The Chief Executive Officer of MTN Nigeria, Mr. Karl Toriola, has said telecom operators in the country have made a request of approximately 100% increase to ensure the industry’s sustainability rather than boost short-term profitability.
Speaking during an interview on Arise TV, the telecoms executive detailed the financial pressures facing operators and their potential impact on service delivery, employment, and overall economic growth.
According to him, the telecom industry is now facing a sustainability threat that must be addressed through a tariff review.
He, however, noted that the telecom regulator, the Nigerian Communications Commission (NCC), may not approve the 100% increase requested.
“We’ve put forward a request of approximately 100% tariff increases to the regulators. I doubt they’re going to approve that quantum of increases because they’re very sensitive to the current economic situation in the country,” he said.
Rising costs in a challenging economy
While emphasising that telecommunications is a fundamental human right and a critical element for driving an economy, Toriola noted that without a sustainable industry, the economy and the well-being of Nigerians will suffer.
- He highlighted how inflation, foreign exchange devaluation, and rising energy prices have drastically increased operational expenses for telecom operators.
- According to him, diesel costs have risen from pre-COVID levels of N230 to over N1,000 per liter.
- The official exchange rate has shifted from N424.50 to about N1,550 at the end of 2024, drastically increasing the cost of importing critical infrastructure like base stations, which now cost nearly four times more than they did two years ago.
“These cost increases are outpacing revenue growth. If large operators like MTN and Airtel are struggling, the impact on smaller players and the ecosystem is even more severe,” he explained.
Impacts on employment and economic growth
Toriola added that the telecom sector’s financial strain threatens its ability to sustain jobs and contribute to economic growth.
According to him, MTN alone accounts for over 2 million direct and indirect jobs, and any contraction in the industry would ripple across the economy.
“This is not just about profitability; it’s about survival. If the industry constricts, employment and commercial activities around it will constrict as well,” the CEO warned.
“If we have an outlook that’s not sustainable, imagine what’s happening to the small operators, because what forex devaluation does to us is: With foreign exchange liabilities, which we have on our balance sheet, and those could be foreign exchange loans or lease obligations, every time there’s a shift in the exchange rate, we have to make provisions for those liabilities,” he added.
Government support
The MTN CEO, however, acknowledged the Nigerian government’s efforts in supporting the industry, through some initiatives aimed at sustaining the industry.
Specifically, he cited the recent declaration of telecom infrastructure as Critical National Infrastructure (CNI) as a move that would ensure the protection of the industry’s investments.
- He also noted the plans to roll out 90,000 kilometers of fiber optic cable under the leadership of Minister Dr. Bosun Tijani, which is aimed at accelerating digital penetration.
- Toriola also commended the efforts of the regulators in addressing sector indebtedness and quality of service obligations.
- While optimistic about the industry’s future, he called for more targeted measures to address sustainability challenges, including tariff adjustments and continued collaboration between regulators and operators.
What you should know
The two telecom industry associations, the Association of Licensed Telecom Operators of Nigeria (ALTON) and The Association of Telecommunication Companies of Nigeria (ATCON), have been at the forefront of advocacy for tariff review in the industry for over two years, citing an increase in costs of operations.
In a joint statement by the two bodies, the operators said the telecom industry is the only industry that has not reviewed its prices despite the rising inflation in the country and other economic realities that warrant increment.
- They blamed this on the regulatory restraints that have been preventing them from pricing appropriately.
- The Nigerian Communications Commission (NCC) regulates prices in the telecom industry and telecom operators are not allowed to implement any price change without the regulator’s approval.
- The regulator has said a cost-based study is being conducted to determine if it would approve price increments for the operators.
