The operating costs of telecommunication companies in Nigeria rose from N1.4tn in 2020 to N1.66tn in 2021, showing an increase of N265.25bn.
This is according to the ‘2021 Subscriber/Network Data Annual Report’ by the Nigerian Communications Commission.
The report reads in part, “Total operating cost for the mobile network operators increased from N1,395,000,000,000 in 2020 to N1,658,235,000,000 at the end of 2021. This illustrates an increase of 18.74 per cent from the figure reported in 2020.”
In April this year, telecommunication providers under the aegis of the Association of Licensed Telecommunications Operators of Nigeria said the rising cost of diesel had impacted negatively on their operational costs, while asking the Federal Government for special interventions. The President, ALTON, Mr Gbenga Adebayo, said that the industry was worried about how the rising cost of diesel would further drive the high cost of business.
He stated that there was a need for an intervention to save the sector, noting that operators might have no other choice but to begin a process of price review. He said, “Diesel is now very expensive, from N250 to over N700. All network planning, operational expenses, and planned projection for the year is based on the diesel prices. This has increased. Today, you know the implication of that. This is one problem; cost has gone up.”
Adebayo added that telecos were also struggling with the availability of diesel and the logistics of delivering it to sites.
He added, “We will be approaching the government for some form of intervention. But we are mindful of the high cost of living, and the implication of this on the economy and citizens. And so, we are not going to talk about direct price increases. But we will be approaching the government for some kind of intervention to cushion the effect of these changes on us as an industry.”
The PUNCH had reported that the cost of powering telecommunication services could hit N60bn per month and N720bn in one year if the cost of diesel reaches N1500/litre as hinted by marketers of the product.
Industry data estimate that mobile telecommunication operators use an average of 40 million litres of diesel per month to power telecom sites. This, therefore, means that telecoms firms may spend as much as N720bn in powering their services in 12 months.
According to ALTON, the telecom industry is one of the largest consumers of diesel in the nation accounting for about 35 per cent of operators’ costs. In a recent letter to the Nigerian Communications Commission, ALTON had lamented the high cost of providing telecom services in the nation, hinting at the need for a price review of these services to reflect market prices. It said, “The telecommunication industry has been heavily financially impacted following Nigeria’s economic recession in 2020 and the effect of the ongoing Ukraine/Russia crisis. This has resulted in an increase in energy costs (which constitutes an appreciable 35 per cent of ALTON’s members’ operating expenses). Consequently, the cost of diesel required to power operators’ towers, base stations, and offices rose by a staggering 233 per cent from N225 per litre in January 2022 to over N750 per litre in March 2022.”
In the letter, ALTON suggested a 40 per cent upward review in the cost of calls, SMS, and data. This would have increased the floor price of calls from N6.4 to N8.95 and the price cap of SMS from N4 to N5.61.