The CEO of Airtel Nigeria, Dinesh Balsingh, has justified the recent tariff hike proposal by telecom operators, pointing to a startling 300 percent rise in operating expenses over the previous 18 to 24 months. Speaking on the challenges facing the sector, Balsingh explained that the planned tariff increase is necessary to guarantee the sector’s long-term viability in the face of growing economic constraints. He stated that telecom Tariffs have remained unchanged for more than ten years, despite notable cost increases brought on by inflation, exchange rate volatility, and increased costs for essential operational inputs like diesel and Electricity generation.
He pointed out that this static pricing structure is no longer viable as operators are finding it more challenging to maintain service quality and build their networks to accommodate rising customer demand. The telecom operators, including Airtel and MTN, have previously jointly submitted a proposal to the Nigerian Communications Commission (NCC), seeking a 100 per cent tariff increase. Balsingh asserts that the adjustment will improve operators’ capacity to provide Nigerians with high-quality services while also assisting them in managing growing expenses.
Operators have warned of impending service interruptions.
In his statement, he stated that the proposed rate adjustments aim to ensure the sector’s Sustainability and also deliver considerable benefits for Nigerian consumers, highlighting the alignment of the move with economic reality. As at the end of December 2024, Nigerian telecoms operators issued a statement warning that service interruptions are impending unless prices are modified to account for increased operational costs. They contended that their capacity to maintain services has been severely strained by the growing operating costs, especially considering the sector’s vital role in supporting Nigeria’s digital transformation.
Reports of large financial losses by major telecom providers in the country, including Airtel and MTN, in recent years, also highlight the industry’s mounting woes. These losses, which are reportedly being caused by stagnant rates and increased operational expenses in an effort to accommodate the growing demand for digital connectivity, have left operators grappling with sustainability. Also speaking on the situation, Dr. Karl Toriola, the CEO of MTN Nigeria, stressed that the planned tariff increase is not just a way to gain more profit but also to guarantee that operators can continue providing reliable services in a challenging economic climate.
Regulatory decisions remain largely unpredictable.
Dr. Karl noted that it has become more difficult for operators to maintain services and make investments in network development due to growing operating costs and stagnating Revenue streams. While acknowledging the pressing need for rate reform, he maintained a cautious optimism and voiced doubts about the NCC’s readiness to grant the request. He added that although the proposed tariff hike is justified and essential for the industry’s long-term viability, regulatory decisions remain largely unpredictable.
It remains uncertain whether the Nigerian Communications Commission, the regulatory body overseeing the telecom sector, will approve the proposed tariff hike. The NCC’s decision carries significant weight as it must find a resolution between operators’ financial viability and the need to guarantee millions of Nigerians have inexpensive access to telecom services. An approval would give telecom operators much-needed financial relief and the ability to keep up with the increasing demand for connectivity. On the other hand, the most immediate impact for consumers would be an increase in the cost of services.
Related Article: Telecom subscribers face a 40% tariff hike
Nigeria’s telecom sector is currently one of the most price-sensitive, with millions of people depending on reasonably priced plans to stay connected. A substantial price increase might put a strain on household budgets, especially for low-income households and individuals who rely on mobile networks for basic functions including financial transactions, education, and communication. The profitability of small firms that depend on inexpensive data to function may be impacted by increased operating costs. This has raised questions about accessibility and affordability in a time when digital connectivity is increasingly indispensable.