Larger Telcos And The Government Must Treat Tier 2 Operators Fairly


Operators in the Telecoms sector, who make up the majority of Tier 2 firms, have urged the larger players, particularly the Mobile Network Operators (MNOs), to treat them fairly and better in exchange for growing contributions to Nigeria’s economy in 2023.

Internet Service Providers (ISPs), International Data Access Service Providers, and Value Added Service (VAS) companies are examples of Tier 2 operators.

The real Gross Domestic Product (GDP) of Nigeria in Q4, 2022, as calculated by the National Bureau of Statistics (NBS), was 16.22% influenced by ICT sector activity.

The NBS states that the ICT sector is divided into four sub-sectors, including publishing, motion picture production, sound recording and music, broadcasting, and telecommunications and information services.

According to the NBS, ICT contributed a total of 16.51 percent to the nation’s GDP in 2022, up from 15.51 percent in 2021.

Additional investigation revealed that the telecommunications sub-operations sector contributed 13.35% of the GDP in real terms, which helped the ICT sector’s real growth rate of 10.35%.

The operators stated that cooperation amongst the stakeholders and backing from the federal government are indeed necessary for this expansion to be sustained. They regretted that significant obstacles still remain and that they must be resolved as soon as possible.

Although complaining about the sharing formulas they claimed were imposed on them on some operations, some of the operators who spoke with some reporters encouraged the Nigerian Communications Commission (NCC) and the Central Bank of Nigeria (CBN) to step in and address some pressing issues.

According to Tunji Alabi, the Managing Director of Infratel Africa, the company competes in the rural telephony/colocation sector, and like other players, is at a disadvantage because of the rising cost of deployment without a commensurate rise in the revenue-sharing formula.

Alabi stated that despite their small investment and acceptance of risk, Tier 1 operators typically receive a higher portion of the revenue.

The MNOs refused to raise the collocation pricing, he claimed; and this had a significant impact on the operations of Tier 2 colocation operators. He stressed that “most Tier 2 players have been forced to absorb this cost.”

He recalled that the greatest challenge Tier 2 telecoms firms had in 2022 were three folds, namely: “inaccessibility to foreign exchange (FOREX) through the commercial banks for capital expenditure as well as the instability of the parallel market.

“Government-regulated voice and data tariff, which has not changed in over 15 years despite the increase in cost of money/cost of borrowing, and increase in the cost of diesel without any increase in the pricing for collocation.This cost increase was absorbed by the Tier 2 operators.”

According to the MD of Infratel Africa, they anticipate that in 2023 the CBN will harmonize its various foreign exchange rates into one that encourages investment; that foreign exchange will be accessible from commercial banks at the CBN rate, and that the Ukraine/Russian War will come to an end; which should result in a significant decrease in the price of diesel.

Alabi urged NCC to evaluate the voice and data tariffs and update them to reflect the situation as it stands. He asked the FG to prioritize broadband penetration, especially in unserved and underserved communities’ areas, and to view telecoms infrastructure as a critical asset, and offer lower customs tariffs and incentives to encourage investment in this sector.

“The cost of doing business in Nigeria keeps rising while revenue stays extremely low;” according to another IDA sub-sector entrepreneur who chose anonymity. “Without access to cash,” he emphasized, “there will be no growth.”

He acknowledged that the $0.10 (10 cent) set rate for international termination (ITR) has not generated profits for market participants, “market is not responding adequately well to the fixed price and unfortunately, you can’t go below it. It is the big players that are still profiting hugely from this.”

He lamented that local content policy in the telecoms sector has been watered down; “unlike in the oil and gas sector, where things are working and priority are given to indigenous players. Something must be done on this if the players must increase their contribution to the sector.”

He bemoaned the annoyance brought on by Right of Way (RoW) tolls imposed by state governments while discussing infrastructure expansion. As opposed to the N145/linear meter set by the Nigerian Governors Forum, he claimed that states like Lagos and Abuja charged more.

As he expressed regret about the growth in telecom equipment damage as well as the danger posed by so-called area boys, he said, “RoW charges are not consistent. Abuja, they claim to be charging N145 per linear meter, but investigations showed the offices charge as much as N1000. So, we can’t expand services because of this. Same plays out in Lagos.

“You cannot say you want to do anything on federal roads, they will charge twice (state and federal). These issues need urgent attention for us to increase our economic contribution to the country.”

Kehinde Aluko, a telecoms specialist, believes that NCC should ensure fair competition and promote Nigerian participation in the telecoms sector. He claimed that since its inception, the telecoms sector has followed technical trends, and the accomplishments seen in the sector are the product of the combined efforts of large and small businesses who have continued to adapt to technological advancements.

According to him, neither large nor small operators have ever had to play the “catch-up” game because they always invest in and adopt new technologies as they become available. He also added that smaller operators need to be protected in order to remain competitive in the marketplace.

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