High fuel prices, naira depreciation reasons for telecom tariff hike – PTECSSAN President, Tomori

After the Nigerian Communications Commission approved a 50 per cent increase in telecom tariffs, the Nigeria Labour Congress announced plans for a nationwide protest on February 4. In an interview with JUSTICE OKAMGBA, the President of the Private Telecommunications and Communications Senior Staff Association of Nigeria, Opeyemi Tomori, defended the tariff hike, insisting that electricity, fuel costs and fluctuating exchange rate were responsible. Excerpts:

Why did PTECSSAN support the 50 per cent telecom tariff hike and what informed the position?

The media has been full of discussions about the Nigeria Labour Congress’s rejection of the telecom tariff hike, and we, as the leadership of PTECSSAN, feel the need to set the record straight. Our stance is rooted in the reality of what is happening in the telecommunications sector.

The NLC’s condemnation is understandable from a standpoint of protecting the masses, it doesn’t overlook the actual challenges the sector is facing. As a Labour centre, it holds the responsibility of negotiations with the authorities to reach a win-win decision.

It is crucial to note that the Nigerian telecom industry is currently under immense pressure, and this tariff increase is not just a random decision, it’s a necessary move to avoid the sector’s collapse.

We’ve seen drastic increases in the costs associated with running telecom services. These increases stem from factors like the rising prices of fuel, electricity tariffs, and the cost of maintaining telecom infrastructure across the country.

When the Federal Government removed the subsidy on fuel, it led to an immediate and exponential increase in fuel prices. This directly affected our ability to maintain telecom base stations. The price of Automated Gas Oil used to power telecom sites has skyrocketed, as have petrol prices, which fuel the vehicles used by our field engineers. If we did not support this tariff increase, the consequences would have been dire—not only for the telecommunications sector but for Nigeria as a whole, as the collapse of the sector would have a ripple effect on other industries.

You pointed out that the rising operational costs are at the core of the decision to support the tariff hike. Could you speak on some of the key factors contributing to these escalating costs?

When we speak of increasing operational costs, we’re not talking about minor fluctuations. We’re talking about astronomical hikes in the prices of key resources needed to run telecommunications services. Let’s start with the basics: fuel and electricity.

The price of Automated Gas Oil, which powers the base stations, has increased dramatically from N842.25 in May 2023 to an average of N1,441.28. This is a major concern for telecom operators because these base stations allow the networks to function.  Moreover, petrol prices, which fuel the cars of our field engineers who maintain base stations and fibre networks, have also risen from N198 to over N1,030 in the same period.

Field engineers are essential to keeping telecom services running smoothly, and their ability to maintain equipment hinges on their mobility. As the cost of fuel continues to rise, so does the challenge of keeping up with maintenance schedules and repairs.

Beyond that, electricity costs have also surged. Electricity tariffs have seen an upward spike with the introduction of bands, which categorise cities into different tariff bands. The cities where telecom operators have their offices – such as Band A cities – now face some of the highest electricity tariffs. This leaves telecom companies with no viable option but to pass on these costs to the consumers.

Additionally, another critical factor is the cost of telecom equipment, which is largely imported. This is where the floating exchange rate policy of the Naira has had an immense impact. The naira exchanged for about N460 to 1 US dollar before May 2023. Now, it’s hovering around N1,700 to 1 US dollar, meaning telecom operators need a much higher amount of Naira to secure foreign currency to import equipment. This has compounded the cost of maintaining and upgrading telecom networks.

With the rising costs, is there a danger of service quality deterioration, and are there plans from the operators to mitigate this?

Absolutely, that’s one of the biggest fears right now. We’ve already seen the toll that these rising costs are having on service quality. The telecommunications industry is on the brink of a crisis, and if we do not take action now, the consequences could be severe.

