued to react to the telco’s letter to NCC, which called for an upward review of telecoms service offerings. While some industry stakeholders have justified the call for an upward review of the cost of telecoms services, most telecoms subscribers who felt differently, said the call for a higher cost of telecoms services will further add to the challenges of the masses who are already complaining of the high cost of data that is limiting their activities in the cyberspace while browsing.
The industry stakeholders who justified the call for upward review said since the inception of telecoms service rollout in 2001, the cost of telecoms services has continued to reduce without any iota of increase, even though the cost of items in other sectors of Nigeria’s economy continues to increase year-on-year.
President, National Association Telecoms Subscribers (NATCOMS), Chief Deolu Ogunbanjo, who spoke on behalf of telecoms subscribers, told THISDAY that there was no need for an increase in the cost of telecoms services, at a time when Nigerian subscribers are facing serious financial challenges. “The planned increase will only be justified if the federal government fixes the economic challenges in the country. It will be out of place to increase the cost of telecoms services when Nigerians are still battling with the increase in fuel, transportation, and food items in the market,” Ogunbanjo said.
Telecom subscribers who spoke to THISDAY said NCC must rise to the situation and call for an industry stakeholders’ meeting that will include telecom operators and their subscribers to discuss and address the issues on the ground.
“The operators may be right in their demand for upward review of the cost of telecoms services, but dialogue with telecoms subscribers is key in addressing the issue,” said Mr. Johnson Temitope, a civil servant and a subscriber to the MTN network.