Almost all the sub-sectors of Nigeria’s telecoms industry, including the 219 million active subscriber base, had one harrowing experience or the other in the first half of the year. Hence, the sector requires an urgent repositioning going forward, ADEYEMI ADEPETUN writes.
For Nigeria’s $76 billion telecoms sector, the first half (H1) appeared tedious for both users and operators. The sector houses several players including mobile network operators (MNOs), value-added service (VAS) providers, data centre operators, towercos among others.
With the quality of service almost at its lowest ebb, operators confronted various issues, including regulations, rising energy costs, stagnant tariffs, fibre cuts and vandalism.
Indeed, in the first six months of 2024, several issues came to the fore including the barring of millions of telecoms subscribers in the country for their failure to link their Subscriber Identification Module (SIM) cards with their National Identification Number (NIN), going by the directive handed the mobile network operators by the Nigerian Communications Commission (NCC), which lapsed on February 28.
However, some of the affected subscribers have started retrieving their telephone lines, apparently after complying with the directive. However, in the heat of the crisis, the Association of Licensed Telecoms Operators of Nigeria (ALTON), led by Gbenga Adebayo, said over 40 million telephone lines were barred.
In the period also, the operators (MNOs) reported huge losses, which were triggered largely by their exposures to foreign exchange crises. For instance, MTN Nigeria and Airtel Africa recorded a combined loss of N511.27 billion, mainly due to a nearly 30 per cent devaluation of the naira earlier this year.
Airtel Africa’s Q1 loss after tax was N118.57 billion ($91 million), a far cry from the N104.65 billion ($227 million) profit after tax it recorded in Q1, 2023. Similarly, MTN Nigeria’s N392.69 billion loss after tax is a departure from the N108.43 billion profit after tax recorded in the same period last year. Both companies attributed these losses to foreign exchange headwinds.
MTN’s foreign exchange loss for Q1 was N575.69 billion, and Airtel Africa’s FX loss for the entire year ended March 2024 was $549 million.
State govts compound woes
AMID calls for better relationships between the states and telecoms operators, especially as regards regulations, this appears to remain a tall order.
While several states have lord exorbitant Right of Way (RoW) levies on operators, others are shutting down base stations. For instance, Kaduna State Internal Revenue Service (KADIRS) sealed six telecommunication masts across the state’s metropolis due to outstanding taxes amounting to N5.8 billion.
Among the sealed masts were MTN servers located at Tafawa Balewa Road, Surami Road, and Etsu Road, as well as Globacom server at Shehu Laminu Road, along with a general mast (ATC) serving various communication services at Unguwan Rimi, Nagwamatse road.
The Secretary and Legal Adviser of the KADIRS Board, Mrs Aysha Ahmad, emphasised the necessity of such measures in enforcing compliance among companies failing to meet their tax obligations.
“We are left with no option but to exercise the powers vested in us by the law to enforce compliance,” she affirmed during a media briefing on the sidelines of the operation.
Trapped funds among operators
WHILE the deposit money banks (DMBs), especially the big banks have refused to pay the telcos the N200 billion legacy debt over the use of Unstructured Supplementary Service Data (USSD), within the telcos space itself, are trapped funds, which run into hundreds of millions of naira.
With the MNOs owing each other in interconnect debts, the Value Added Service (VAS) has been fighting a cold war to retrieve their trapped funds with telcos.
VAS refers to services that are not within the scope of core telecommunications services such as voice calls and text messages. These services can either be rendered by telecommunications companies or by other companies working with or through telecommunications companies.
Examples of such services include multimedia messaging, caller tunes, among others. The market value of the industry was estimated at $200 million per annum in 2016 and grew to $500 million by 2021.
The trapped funds, alongside the introduction of the Do-Not-Disturb (DND) in 2017 by the NCC and other challenges have cut the VAS ecosystem growth by about 35 per cent with thousands of jobs lost.
Speaking on this development, the National Coordinator, Wireless Application Service Providers of Nigeria (WASPAN), the umbrella body for VAS operators, Chijioke Eze, maintained that the health of the sub-sector remained stable.