Telecom operators are warning that they might have to resort to service shedding, much like what we see in the electricity sector, where certain areas get power for a few hours while others do not.  This kind of service disruption is not something we want for the telecom industry. Imagine being in a country where you cannot rely on consistent mobile network services or internet connectivity.

This would cripple essential services like banking, healthcare, and even security, all of which rely heavily on telecom infrastructure. If the tariff increase doesn’t happen, these disruptions will become a reality.

However, it’s important to recognise that this increase is not just about raising prices; it’s about sustaining the sector to ensure that we continue to have access to reliable services.

The alternative – failure to adjust the tariffs – is the collapse of telecom infrastructure, which would affect every sector in the country.

Some may argue that the telecom sector is profiting and could absorb the increased costs without passing them on to consumers. How do you respond to this argument?

I can understand why some people might think that the telecom sector is well-positioned to absorb these costs, but the reality is different.  While the telecom sector is vital to Nigeria’s economy, it is also one of the most capital-intensive industries. When you factor in the ongoing expenses of maintaining and upgrading infrastructure, paying employees, and the high costs of imports, you quickly see that the financial strain is immense.

Let’s take a closer look at the operational costs. Even if telecom companies generate revenue, much of that revenue is being consumed by overhead costs. You also have to consider the rate of inflation, which affects everything from staff salaries to operational expenses. Telecom operators are simply not in a position to absorb all these costs without compromising service quality or risking layoffs.

If telecom companies are unable to cover these costs, we could see job losses, as we’ve already seen in some sectors. The cost of production has increased exponentially, but workers’ wages have remained stagnant. It’s not just about protecting the businesses; it’s about ensuring that the workers in the sector can continue to earn a living wage, which they have not seen any increase in for quite some time.

What do you say to the NLC’s call for a protest against the tariff?

As I said earlier, the NLC oversees the end-to-end needs of both the workers and their places of work, to ensure there is continuity in operations. The problem this time around is that before such increases happen, the authorities are supposed to bring in the stakeholders in Nigeria, one of which is the NLC. I believe an optimal increase could have been reached without any resort to strikes and demonstrations. Let it be clear that the NLC leadership are very knowledgeable and experienced, they are not resisting simply because there shouldn’t be an increase in tariffs, but rather, to show displeasure that in planning and executing such an increase, the labour bodies were not consulted.  This was the same case during the removal of subsidies. It’s a pity this is repeating itself.

The increase is not some arbitrary decision made by telecom operators – it’s a necessity. If the government does not allow the tariff increase, we will face a complete collapse of the telecommunications sector.  We’ve seen what’s happening in other industries, and we’re all interconnected. If telecommunications goes down, banking, oil and gas, and other critical sectors will suffer.

Protests won’t solve the problem; but, it is to ensure that we get the attention of the authorities who are supposed to have called on us in the first instance.

Given the current state of affairs, what steps do you believe the government should take to prevent further strain on the telecommunications sector?

For the sector to avoid further strain, the government must address three key areas: fuel prices, electricity tariffs, and the value of the naira. These are the fundamental drivers of telecom operating costs. If these factors are not addressed, no tariff adjustments will be enough to stabilise the industry.

Firstly, fuel prices need to come down. The removal of fuel subsidies led to an immediate hike in fuel prices, and that has had a domino effect on every other sector, including telecommunications. If fuel prices remain this high, operators will continue to struggle with the cost of powering base stations and field operations.

Secondly, electricity tariffs must be reconsidered. With many telecom offices located in cities categorised as Band A, the electricity costs are exorbitant.  This adds another layer of financial pressure on operators who are already burdened by rising fuel costs. The government must work with operators to find a sustainable solution for energy costs.

Lastly, the naira must be stabilised. The floating exchange rate policy has made it significantly more expensive for telecom operators to import equipment and pay for services in foreign currencies. The depreciation of the Naira has made telecom services more expensive to maintain. If the Naira is not stabilised, it will be difficult for operators to continue functioning without continually raising prices.