The Chairman of the Association of Licenced Telecom Operators of Nigeria (ALTON), Gbenga Adebayo, highlights a number of issues facing telecoms operators in the country. From cost of energy to vandalisation of infrastructure, Adebayo believes these challenges are enough reasons to justify mobile operators’ recent clamour for tariff increase. He also identifies lack of investment in the sector as a big issue, lamenting that the economic realities in the country have stifled investment in the telecoms sector, a situation he fears may put the sector in the same miserable situation as the energy sector. Adebayo was a guest on Channels Television’s The Morning Brief breakfast show during the week.
Enjoy the excerpts of the interview:
What is the proposed tariff going to look like, what’s the percentage of increase? I want you to break it down for us based on what we’re paying now and what we’ll be paying should this tariff increase come through?
Thank you. The statement we issued last week was about the state of affairs of the industry and we spoke about issues ranging from the lack of investment, to high cost of operations, quality of services and sustainability of the industry. Along the line of that conversation, we mentioned cost-reflective tariff; meaning that the tariff that we charge should reflect the cost of providing services but unfortunately that issue of price review gained the headlines and almost made us lose substance of the main issue. So, our concern mainly is on the sustainability of the industry. I can’t come today and say to you: ‘Let’s do a 5% increase in prices, 20% increase in prices and that will solve the problem’. No; we are in an ecosystem and this ecosystem is challenged by a number of factors, part of which is high cost of doing business and high cost of providing services.
So, I’m not here to say this is the percent of increase that we are looking at in terms of price review. We are only saying that we have a price window within which we want regulatory approval for. We are asking the regulator to allow us to move within that price band while a cost study is being conducted. What a cost study will do is actually to analyse what is the cost of providing services and what is the reasonable tariff when they look at the elements that makes up the cost and that’s where we are. So, we are more concerned about the sustainability of the industry much more than the issue of price review because if you review prices without reflecting on the actual cost of providing services, you are doing a kneejerk reaction. We have seen the impact of price control in other sectors. You know what is happening in the energy sector. In spite of the introduction of different zone and bands, it doesn’t really improve on the services, and we are saying that if the fundamental infrastructure is not improved upon, if people do not invest in the sector, we have a problem going forward.
Based on the current operational realities, what would be the range? You don’t have to peg it at a specific percentage but what would be the range of increase that would be realistic to make up for what operators are currently spending on cost of operations?
Without going too academic about it, the numbers don’t lie so we need to be guided by what the figures say. We have a price window today of minimum of N6.40 per call. We can move within that price band based on previous regulator approval. We are only saying that regulators should unfreeze that point and allow us to move within the current price window while a cost study is being conducted. So, I will not be right to say that 1%, 2%, 10% or more increase should be done without referring to statistics and cost study. That’s what we are asking the regulator to do: a cost study on the actual cost of providing services. While that is ongoing, allow us to move within the current price window which is between the N6.40 and N6.90 per call thereabout.
So, apparently what I hear by inference is the fact that doing business in the country has become very challenging.
At the bottom of this is high cost of energy. Energy is a major cost, following that is vandalisation of our infrastructure and cost of having to rebuild. Also, the behaviour of public actors in different states, high cost of right of way, closing of sites in an attempt to collect internally generated revenue and other characteristics that we experience on the field make the cost of doing the business very high. Today, the industry faces about 49 different taxes and levies across various tiers of government, not only are a number of them not relevant to telecommunications services but because we are seen as a driving sector, every state with the aggressive IGR drive sees telecoms operator as the first call in an attempt to collect revenues. The behaviour of public actors is unacceptable, they lock sites, seize equipment of
workers and so on and so forth. We also have repeated vandalisation across the country; fibre cuts, destruction of telecoms towers, among others. In other jurisdictions when you damage communication infrastructure, it is a problem between you and the state but here when that happens, operators have to pay for cost of replacement and all of that or the series of fibre cost that we have and the impact on quality of
services, there’s no recourse for the operator whatsoever and part of what we are saying is other than that the infrastructure is challenged because people are no longer investing due to the current realities. We are also saying that infrastructure that support communication services should be protected, classified as critical national security and economy infrastructure. I call it the first level of protection that you require for any security infrastructure. And then we are also talking about price which of course gained the headline. We’re also talking about the independence of our regulator because all of these elements make up for the operating environment. Nobody wants to invest in an environment where you are unsure about price, where you are unsure about regulation, where you are unsure about policy, where you are unsure about vandalisation and the rest of it. So, these are issues that lead to high cost of providing service and that’s why we are calling on government to look at the state of health of the sector and address this issue holistically. Moreover, you can’t do self-help in communications, if you have problem with power, you can buy a generator, you can provide a solar system for the house, you can provide a power inverter. With water, you can sink a borehole, you can sink a well. If there is problem with your energy supply or with your fuel supply, government can provide some subsidy but in telecoms, there’s no self-help because it’s an interconnected service. So, we need to look at the state of health of the sector holistically, we can’t look at it just by way of price increase or price review without addressing all the other factors.
