Except something drastic is done by the Nigerian Communications Commission (NCC) to rally industry stakeholders to develop strategies to actively support telecoms sector growth, the Commission’s N549 billion revenue targets for the year may be unrealisable.
The Guardian checks showed that beside proceeds from spectrum sales, numbering planning sales and other sources of revenue of the Commission are dwindling.
The annual operating levies (AOLs), which constitute a major source of revenue through which the regulator can implement its industry-wide regulatory initiatives to sustain the growth of the industry, are not paid as when due.
While money made from the spectrum is remitted wholly into the Consolidated Revenue Fund (CRF) domiciled in the Central Bank of Nigeria (CBN), a major source of revenue for an operational activity for NCC is AOL.
Owing to the macroeconomic headwinds, resulting in increased cost of operation and overheads, most telecom companies in Nigeria have been posting losses, making it difficult for them to pay their AOL to the Commission as and when due.
Telecom companies are obligated to pay an AOL assessed at one per cent of the company’s net revenue (after approved cost deductions). This payment must be made within the timelines stipulated in Article 4 of the AOL Regulations.
Available information obtained by The Guardian showed that MTN, which is the largest telecoms company operating in Nigeria with about 81 million mobile subscriptions as of April 2024 and Airtel Nigeria have been the most consistent MNOs in terms of AOL remittances to sustain the activities of the regulator. Airtel has about 62 million mobile subscriptions.
However, recent events are showing increased losses on the part of the compliant operators, which could affect their contributions to the economy, including taxation.
MTN Nigeria and Airtel Africa (the only two telcos publicly traded) lost N479 billion to currency revaluation and recorded reduced profit margins in the first nine months of 2023.
In its financial report for Q1, 2024, MTN reported a second successive loss after declaring a loss after tax of N392.7 billion for the first quarter of 2024.
This is coming despite growing its service revenue by 32.0 per cent to N747.3 billion year-on-year, the telco recorded its second loss since it was listed on the Nigerian Exchange.
It noted that its net loss for the quarter further increased its accumulated losses and negative shareholders’ funds to N599.2 billion and N434.7 billion, respectively. It highlighted that its profit after tax adjusted for the net forex loss declined by 57.8 per cent to N47.1 billion.
“Further adjusting for the impact of the naira devaluation in OPEX, PAT would have been down by 5.3 per cent to N105.6 billion,” MTN said. The telco’s net foreign exchange loss stood at N656.37 billion.
MTN Nigeria’s chief executive officer, Karl Toriola, noted that severe macroeconomic headwinds overshadowed a solid operating performance. He said: “The operating environment in the first quarter remained very challenging, with rising inflation and continued naira depreciation off an already low base.” He stated that the naira’s devaluation and record-high inflation have impacted the operating environment for businesses in Nigeria.
“These factors have caused significant difficulties for businesses operating in Nigeria, including MTN Nigeria, putting additional pressure on consumers, the cost of doing business, and further foreign exchange (forex) losses,” he added.
Recall that in 2023, MTN declared its first loss after tax of N137 billion. Its retained earnings and shareholders’ fund fell to negative N208.0 billion and N40.8 billion, respectively.
For Airtel, PBT result for the half-year 2023 was much worse, it dropped by a staggering 97.7 per cent – from $516 million to $12 million – compared to the results from 2022.
The report showed that Airtel has consistently grown its revenue in Nigeria since Q2 2018. The only time there was a drop in revenue between quarters was in 2020 when revenue dropped from $377 million in Q1 2020 to $341 million in Q2 2020. This $36 million drop in revenue is nothing compared to the decline seen in 2023.
Its revenue for Q1 2023 was $543 million, a $2 million drop compared to the previous quarter – $545 million in Q4 2022. By Q2 2022, the drop in revenue increased by $15 million, from $543 million to $528 million.
Meanwhile, experts are calling for customer-centric sector engagement to stimulate more growth for the $76 billion telecoms industry. Telecoms expert, Kehinde Aluko, while referencing the National Bureau of Statistics (NBS), said growth in the telecommunication sector slowed in the third quarter of 2023. He said the contributions of the sector, in real terms, declined by N219.97 billion in Q3 2023, which was 8.38 per cent quarter-on-quarter.
Aluko, who predicted further slower growth in 2024, said the slowed growth was attributed to the increasing impact of high inflation and the foreign exchange unification policy. He said the ICT sector expanded in real terms by 6.69 per cent y-o-y in Q3 of 2023, the lowest in five years.
Already, both the Association of Licensed Telecom Operators of Nigeria (ALTON) and the Association of Telecommunications Companies of Nigeria (ATCON) have called for measures to stem the crises confronting the sector.
According to them, ALTON & ATCON members still lack access to essential telecommunication services due to a myriad of challenges, including multiple taxation and regulations and prohibitive Right of Way (RoW) charges, inadequate electric power supply and vandalism of telecommunications infrastructure.
ATCON and ALTON called upon the government to facilitate a constructive dialogue with industry stakeholders to address pricing challenges and establish a framework that balances consumers’ affordability with operators’ financial viability.
The bodies advocated for the sustenance of a culture of independence in the regulatory landscape to safeguard against undue influence and unwholesome incursion into the Nigerian Communications Commission’s (NCC) or (Commission) domain, which will inspire trust in the telecommunications sector and encourage investment.
Discussion about this post