On trapped funds, Eze said there could be instances where an MNO may experience cash flow deficiencies and notify their partners on new payment terms, “but also in some cases, this idea of payment discrepancy could stem from unrealistic expectations of some VAS players as you mentioned. However, some MNOs have owed some VAS companies for extended periods.”
Already, the NCC, who has considered reviewing the VAS ecosystem for efficiency, noted that it has carried out a benchmarking exercise with some jurisdictions across the world and observed that there may be currently more VAS Aggregator Licensees than may be required.
NCC said there are currently 49 VAS Aggregator licensees in the country, “there is, thus, the concern of saturation, with not enough market for the aggregators due to “over-supply”. This has also led to an increase in several aggregators with difficulties interconnecting with the four MNOs.”
Drop in startup funds to Nigeria
THE startup ecosystem is also struggling as funding continues to slow. In Africa, funding to Nigeria, South Africa, Egypt, Kenya and other parts dropped by 31 per cent in H1, 2024.
This was revealed by Africa: The Big Deal, in its half-year report of startup funding. It noted that, overall, startups in Africa raised $780 million, which represented a -31 per cent drop compared to H2 2023, and an even starker -57 per cent decline compared to H1 2023 if seasonality is to be noted.
It said two-thirds of this funding was in the form of equity, and a third was debt. The report stressed that as of 2023, this is a much higher share of debt than what was seen in the past (17 per cent on average since 2019).
Accordingly, four out of five dollars invested in start-ups in Africa went to ventures based in the Big Four. It stressed that is high, “but not the highest we’ve seen (92 per cent back in H1 2023). A third of all the funding went to Kenya alone.”
Out of the $780 million secured, Kenya garnered $244 million, representing 32 per cent of the total funding raised, while Nigeria received approximately $172 million. Egypt took a share of $101 million, and South Africa secured $85 million.
Over the last five years, from 2019 to 2023, Nigerian startups received the largest portion of funds raised by African startups, accounting for 29 per cent of the $15 billion total investments. Specifically, Nigerian startups received $4.4 billion out of the $15 billion that flowed into Africa during this period.
As FDI returns slowly
AGAINST dwindling investments, the sector attracted a total of $191.5 million in Foreign Direct Investments (FDIs) in the first quarter of this year. This was disclosed by the National Bureau of Statistics (NBS) in the latest capital importation data.
Indeed, the Q1’24 figure surpassed the total FDI the sector recorded in 2023, which stood at $134.75, according to the NBS. Year-on-year, capital importation received by the sector in Q1’24 represented a 769 per cent increase compared with $22.05 million received in Q1 2023. Similarly, compared with the $22.84 million received in the preceding quarter, Q4, 2023, this also represents a 738 per cent growth in investments.
The investments are coming amid a move by the Federal Government to woo investors into the sector. Indeed, the Federal Government recently launched a Special Purpose Vehicle (SPV) for the delivery of an additional 90,000km of fibre optic cable to complement existing connectivity for universal access to the Internet across Nigeria.
According to the Minister of Communications, Innovation, and Digital Economy, Dr Bosun Tijani, working with partners and stakeholders from the government and private sector, the SPV would build the additional fibre optic coverage required to take Nigeria’s connectivity backbone to a minimum of 125,000km, from the current coverage of about 35,000km.
Sector urgently needs retooling
TO move the sector forward, telcos have continued to insist on tariff hikes to cushion the impact of the sluggish economy on operations despite the Minister, faulting such calls.
Tijani rather urged the companies to explore innovative solutions to counter inflationary pressures and high operating costs. NCC, however, admitted that the telecoms sector is challenged and hoped that the various issues would be tackled headlong.
The NCC EVC, Dr Aminu Maida stated this in Lagos when he was hosted by telecoms companies. Maida, who recognised the challenges faced in the industry, said although Nigeria has close to 200 million connected lines, more than half are on 2G.
“So, there is a lot of work to be done, especially in addressing challenges faced by MNOs (Mobile Network Operators) and OEMs (Original Equipment Manufacturers), among others for long-term sustainability.”
The NCC EVC admitted that the challenges are acute, “but we are looking at them working with the minister. The industry has done well for the country, contributing about 14 per cent to the GDP.”
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