Operators claim 85% increase in OPEX threatens broadband target
• Seek regulator’s urgent intervention
Telecommunications operators, mainly the Tier II players, have drawn the attention of the Federal Government to the increase in network operating expenses (OPEX) in Nigeria, which they claimed had increased by 85 per cent in the last 15 months.
The Tier II operators, which include nTel, Smile, Spectranet, Swift and a host others, raised the alarm when they visited the Executive Vice Chairman of Nigerian Communications Commission (NCC), Prof. Umar Danbatta, in Abuja, at the weekend. They claimed that the rise in OPEX, among other challenges threaten their survival.
“Network OPEX of telecommunication operations has sky rocketed in the last 15months by over 85 per cent with revenues remaining relatively flat,” they complained.
They warned that if not adequately and timely tackled, the development is capable of derailing the Federal Government’s 2018 broadband target, where it hoped to increase Internet penetration by 80 per cent and deepen broadband penetration by 30 per cent.
The Tier II operators, which are broadband companies, urged the NCC to take immediate and decisive steps to avert the looming threat of strangulation, which its members currently face.
Operators present at the meeting with the NCC EVC were the managing directors and chief executive officers of Smile Communications, and Spectranet, Godfrey Efeurhobo, and David Venn respectively.
The Director Regulatory and External Affairs, nTel, Osondu Nwokoro, and the Chief Commercial Officer, Swift Networks, Chuma Okoye, represented their respective CEOs.
The operators warned of possible systemic industry failure with likely negative collateral and great national socio-economic implications in the offing.
According to them, the industry is in a situation where all operators are finding it difficult to justify the required investment case for additional CAPEX for network capacity expansion to improve quality of service to customers.
Most operators, they observed, are currently struggling with meeting obligations to their suppliers particularly network vendors, TowerCos and servicing Loan obligations. This worrying trend, they noted, includes even some of the Tier I operators.
According to them, “a perfect storm is brewing and if not headed off will result in the collapse of key players in the industry. This is because the domino effect of bankruptcy of any of the Tier I or Tier II operators on the entire ecosystem particularly, banking, employment, corporate and SMEs businesses constitutes a major threat to the Economic Recovery and Growth Plan of the current administration.
“Such bankruptcy and consequent collapse will also substantially lessen competition with its attendant deleterious impact on consumer choice and attainment of the Broadband objectives of the country.”
The chief executives noted that the NCC’s declaration of 2017 as, the Year of the Telecoms Consumer can be derailed by the failure of operators to deliver on the expected quality of service. This is particularly on data throughput and experience due to the weak investment case to support additional CAPEX as a result of deteriorating market conditions.
Symptoms of the declining fortunes of operators, they said, are already evident in the market, as debts continue to grow and overall service quality continues a downward trend.
“As it is, there is a grave threat to the Broadband Agenda of the government and expected dividend from growth in broadband penetration envisaged in the Economic Recovery and Growth plan 2020. This threat, will materialise if the market is not sanitized and the Tier II Operators are not protected to encourage and justify the capital investment required to continue to invest and improve Broadband penetration in the country.”
The Tier II operators also bemoaned their deteriorating fortunes due to predatory pricing and cross subsidy of data using voice by Tier I operators, who possess significant market power, and urged NCC to intervene immediately.
While applauding the various interventions of the NCC in engaging other stakeholders in ameliorating the difficulties that operators face, they expressed their gratitude to Danbatta for intervening with the CBN to reduce the burden of foreign exchange liquidity.
They also commended him for his role in leading the campaign to educate the populace that base stations do not cause cancer. They however implored him to protect the Tier II Operators so that their operations will not collapse.