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Telecommunication sector remains sturdy

A review by Cordros Group concluded that without downplaying the impact of rising smartphone and broadband penetration, a faster replenishment rate for data bundles has contributed to the rapid expansion in data revenue in the past three years.

“In our view, this lends credence to healthy margins in the face of rising cost pressures. With data revenue not showing any signs of weakness, we do not see any threat to industry margins in the near term,” the review based on possible impact of tariff hike stated.

The report noted that while the prerogative to hike telecom tariffs resides with the Nigerian Communications Commission (NCC), the body language of NCC does not show any inkling for an upward review of telecom tariffs in the meantime. “However, we think mobile network operators have tactically passed on some portion of the cost burden to subscribers through a marginal increase in the depletion rate of data bundles,” the report stated.

Telecommunication companies under the aegis of the Association of Licensed Telecoms Operators of Nigeria (ALTON) had proposed a 40 per cent increase in the cost of calls, SMS, and data services in the country. However, the NCC rejected the request by the telecom operators, noting that such a decision must be fair to the subscribers and engender healthy competition among service providers.

Though it remains unclear whether the proposed hike in tariffs will be eventually implemented, the Cordros Group review examined the broad range of issues surrounding the development and the implications for mobile network operators. The details of ALTON’s proposal revealed that the price floor of voice calls would increase from NGN6.40 to NGN8.95 while the price cap of SMS will increase from NGN4.00 to NGN5.61.

On data services, ALTON stated that the NCC should implement the recommendations from the August 2020 KPMG report on the determination of cost-based pricing for wholesale and retail broadband services. The review noted that the proposal by ALTON must have been induced by the rapid increase in the cost of providing telecommunications services in the country.

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