By Sonny Aragba-Akpore
Nigerians are commonly used to electricity power load shedding which strategically reduces or cuts off electricity supply to different consumers or areas in a controlled manner. “This process helps balance demand with available resources.”
It is often planned and negotiated with local building owners. Utility providers monitor electricity demand and identify when it exceeds supply or nears capacity limits. They then create a load shedding plan that entails rotating power outages, temporary current disconnections and incentives to building owners for complying. Once demand decreases or additional power resources become available, the utility provider restores power to the affected areas.
Load shedding can also happen without prior planning. Power customers might experience involuntary load shedding when a utility electrical provider lowers or stops electricity distribution across a coverage area for a short period of time. This type of load shedding is commonly referred to as a rolling blackout. Brownouts, another type of involuntary load shedding, are caused by a power supplier lowering voltage distribution during peak usage times to balance supply and demand.
Load shedding is about survival when telecom operators might start turning off some of their cell sites during less busy times to save on energy and costs. This could help them minimize resources better and keep services running, even when it’s not a perfect solution. If telecom operators implement load-shedding, the quality of service could decline sharply. Load-shedding would likely result in reduced network coverage, slower internet speeds, and an increase in dropped calls, according to an analyst.
According to the Nigerian Communications Commission (NCC), Nigeria had over 164 million million active internet subscriptions as of March 2024, with mobile data accounting for the majority. A reduction in service quality could severely impact these users, leading to widespread frustration, this analyst added.
An analyst describes load shedding as a deliberate shutdown of telecom services in a part or parts, generally to prevent the failure of the entire system when the demand strains the capacity of available infrastructure.
Plagued by incessant rising cost of operations, including the increased prices of diesel, infrastructure maintenance, and a depreciating Naira, “have called on the NCC to approve a tariff increase to help mitigate their financial burdens.”
MTN, for instance, with a subscriber base of 81.7million as of March 2024, reported a first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange in 2023. The telcom incurred FX losses of N740 billion ($815.79 million at N907.1/$).
“Airtel Africa, which had 63.3 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi. It lost $1.26 billion to derivative and FX exposures, with $770 million attributed to the Naira’s devaluation.”
This has led to dwindled investment in the telecoms sector, Carl Cruz, chief executive officer of Airtel Nigeria, stated, adding that, “the devaluation of the Naira moving from N420/dollar to N760/dollar in a month’s time, to about N1500/dollar today, had indeed affected telecoms industry who rely heavily on importation of infrastructure to grow the sector.”
In the same vein, Karl Toriola, CEO, MTN Nigeria, said operators are reluctant to invest, simply because of the high operating cost and the devaluation of Naira, among other issues that have marred the growth of the sector.
According to him: “The telecoms sector in Nigeria is now in an intensive care unit (ICU) gasping for breath, while calling on the government to intervene. The sector is facing a lot of challenges of which if urgent action is not taken, it will dry up. The truth is that investors are not going to come to invest in the sector if the fundamental issues are not addressed. To rescue the sector from collapsing, there is a need to increase prices of telecom services.”
Despite repeated pleas, the regulatory body has remained silent on the issue, causing frustration and uncertainty among industry players.
ALTON had earlier sent a working paper (memo) to the telecom regulator (NCC) saying that “the telecommunications industry has been significantly impacted by a myriad of macroeconomic challenges experienced in recent years due to the resulting exponential increase in broad business costs.
“Of particular importance are:
– The upward trajectory in the inflation rate from 11.98% in 2019 to 21.34% in 2022 and currently 27.33% as at October 2023;
– Rapid devaluation of the Naira evidenced by the recent upward movement at a rate of 68.5% from N461/$1 in December 2022 to N777/US$ as at the end of September 2023; and now over 1,590/a dollar;
– Sustained rise in energy prices with diesel currently retailing at an average price of N1,400/litre from N250/litre in January 2022.
