Tariff hike: Telecom operators hint at possible service disruptions, service shedding

Following the impasse on the tariff hike push by telecommunications operators, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) has warned that service disruptions are imminent unless there’s an increase in tariffs. The association claimed that the hike is necessary for escalating operational costs.

Recall that a while ago, Technext reported that the Nigerian Communications Commission (NCC) dismissed reports that telecommunications companies are set to increase their tariffs. The commission also described reports suggesting a tariff hike in January 2025 as false.

In a statement issued on Monday by Chairman, Gbenga Adebayo ALTON said that the telecom sector had been financially crippled by rising operational costs which were caused by inflation, economic situation, volatile exchange rates and rising energy prices. 

The Chairman noted that despite the varying difficulties, tariffs have remained unchanged, leaving mobile operators in a challenging situation of managing quality and expanding their network. He then expressed that the sector is “under siege”. 

Adebayo warned that the failure to grant an immediate tariff adjustment may lead to operators resorting to service shedding. This is a situation where there is limited availability of telecom services in certain areas.

Likewise, service shedding in telecommunications is the deliberate reduction or limitation of telecom services in specific areas or at certain times as a result of operational challenges faced by telecom companies.

“If nothing is done, we might begin to see in the new year grim consequences unfolding, such as service shedding. Operators may not be able to provide services in some areas and at some times of the day leaving millions disconnected, there will be significant economic fallout, because businesses will suffer from a lack of connectivity, stalling growth and innovation,” he said.

The association’s Chief pointed out that service shedding will harm national security due to key sectors suffering from mobile network disruptions

“There will also be national economic disruption where key sectors like security, commerce, healthcare, and education which rely heavily on telecom infrastructure, will face serious disruptions,” Adebayo added.

He then noted that operators can no longer bear the escalating financial burden and without a tariff hike, there will be little growth in the sector’s ability to improve infrastructure and deliver quality service.

Lastly, Adebayo called on various stakeholders for necessary intervention and expressed hope for a sustainable future. He added that an improved 2025 in the sector is only possible with a tariff hike.

The push for tariff adjustment by ALTON and the Association of Telecommunications Companies of Nigeria was first made in April 2024. This was the first move for a tariff hike after it has witnessed stability for the past 11 years. 

Telecom financial struggles

Amidst the push and call for tariff adjustments, telecommunications companies are cut within a red line of dealing with increasing operational costs. Hence, they are seeking approval for a 10% tariff increase. The telecom companies believe that this will help them meet up with the current economic realities.

In October, MTN Nigeria raised concerns about the impact of the existing tariff pricing structure on its operations and survival. According to CEO, Karl Toriola, the company might shut down if things don’t change soon.

The CEO noted that the telecommunications sector has incurred huge losses that require significant intervention. He added that MTN, the largest telecommunications company in the country with about 78 million subscribers, is not left out.

While calling for immediate intervention, he pointed out that the company is now surviving on the reserves it has accumulated in two decades. “We must return the industry to profitability,” he stated, emphasizing the urgent need for reformation. He also noted that MTN, a top taxpayer in the country, has seen its tax contributions decline following several financial crises.

Toriola added that telecommunications operators face rising costs including increasing the rate of diesel prices used in powering base transceiver stations. Following their first-half results, MTN and Airtel adopted a cautious capital expenditure model for 2024. However, the two other mobile operators in the country, 9mobile and Globacom, were not publicly listed.

Recall that MTN Nigeria recently issued Commercial Papers to strengthen its short-term working capital.

The latest Series 15 and 16 of its Commercial Papers (CP) are targeted at raising N50 billion following the successful implementation of the Series 13 and 14 CP issuance on November 29 where the company raised N72.18 billion, representing 144 per cent above the N50 billion target.

The back and forth over tariff hike

The latest 100 per cent price increase by Starlink might spell a new change. The Standard (Residential) package, which previously cost N38,000, will now cost users N75,0000.

As the NCC is. yet to respond to the development, a possible approval might be imminent.

Although the Commission when disclaiming the tariff hike rumours assured that it remains committed to ensuring stability within the telecommunications industry, it left the possibility of a change when it indicated in its announcement that updates on tariffs and other related issues would be communicated through its official platform.

It also noted that there are procedures to that effect, which shall be followed. 

In the same vein, the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, recently hinted at a possible tariff hike for mobile operators.

He explained the possibility of a tariff hike and added the significance of ensuring valuable output from mobile operators.

“Beyond just the conversation, which is out there, which is about increasing the tariff, Yes, we think there may be a need for the hike, but lots more need to be done as a country to ensure that the sector is competitive and beyond just supporting them to be competitive, the government must support be investing in digital infrastructure as well,” Bosun Tijani added.

Also Read: NCC dismisses claims of possible tariff hike by telcos, says they are baseless rumours.