Recession : Telecoms Operators Set For Tariff Hike
Telecommunication subscribers in the country may be in for a rough year as the network operators are said to be considering another increase of their tariffs soon in order to sustain services amidst a tough operating environment.
Sources within the industry told LEADERSHIP Weekend that the major reason for the planned hike, according to the telecommunication operators, was the increasing multiple taxation by governments at different levels.
LEADERSHIP Weekend recalls that the proposed new data tariff floor, approved by the Nigerian Communications Commission (NCC), was suspended last December, after a public outcry and intervention by the Senate.
In its reaction, the Association of Licensed Telecommunications Operators of Nigeria (ALTON) has expressed its dissatisfaction with the new development.
It made its position known in a statement by its chairman, Mr. Gbenga Adebayor.
This year, Nigerian telecom consumers may witness increase in their voice, data and broadband services from the mobile network operators.
Already, the planned introduction of a nine per cent Communications Service Tax (CST) by the federal government through the National Assembly to shore up 2017 budget revenues may be another trigger that would lead to the hike.
Engr. Adebayo said, “The tax bill, if enacted, will bring hardship to telecom subscribers. ALTON and some stakeholders, like the GSMA, Consumer Advocacy Foundation of Nigeria (CAFN) and NATCOMS have jointly spoken out that the bill is unacceptable to us.”
Meanwhile, the president, Association of Telecommunication Companies of Nigeria (ATCON), Engr. Olusola Teniola, noted that telecom companies do not object to tax reforms nor regard taxes as a burden.
“The truth is that there is severe over-taxation in our industry. It explains the slow penetration of services into unserved areas of the country.
“Contrary to popular belief, telecom operators and service providers are barely sustaining existence in these times. We, therefore, suggest that an increase in value added tax (VAT), which is already included in all services of telecommunication by an increase that is not beyond one per cent, should be a good reform strategy,” he said.
In November 2016, Nigerian telecom consumers were
inundated with text messages from all the operators about an impending hike on their data and Internet service with effect from December 1, 2016. The outcry that greeted the hike and the intervention of the Senate led to the temporary suspension of the implementation by the telecommunications regulator, the Nigerian Communications Commission (NCC).
Already, the NCC has instituted a study to determine retail prices for broadband and data services in Nigeria.
This study, which the mobile operators are banking on to be favourable to them, may be the premise for them to raise the bill for telecom services used by consumers.
The network operators had faulted the suspension of the data tariff floor by the NCC, insisting that data prices be set at realistic levels to ensure that they are able to provide first-rate quality of service to
their subscribers. The suspended data tariff floor would have increased charges for data services used by consumers.
Facts on ground showed that the NCC had written to the operators on November 1, 2016 on the determination of an interim price floor for data services after a stakeholders’ consultative meeting on October 19, 2016.
The price floor in 2014 was N3.11k/MB but was removed in 2015. The price floor that was supposed to flag off on December 1, 2016 was N0.90k/MB.
Director, Public Affairs, NCC, Mr. Tony Ojobo, had explained that the decision to have a price floor was primarily to promote a level playing field for all operators in the industry and encourage small operators and new entrants.
According to him, in taking that decision, the smaller operators were exempted from the new price regime, by virtue of their small market share.
“The decision on the price floor was taken in order to protect the consumers who are at the receiving end and save the smaller operators from predatory services that are likely to suffocate them and push them into extinction. The price floor is not an increase in price but a regulatory safeguard put in place by the telecommunications regulator to check anti-competitive practices by dominant operators,” he said.
Before the suspended price floor of N0.90k/MB, the industry average for dominant operators, including MTN Nigeria Communications Ltd, EMTS Ltd (Etisalat) and Airtel Nigeria Ltd, was N0.53k/MB.
Etisalat offered (N0.94k/MB), Airtel (N0.52k/MB), MTN (N0.45k/MB) and Globacom (N0.21k/MB).
But the smaller operators and new entrants, like Smile Communications, Spectranet, and ntel charged different rates. Smile Communications charged N0.84k/MB, Spectranet charged N0.58k/MB and ntel charged N0.72k/MB.
Publicity secretary of ALTON, Adebayo, and Mr. Damian Udeh said data prices falling to unreasonably low levels have led to operators being unable to recover the cost of providing data services and reinvesting in capacity expansion to accommodate the increased usage arising from lower tariffs.
“The situation has been compounded by the recent economic challenges characterised by the steep depreciation of the naira, the need to resort to the parallel market and foreign exchange scarcity which have considerably increased the capital and operational cost of providing telecommunications services, thus making current data tariffs unsustainable.
“This situation, if left unaddressed, could result in a sustained deterioration in the quality of data services across all networks and the attendant poor quality of experience for users. In this regard, our members await the conclusion of NCC’s market study when the Commission will be in a position to determine its requisite intervention,” they said.
According to Adebayo, “We are aware that the NCC introduced the minimum price for data services to help ensure cost recovery and drive the continued investment in the telecommunications sector necessary for the provision of world-class data services for the overall benefit of the Nigerian subscriber and the Nigerian economy.”
The operators further emphasised that while it is imperative that they continue to explore opportunities to provide their subscribers with more value for their money, it is important that prices be set at realistic levels which ensure that subscribers are not only able to afford services but that operators are also in position to provide first-rate Quality of Service (QoS) to their subscribers.