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Diesel cost threatens Nigeria’s telecoms

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By Abraham Adekunle

Navigating the storm of rising fuel costs threatening the industry.

The telecommunications industry in Nigeria is facing a formidable challenge in the form of escalating diesel prices. This poses a threat to the sector’s communication backbone. Telecommunication operators grapple with mounting expenses, with diesel expenditures surging to ₦50.28 billion in February, marking a substantial 50.2 percent increase compared to the same period in 2023. The reliance on diesel is critical for powering telecom infrastructure, particularly base stations, due to the erratic nature of grid electricity. Industry data reveals that operators consume an average of 40 million litres of diesel monthly to sustain telecom sites, with prices soaring to ₦1,257+ per litre in February 2024.

As of the end of 2022, the Nigerian Communications Commission (NCC) reported a staggering 34,862 towers and 127,294 base stations across the country, underscoring the magnitude of the telecom infrastructure that demands substantial energy resources. The telecoms industries operational costs amounted to ₦2.09 trillion in 2022, according to the commission’s figures, highlighting the significant financial stakes involved. In response to the escalating costs, telecommunication companies sought a 40 percent increase in call, SMS, and data prices in May 2022, citing the rising operational expenses, including a 35 percent surge in energy costs. The effects of these cost escalations were palpably evident in the audited results of MTN Nigeria Communications Plc for the year ended December 31, 2023, where increased operational expenses were attributed to currency devaluation, higher inflation rates, energy costs, and regulatory changes.

Investments in alternative energy sources can be viable.

Industry experts emphasize that the relentless rise in diesel costs has reverberated across sectors, attributing it to the lack of stable electricity supply from the national grid. This situation becomes particularly challenging for telecom infrastructure companies, which bear the brunt of sourcing and financing diesel for operations, impacting their sustainability and overall industry resilience. Gbenga Adebayo, president of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), highlighted the strain on infrastructure companies, stressing that current telecom service prices fail to cover production costs. Adebayo emphasized the urgent need for new pricing regimes to align with the industry’s operational realities, advocating for a strategic approach to address the sector’s sustainability challenges.

Amid these challenges, there are discussions about potential investments in alternative energy sources. While alternative energy presents a viable intervention, industry experts caution that it cannot fully replace traditional energy sources like diesel due to limitations in reliability and scalability. The vulnerability of alternative energy infrastructure, including theft and inadequate backup capabilities, underscores the complexities involved in transitioning away from diesel reliance. Recent strategic moves by telecom giants, such as MTN’s transfer of tower ownership to ATC from IHS, reflect the industry’s evolving strategies to navigate energy costs. Karl Toriola, CEO of MTN Nigeria, emphasized a multifaceted approach that includes cost optimization, green energy utilization, and sustainability initiatives to mitigate the impact of energy costs on operations.

Development of infrastructure remains a priority.

Further, the surge in diesel costs, influenced by global crude price trends, domestic refining challenges, and currency fluctuations, has prompted industry stakeholders to advocate for adjustments in service pricing. ALTON’s advocacy for higher call tariffs and data prices underscores the industry’s collective efforts to address the looming threat posed by exorbitant energy costs. To delve deeper into the telecom industries dynamics in Nigeria, it’s essential to understand the broader context of technological advancements, regulatory frameworks, and market competition. The telecom sector has witnessed significant transformations over the years, evolving from traditional voice-based services to encompass a wide array of data-centric offerings, including mobile internet, digital services, and IoT (Internet of Things) solutions.

Nigeria boasts a vibrant telecom market characterized by robust competition among major players such as MTN, Airtel, Globacom, and 9mobile. These operators continually invest in network infrastructure, spectrum acquisitions, and service innovation to meet the growing demands of consumers and businesses alike. The proliferation of smartphones and affordable data plans has spurred a digital revolution, driving increased connectivity, digital inclusion, and economic empowerment. However, alongside these advancements, the telecom industry grapples with challenges ranging from regulatory complexities to infrastructure limitations and cybersecurity threats. Regulatory frameworks play a crucial role in shaping the industry’s trajectory, balancing consumer interests, investment incentives, and market competition. The NCC serves as the regulatory authority overseeing the telecom sector, ensuring compliance with licensing requirements, quality of service standards, and consumer protection measures.

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Infrastructure development remains a priority for telecom operators, particularly in expanding network coverage to underserved and rural areas. The deployment of 4G and 5G technologies promises enhanced broadband speeds, low latency, and support for emerging applications like video streaming, cloud services, and IoT deployments. However, infrastructure investments require significant capital outlays, regulatory approvals, and collaboration with government agencies and local communities. Cybersecurity emerges as a critical area of focus, given the increasing prevalence of cyber threats, data breaches, and privacy concerns. Telecom operators invest in robust cybersecurity measures, including network monitoring, threat intelligence, encryption protocols, and user education programs. Collaborative efforts with cybersecurity agencies and industry stakeholders aim to strengthen resilience against cyber attacks and safeguard digital assets.

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