Telcos’ operating costs surged by 50.92% – NCC

Telecommunication companies’ operating costs surged by 50.92 per cent in 2023, reflecting the challenges faced by Nigeria’s telecommunications industry in maintaining network operations amid rising inflation and currency depreciation.

According to the most recent Nigerian Communications Commission’s 2023 Year-End Performance Report for the telcos, operating costs climbed from N2.09tn in 2022 to N3.16tn in 2023, signalling increased financial pressures for operators.

However, this rise was accompanied by a notable growth in revenue, which increased by 37.54 per cent to N5.30tn from N3.86tn in the preceding year, driven by a growing demand for voice and data services.

The report read, “This collation was based on the submissions received from responsive service providers in the industry and includes the following matrix as of December 2023;

“i. CAPEX (Domestic Investment): N990,550,661,501.73; “ii. Operating cost: N3,158,403,767,328.48. iii. Revenue: N5,303,539,102,697.93.”

The report highlighted that GSM operators remained the primary contributors to the industry’s financial performance, accounting for N2.52tn in operating costs and N4.01tn in revenue.

The Internet Service Providers segment also reported significant figures, with operating costs reaching N96.81bn and revenue recorded at N89.81bn.

Capital expenditure in the sector rose by 26.06 per cent, with operators investing N990.55bn in 2023 compared to N785.77bn in 2022.

This increase affirms the sector’s commitment to enhancing infrastructure, including deploying 5G networks and expanding broadband services.

The growth in capital investments was reflected in key infrastructure developments.

The number of base stations rose 8.4 per cent to 137,992, while on-land fibre optics deployment reached 83,254.5km.

Towers deployed by operators stood at 39,356, indicating sustained efforts to improve connectivity across the country.

Despite these achievements, broadband penetration slightly declined from 47.36 per cent in 2022 to 43.71 per cent in 2023, due to adjustments in population figures used for calculations.

Nevertheless, active broadband subscriptions increased to 94.76 million, aligning with the national broadband target of 70 per cent penetration by 2025.

The sharp rise in operating costs was attributed to a combination of factors. Energy costs, driven by rising diesel prices and electricity tariffs, exerted significant pressure on the operators, who rely heavily on power to maintain their networks

Inflation and the depreciation of the naira further compounded the financial burden as the cost of imported telecom equipment and maintenance services soared.

Also, operators increased investments in service quality, bandwidth, and capacity to meet the surging demand for data, which grew by 37.58 per cent year over year to 713,200.62 terabytes in 2023.

The sector’s resilience was evident in its contribution to the economy, with the telecom industry accounting for 14 per cent of Nigeria’s Gross Domestic Product in the fourth quarter of 2023, up from 13.55 per cent in the corresponding quarter of 2022.

Active voice subscriptions increased marginally by 0.96 per cent to 224.71 million, while internet subscriptions grew by 5.81 per cent to 163.84 million.

However, teledensity, a measure of telephone connections per 100 individuals, fell from 116.6 per cent in 2022 to 103.66 per cent in 2023.

The decline was attributed to a revision of population data by the National Population Commission, which adjusted Nigeria’s population estimate to 216.78 million in 2022, up from a previously used figure of 190 million.

The telecommunications sector remains a vital pillar of Nigeria’s digital economy, demonstrating resilience in the face of economic challenges.

The Nigerian Communications Commission recently approved a 50 per cent tariff adjustment for telecommunications operators in response to increasing operational costs and prevailing market conditions.

According to a statement by the NCC’s Director of Public Affairs, Reuben Muoka, the decision was made under the NCC’s regulatory powers as stipulated in Section 108 of the Nigerian Communications Act, 2003.

The approved adjustment falls significantly below the over 100 per cent increase initially requested by some network operators.

The NCC stated that the decision was carefully calibrated to balance the rising costs faced by operators with the need to protect consumers from excessive price hikes.

The adjustment will adhere strictly to the tariff bands outlined in the NCC’s 2013 Cost Study and the newly issued Guidance on Tariff Simplification, 2024.