“With energy costs representing 40% of Mobile Network Operators’ operating expenses, tighter external financing conditions, higher debt service payments, and increased pressure on the Nigerian FOREX market, there has been a significant increase in the cost of production which has jeopardized MNOs’ capacity to maintain healthy margins in such a capital-intensive and FOREX- dependent industry as ours.
“Despite these adverse economic headwinds, the telecommunications industry remains the only industry that has yet to effect any general tariff increase for its services in the last five years due to regulatory and political restrictions limiting the MNOs’ ability to react to the increased cost of doing business with our applications for these general increases still pending with the Commission one year after submission.
“The same cannot be said for our counterparts in other critical industries who have adjusted the retail prices of their goods and services with the support of their industry regulators to be reflective of their true business costs of production as a means of cushioning the net effect of the sky rocketing costs of doing business. We have attached, for the EVC’s consideration, a detailed overview of examples of such price increases in other sectors.”
The operators also lament regulatory overlaps where unbudgetted expenditures are spent to defray unexpected expenses.
In their own position, ALTON also advocates for the co-creation of policies for the ICT sector, better collaboration between ICT and non-ICT regulators with oversight over the sector (environment and consumer and corporate
governance) given the cross-cutting nature of digital services, which span multiple subject areas and regulatory frameworks.
“The Federal Government should also give the telecoms sector a special status like Agriculture and Manufacturing and introduce fiscal incentives for the sector, for example, the reduction of spectrum and numbering fees,replicate Road Infrastructure Tax Credit scheme for digital infrastructure projects.
“There is also a need to encourage market consolidation/collaboration arrangements to build stronger market players in the industry.
“Implementation of the Open Data policy to make data accessible such that companies can collaborate with third-party developers, startups, and other industries to develop applications, analytics tools, and personalized services which will unlock new data-driven revenue streams not only for telecoms but also for other industries such as
banking, agriculture, manufacturing.
“We also require capable regulatory agencies overseeing and regulating these innovations. As such, the staff of relevant agencies will need to upskill and broaden their knowledge base while revising their frameworks to enhance technical and analytical capabilities.”
ALTON laments that amid the formidable challenges facing the industry, “MNOs have also had to contend with a protracted history of non-payment by Deposit Money Banks (DMBs) and other Financial Institutions (FIs) for their utilization of Unstructured Supplementary Service Data (USSD) services provided by MNOs from September 2019 till date.
“Regardless of the numerous Ministerial and joint regulator-led interventions on this issue, commencing with the intervention of the immediate past Honorable Minister of Communications and Digital Economy (HMoCDE) in 2021, the consequent approval for disconnection of the banks issued by the Commission further to the HMoCDE’s directive in 2022, and the recent joint resolutions issued by the Commission and the CBN in August 2023 on the terms for defraying the debts owed, the DMBs and FIs have brazenly and persistently refused to meet their obligations to the MNOs through the malicious non-payment or, in many instances, the payment of a minuscule portion of their monthly invoices which has led to the accumulation of a massive debt of N200 Billion.”
As a former Executive Director, Technical Services at the Nigeria Inter-Bank Settlement System PLC (NIBSS), said: “We believe the EVC appreciates the facilitative role of telecommunications in the provision of financial services to Nigerians and how the USSD service has transformed digital banking and advanced financial inclusion in Nigeria, thereby, positively impacting the balance sheet of the DMBs and FIs.
“We maintain that it is beyond the pale for the banking industry to hold the telecommunications industry to ransom by its impenitent freeloading activities. We, therefore, respectfully urge the EVC to take decisive action to put an end to this deplorable practice moreso as the provision of such USSD services to DMBs and FIs come at considerable cost to MNOs.“
USSD services require substantial investment in enabling platforms such as Applications Programming Interface (APIs) and USSD Gateways for service delivery, cost of establishing signaling channels (a limited and critical network resource essential for the hitch-free service delivery) and the opportunity cost of utilizing these signaling channels and network services for USSD services instead of other prepaid network services such as Call/SMS set-up and delivery which cannot run in parallel with a USSD session.
