Nigeria’s telecommunications industry is under severe pressure and all four GSM operators could see service revenues take a hit, owing to the combination of harsh operating environment and the knock-on effects of the country’s raging economic downturn, industry observers say.

Strong economic headwinds arising from the steep decline in global oil prices, along with the devaluation of the naira by the Central Bank of Nigeria (CBN) are threatening the revenue projections of operators in country’s telecoms industry, BusinessDay investigations show.

The price of OPEC basket of twelve crudes stood at $59.96 a barrel on Tuesday, according to the organisation’s secretariat calculations, down from $104 per barrel in August. In view of this, the Buhari-led administration is contending with a revenue crisis, amplified by widespread corruption, which is dampening government finances and currently being felt by the citizenry and their businesses.

Eighteen out of 36 states of the federation are technically bankrupt, with a backlog of unpaid workers wages and salaries running into months. “The resultant decline in consumer spending power is keenly felt by MTN and many other businesses”, said Funmi Onajide, general manager, corporate affairs at MTN Nigeria.

Inflation rose 0.2 percentage points to 8.2 percent in June, the fourth consecutive year-on-year rise in the headline index since the price easing seen in February.

With a monthly Average Revenue per User (ARPU) of N1,193.10 and an active subscriber base of 145 million lines, calculations show that subscribers on the networks are expected to spend an estimated N2.1 trillion on calls in 2015. ARPU is the financial performance benchmark that measures the average monthly spend of subscribers.

With consumers closely prioritising their needs, resulting in a keen battle for a share of their wallet, concerns are that telcos might struggle in terms of revenue generation.

Industry observers are of the view that the cost of doing business has also risen sharply as a result of fierce economic headwinds in the shape of naira devaluation and inflation – all direct fallouts of the steep decline in global oil prices.

Onajide said the devaluation of the local currency by the Central Bank of Nigeria (CBN) has added to the cost of doing business, especially in an industry extremely dependent on FX (Foreign Exchange) and capital.

“The recently introduced CBN policy that stipulates that importers of finished goods should buy FX through interbank channels, has further increased our costs in an environment where there is constant pressure to reduce tariffs”, said Onajide in an interview with BusinessDay.

The ensuing FX crunch currently plaguing the telecoms industry is also slowing down on-going network expansion initiatives across the country, as the cost of equipment and infrastructure procurement hits the roof, industry observers have said.

According to them, the telecoms industry is currently faced with the challenge of inadequate network capacity (limited base stations, network switching and transmission capacity). These contribute partly to the problem of low call set up rates, high rate of call drops and poor call completion rates.

“Nigeria with a population of more than 160 million people had about 20,000 base stations at the end of 2010. The UK with just about 60 million people had more than 50,000 base stations at the same period. Thus, Nigeria needs more than 100,000 base stations to service its huge population”, said Lanre Ajayi, national president, Association of Telecommunications Companies of Nigeria (ATCON).

According to Ajayi, “more investment would be made towards network expansions when the operating environment becomes friendlier”.

The industry is still grapling with other issues which hinder the deployment of critical network infrastructure. These, they say, include multiple taxation and regulation, delays in site approvals and inordinate Right of Way (RoW) charges.

“Its been challenging”, said Ayotunde Coker, managing director of Rack Centre Limited, West Africa’s most connected data centre. “We have been assessing the impact of the downturn on our operating cost. We have to invest in bringing in infrastructure but we must localise as much as possible”, said Coker. The impact of economic downturn on telecoms is already apparent as sectors’ contribution to the total economic output of the nation dropped by a margin in the opening quarter 2015, according to the Nigerian Bureau of Statistics (NBS).

In naira terms, the sector contributed N1, 344,489.25 million or 8.38 percent to the total economic output, which is a marginal decline from the 2014 average contribution of 8.46 percent.

One of the measures telecoms firms can put in place to manage their costs is to transform procurement practices to tilt towards local content, long term partnerships models which encourage economies of scale.

“We also enter into smart contracts which are designed to help mitigate exchange rate risk and other exposure that are beyond our immediate control”, said Onajide. But its not all doom and gloom. Pyramid Research, in a recent industry study, said the nation’s vibrant telecoms market will grow at a Compound Annual Growth Rate (CAGR) of 2 percent over the next five years. According to the research company, the long-term outlook of the industry looks bright as service revenues are expected to rise by 18.5 percent, to $10.9 billion in 2019, as against $9.2 billion in 2013. The growth is expected to be driven by rising demand for mobile data services, especially amongst the youth. “…low oil prices have led to a depreciation of the naira against the US dollar, but the telecoms market will remain an integral part of the nation’s efforts to diversify its sources of growth,” said Severin Luebke, analyst at Pyramid Research.

http://businessdayonline.com/2015/07/gsm-operators-under-pressure-as-economic-crisis-hits-telecoms/#.VZTH1flViko Cc:lalasticlala

Summary please.

Mtchew.. These thieves

Abeg summarize

How

So we should expect a higher call rate?

gt

4tt 2 comment

Story story

As much as we know how the economy is dwindling these service providers shouldn't complain now they would want to increase tariffs.. awon one jatijati

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prof1990:
f

Fuc-k? Fatima? For? Free?

wunmi590:
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Get sense please

in summary....

iyke926:
Fuc-k? Fatima? For? Free?

lmao please fatima is fasting oooo

ApcSucks:



Get sense please

And if you think you have sense, you should have ignored it

Useless service providers looking for a way to increase their tariff, to improve their services is a problem but only good at dishing money to yeyebrities.

prof1990:


lmao please fatima is fasting oooo

OK...u need to start fasting too to chase that spirit wey dey make u book space.

.

Change everywhere but sadly it's confusing

And the dullard can't do anything about it.

Change is here.

I knew this illiterate abo.ki doesn't have an idea what he's taking on as president, he's still shell shocked and doesn't know what to do.

My Glo line, serves me well, atleast always blogging nairaland..

The reason why I read threads like dis one is to read d comment of nairalanders and laugh.

With a monthly Average Revenue per User (ARPU)
of N1,193.10 and an active subscriber base of
145 million lines, calculations show that
subscribers on the networks are expected to
spend an estimated N2.1 trillion on calls in 2015.
ARPU is the financial performance benchmark
that measures the average monthly spend of
subscribers

So Nigerians spent as much as their national budgets in buying MTN services

we are reading to pay more

Chai

Is this why I get incessant messages from em?

dave2meek:
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diaris God o

E 2 long jawe... D summary b say... I dnt call pipo like I do call b4.... Cus d way tins dey go, every kobo matters now...

Motigbo