Nigerian telecom operators, including MTN, are calling for mobile tariffs to be raised by 100% in the West African country.
The request is part of an ongoing effort to right-size an industry devastated by inflation and a historic currency devaluation.
Like many other companies operating in Africa’s largest economy, MTN has been a casualty of the devastation caused by the Nigerian naira’s more than 90% plunge since mid-2023.
The group dipped into the red at the halfway stage of its financial year, the first time the telecom major has reported a loss since 2016, as the further devaluation of the naira and the conflict in Sudan weighed on results.
In April 2024, MTN Nigeria convened an emergency meeting of its shareholders to discuss its plans to grow revenue, improve margins and return to profit in an effort to address declines caused by a challenging operating environment.
At the top of the five-point plan is a lobbying effort for regulated tariff increases meant to boost revenues and offset some of the declines that operators have experienced as a result of the currency devaluation. The company said it was engaging with the authorities through an industry body to get this done.
These calls are now getting stronger. MTN Nigeria CEO Karl Toriola highlighted to Business Day the urgent need for a tariff increase, stating that the industry has formally requested a 100% rise in prices.
“The current pricing structure is unsustainable and hampers the ability to deliver the quality of service that customers expect,” he said.
Despite facing a cocktail of headwinds in Nigeria, Toriola expressed optimism for the future — particularly for 2025 — suggesting that “if the regulator permits the adjustment in pricing, it would enable operators to enhance their services. For MTN in particular, this growth would be supported by initiatives to expand coverage in rural areas and increase the penetration of 5G broadband services.”
Tariffs have remained unchanged for 11 years in Nigeria. In 2019 call tariffs stood at about 3.3 US cents, dropping to about 1c at present. Over the same period, mobile telecom revenue in Nigeria is seen falling to about $3.05bn this year from $6.39bn in 2019.
The Nigerian Communications Commission oversees prices for the industry, with operators not allowed to make changes without the regulator’s permission.
In a report released in the first half of 2024, global telecom body GSMA urged the commission to focus on regulating wholesale prices and leave operators to set retail prices, as is done worldwide.
“Wholesale” refers to the business of physical infrastructure such as fibreoptic cables, cell towers and switching stations. Operators sell access to this infrastructure in bulk to other companies.
Outside tariff increases, MTN aims to cut capital expenditure.
In a sign of the times, MTN and associate tower company IHS put aside some of their differences in August, ironing out a renegotiated agreement of the mobile operator’s tower leases in Nigeria.
The new agreement helps the communications group reduce amounts it has to pay for the infrastructure in foreign currency, specifically the US dollar.
IHS owns 16,000 towers in Nigeria, of which MTN leases 13,500.
Another part of the plan is to repurpose and make the most of existing network capacity, without reducing quality or causing disruptions. MTN has used such strategies in the past to mitigate the lack of radio frequency spectrum in SA.
Given the depreciation of the local currency, MTN is working to also reduce its exposure to the dollar that is driven by debt issued in foreign currency, leaning more on local debt markets as a way to increase liquidity.
In early December, MTN Nigeria raised 72.18-billion naira (about R880m) by issuing commercial paper. The offer recorded a 144% over-subscription, the company having originally sought to raise 50-billion naira.
Later that month, the mobile provider said it would be issuing more commercial paper with the aim of raising another
50-billion naira.
In the same month, Nigerian authorities moved to end a stalemate between mobile operators and banks that had kept telecom companies from recognising certain financial transactions through banking systems.
Business Day understands the move is good for Nigeria’s telecommunication players as historically operators have not recognised this segment of revenue.
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