Telecoms sector hard hit by harsh govt policies — REPORT

For instance, in Q1 2024, the sector’s contribution in real terms to the GDP dropped by 12.60 per cent quarter-on-quarter to N2.67 trillion.

According to the National Bureau of Statistics, NBS, the sector also saw a 9.89 per cent decline in quarter-on-quarter real terms contribution.

Even as the sector achieved a year-on-year growth rate of 5.43 per cent, ironically, it still represents a 4.89 percentage points decline from the same period in 2023.

The decline, however, is attributable to the sector’s weakening financial performances, sustained losses by telecom operators; occasioned by the dwindling buying power of those who use the services of the sector.

MTN Nigeria in April reported a pre-tax loss of N575.69 billion, a sharp reversal from the N162.9 billion profit reported a year earlier. This is after paying well over N4.2 trillion in taxes since inception.

Also, Airtel Africa reported a loss after tax of US$89 million for the fiscal year ending March 31 2024.

The losses are said to be primarily driven by exchange rate depreciation, which not only affected the operators but also the subscribers.

The economic crunch and high inflation have pushed many Nigerians towards lower recharge denominations and dropped Average revenue per user abysmally.

Chairman of NATCOMs, Deolu Ogubanjo said the ICT industry particularly as it concerns the telecom sector requires the government’s deliberate investment of goodwill.

“The subscribers are worse hit in the situation the telecom sector found itself. It is easy to be deceived that two telcos, MTN and Airtel who are open to publicly showing their financial reports, recently announced that Nigerians spent over N500 billion on data consumption in just a quarter.

“But it’s not surprising. With the economic condition the only option available for business people is to showcase their businesses online. So, many people go hungry and some borrow to feed data.
“But the voice subscription which mainly powers communication and drives Average revenue per user is suffering and that’s mainly why operators are declaring huge losses.

“The Federal Government should look at its forex and petroleum pricing policies. I think most especially there’s a need to revisit the Petroleum Industry Act, in a way to make it support refining crude in Naira. My members are suffering. It will affect the telcos and eventually rub off adversely on the aggregate economy,” he added.

Corroborating their president, a few subscribers who spoke to Vanguard did not recount a comfortable experience.

Mrs Patricia Okoro, a chef in one of the prominent hotels in Lagos said: “Frankly speaking, I have abandoned my phone. Before, I used to recharge N1,000, and I will use it for my online prayers every morning.

“Currently, I have stopped because it was consuming so much data and things aren’t getting better. So what I do now is to recharge N100 or sometimes N200. I just use it to send and receive WhatsApp messages only.

“Making calls is out of the picture because you can’t say what you want within the minutes the small airtime you have can allow you.”

Also, a Lagos-based musician, Samuel Nsika, said ‘’before things got to a head as we are witnessing now, I used to recharge up to N3,000, use N1,000 to subscribe and make calls with the rest.

“But now, one has to think of feeding first, before feeding the phone. But, it’s not funny for my business, because I need to constantly stay in touch with my producer and my fans.”

Dwindling purchasing power

The declining purchasing power of users is also affecting the Nigerian and indeed African smartphone markets.

In Q1 2023, Africa’s smartphone market led by Nigeria’s mobile market, declined 3.4% quarter on quarter (QoQ) to a total of 17 million units, the lowest level of shipments since the start of the COVID-19 pandemic in Q1 2020.

IDC’s data showed that rising inflation and local currency depreciations against the US dollar negatively impacted demand across the continent. Shipments of feature phones across Africa also declined in Q1 2023.

George Mbuthia, a senior research analyst at IDC, said: “Africa’s smartphone declined throughout 2022 amid weak consumer demand, and this has been exacerbated by rising inflation and higher device prices.

“The average selling price (ASP) for smartphones grew QoQ due to high import costs and the fact that many vendors’ flagship devices are now equipped with 5G and have therefore moved up in price to the premium segment,” he added.

Why the Golden Sector Needs Salvation

Bismarck Rewane agrees that the fortunes of the telecom sector are dwindling but warned that allowing the golden sector to lose its sheen will spell doom to the aggregate economy.

He highlighted the signs of an ailing ICT sector, at a recent breakfast meeting at the Lagos Business School, LBS, in Lagos.

“When the EBITDA is sharply lowering by 12% to N1,202bn, then things are not completely in place. “Telecom CAGR was 32% per annum between 2000 and 2010 but now, the sector’s growth is stagnating at 6 per cent, although, that is still above population growth rate of 2.2%.

“Yet, the telecom industry is becoming relatively unattractive and while expenditure has increased over the years, returns and revenues have squeezed to negative margins.”

He, however, highlighted some of the causes of this ugly scenario to include Limited access to foreign exchange, rising inflation, high operating costs, regulatory burden, multiple taxation, Right of Way issues, vandalism – insecurity, declining investment and lack of new investment, poor quality of service, and state and local government extortions.

For him, the short and long-term solutions to the problem are to increase tariffs and deregulate prices respectively.

Rewane said that “Market distortions arise from fixed prices, which hinders competition and affordability for consumers.”

He also described price controls as a deterrent to investment, impacting service quality
His reasons for proffering the solutions were that the decline in telecom sector investments limits infrastructure development and technological advancements while over-regulation stifles telecom innovation and quality, distorting markets and diminishing investment incentives.

He noted that the economic repercussions of such practices include job losses, reduced GDP contribution, and digital inclusion setbacks, which Nigeria does not need to experience on a large scale.

He said if these measures are not taken, the ICT industry may sink into oblivion but warned: “If the sector collapses, the economy fails.

“Without immediate intervention, the revenue potential from telcos may start falling drastically. Telcos are linked to many sectors, hence, any disruption in its operations will have a chain effect on other sectors of the economy.”