Across Nigeria, telecom consumers are feeling the pinch of higher tariffs, as a result of the recent increase in telecom services.
When Adebayo, a small business owner in Lagos, saw his latest mobile data bill, he was shocked to see the sharp increase.
“I rely on the internet to market my products and connect with customers, but these new costs are killing my business. Before, I used to subscribe for N150,000, for 1.5TB but now I have to pay N240,000 for the same plan,” he lamented.
With network operators facing increased costs due to diesel price surges and forex-related equipment expenses, the industry is at a critical juncture. While operators insist the hikes are necessary to keep their businesses afloat, the bigger question is: how does the industry grow without pricing out its customers?
In an interview with Nairametrics, Chief Executive Officer of IT solutions company Jidaw Systems, Mr. Jide Awe, emphasized the need for telecom operators to embrace innovation and explore new revenue streams beyond traditional services like data, SMS, and voice calls.
He stressed that telecom operators need to invest in digital transformation and be more entrepreneurial rather than relying solely on conventional services.
“What they have been doing is just what traditional telecom operators do—calls and data services. But they need to go more into data transformation, working with startups. The telecom companies are large organizations. They need to work with startups that can introduce innovative solutions,” he said.
Awe pointed out that while telecom operators face revenue challenges, they possess substantial capital and a large subscriber base.
“Are they fully utilizing their subscribers if all they rely on is calls and data? If they collaborate with startups and innovators, they can develop new offerings that will make them more sustainable.”
“They need to create new value-added services using emerging technologies and data transformation,” he added.
Awe believes the solution lies in partnerships with smaller businesses and individual innovators who understand how to leverage AI, IoT, and other emerging technologies.
“Startups are more innovative, agile, and responsive to economic and societal changes. Telecom operators must collaborate with them to remain competitive and sustainable.”
PwC’s Global Telecom Outlook 2024-2028 report lays out a roadmap for sustainable expansion, pointing to strategic investments in artificial intelligence (AI), fixed connectivity, and B2B services as key growth drivers. It also highlights the importance of working with regulators and investors to optimize the market structure and create new opportunities.
B2B services as a growth strategy
Carriers worldwide are returning to B2B as a growth priority due to price erosion in basic connectivity services.
- According to PwC, companies are pursuing two strategies: verticalization, where they develop industry-specific solutions like IoT services and private 5G networks, and horizontal standardization, such as the CAMARA API initiative launched by major carriers and Ericsson to simplify and standardize network services.
- Saudi Telecom Company (stc) is one of the telcos investing heavily to drive new growth opportunities. In Saudi Arabia, where over 60% of the population is under 35 and ICT spending is rising, digital adoption is expanding rapidly.
PwC notes that:
“STC B2B holds the largest market share of Saudi Arabia’s ICT market, at around 25%, and has successfully secured flagship projects,” the report noted.
These include a disaster recovery solution for Aramco affiliates and an IoT-based fleet management system tracking 25,000 vehicles.
AI’s role in telecom expansion
AI is also reshaping the telecom industry, helping companies address declining revenue in fixed and mobile services.
“Fixed communications services have become commoditized or are ‘on the edge’ of commoditization in 34% of countries, with global population-weighted ARPU (Average Revenue Per User) declining by 21% in the past seven years,” PwC stated.
- The report stated that AI offers a solution by reducing costs, improving margins, and enhancing customer experience through automation and personalization.
- According to the report, an Indian telecom provider has developed a cognitive network operations center (NOC) powered by AI, which acts as a smart assistant for engineers, helping them automate network management and build self-healing capabilities.
The growing need for AI-driven telecom infrastructure
Beyond traditional telecom services, PwC points out that the internet, as it stands today, is insufficient to support an AI-driven economy. AI is increasing demand for network and computing power, requiring more capacity, tighter network connections, and higher energy use to support the digital economy.
“Network and compute infrastructure provide essential utility to the digital economy—and AI is elevating demand pressure across capacity, densified topology, and the energy grid,” the report states.
- The report noted that this rapid transformation of digital infrastructure to meet this demand has attracted over $1 trillion in private equity and public funding, fueling mergers, joint ventures, and divestitures.
- To address these demands, telecoms are positioned to lead the development of the AI grid by leveraging their expertise in network deployment, infrastructure operations, and connectivity management.
“Building the AI grid is more than just a business opportunity for telcos…. It presents a platform for fundamental reinvention and growth,” the report stated.
Companies that successfully integrate AI, optimize network structures, and invest in next-generation connectivity solutions are best placed to thrive in this evolving landscape.
Challenges to Network Expansion
Mr. Tony Emoekpere, President of the Association of Telecommunications Companies of Nigeria (ATCON) in an interview with Nairametrics, emphasized that without addressing fundamental cost drivers, foreign exchange constraints, and regulatory bottlenecks, telecom operators will struggle to sustain operations and expand their networks.
- While strategic investments in AI, B2B services, and fixed connectivity can drive growth, he argues that they will not be effective unless the government fosters a more business-friendly regulatory environment. Investment alone, he insists, is not enough—policy reforms and cost reductions are equally crucial for sustainable industry growth.
- He mentioned that the challenges affecting telecom operators, which include high infrastructure costs make it difficult for the sector to scale efficiently.
“Market liberalization is crucial. If we don’t address these cost drivers, telecom operators will struggle to sustain operations and expand their networks,” he said.
- He further stressed the need for policies that balance affordability for consumers with revenue generation for operators.
“We must create policies that ensure affordability while allowing operators to generate enough revenue for network expansion and service improvement,” he said.
Emerging markets in telecom
The PwC report highlights that emerging markets, such as India, Nigeria, Egypt, and Kenya are experiencing above-average growth rates, whereas mature markets like Japan and Switzerland are seeing little to no growth.
- According to the report, these emerging markets are expected to drive telecom expansion, while more developed markets face stagnation or decline.
“In fixed telecoms, most countries are grouped around the 0 to 6% CAGR range, including the US and China. But a few outliers show much higher growth—notably India, Nigeria, Egypt, and Kenya,” the report stated.
- PwC’s analysis projects that telecom revenues in Nigeria will grow at a compound annual growth rate (CAGR) of 5.3% from 2024 to 2028.
While tariff hikes present immediate challenges, the sector’s long-term growth depends on strategic investments and regulatory alignment.