It looks like the telecoms sector has its own fair share of challenges and I don’t know if you think it might end up like the power sector. We understand that diesel prices are coming down. Has that improved your energy costs?
Not significantly, when projections are done you look at it over a period of time, six months, 12 months, may be 24 months or more. At the beginning of last year, diesel was selling for about N500 or 600 naira thereabout in the early part of last year. Today, it is over N1,000, it was N1,600 at a point and it’s now about N1,200 now. The difference is still wide and for a sector like us that powers majority of our sites with diesel, you can imagine the cost. And the pump price of diesel is not the delivery cost of diesel to site because there is also the logistics. When you go to the filling station to buy for home use it’s not the same as when you truck diesel to 40,000 sites across the country.
We hear that diesel is being sold N1,100 per litre.
Well, even if you get at N1,100, there’s delivery cost. In some part of the country, you can’t deliver diesel to site without having to pay local taxes and levies and that can be from state government, from local government, from community development people and the rest of them. In some cases when you land a truck on site, they give a price before they will allow you to offload.
So, you’re saying that the reduction that you experience in that space is not significant enough to solve the problem?
It is not.
By the time you add up all of these multiple taxes, are you talking about N2,000 or more per litre of diesel?
In some cases, yes. In some parts of the country, yes. So, at the end of the day a little here, a little there doesn’t make much difference and the other problem is that some regulatory agencies of the petroleum sector, they are going after telecoms providers. So, they say to you there is something in the law that says if you have more than 500 litres of storage tank on your site you have to get the permit, you have to pay fee and all that, so it’s an all-round problem that we’re facing. We have a number of cases like this where state agents will say without this permit from the petroleum authority, we cannot allow you to offload, petroleum authority will go there to seal up the site. So, on the issue of diesel and energy, the reduction you are seeing in the pump price does not necessarily translate to reduction in the cost of delivery to telecoms site. Absolutely not.
Just too many bites on the skin.
Yeah, and you see the other side of it is when we talk about investment in the sector, when these generators have a useful life, they run for certain number of hours after which you have to replace them because they work 12 hours and some, they work 24 hours. When people stop investing, they will stop replacing those generators so you can come to a point where some sites are out of power, and it even happened today because in some cases you can’t deliver to some sites. Some sites have to go down, some sites are out of power because of the age of generators and if we are not careful, we may have situation where telecoms services become available only a certain time of the day and
that’s why we are saying we must do something now. You don’t want to come to a point when service is available in the morning and it’s not available in the afternoon or it’s not available in the evening. You don’t want to come to a point when because the cell site next to you is no longer available you have to go on the rooftop to go and get services from distances. You don’t want to come to that point, and you see if we don’t invest, if you don’t attract the right investment in the sector, the spill-over effect will be too much because we’re a technology sector and a lot of other sectors depend on us.
What is the enabling law guiding the operations of telecoms operators? Are you supposed to be shouldering all of these challenges alone, without government’s assistance?
Communications has become one of the most critical services to us as a people; both for commerce, for security, for education, and all of that. This infrastructure has become so critical to our national economy, and what we advocating to the government is to classify telecommunications as critical national infrastructure and provide the same level of protection you provide for any security infrastructure. If we do that by law or by proclamation of parliament or by presidential declaration, then all those who will lock up site will not do it again because they will have to face the wrath of the law. Local government authority and citizens who go and seal up sight because of IGR will not do it again, those who do wilful damage on infrastructure because there are no consequences will not do that again. Landlords who just prevent workers from servicing sites because he wants to increase his ground rent will not do that again. Without this law of protection as critical national security and economy infrastructure, it would be a bit difficult. We think that infrastructure is critical enough for government to accord this the first level of protection because imagine a day without communication services, what will happen to the economy?
So, there are gaps in the law?
There certainly is but we believe that if we have some laws protecting infrastructure as critical infrastructure, it will help in a lot of ways, particularly the primary and secondary behaviour of people who impact on this infrastructure especially on the issue of wilful damage and unwilful damage. We had in times past a state governor who sent his revenue agents against the operators, and they sealed up sites in his state. His state being a gateway state to the northern part of the country, there are 10 states affected by the action of that state government and at the end of the day, we are told go and negotiate with the revenue agents. There was absolutely nothing we could do.
So, let’s go back to that issue of tariff. Is this an excuse for this poor quality of services like frequent drop calls?
The demand for good quality of service is a fair demand and I think what is good is good, what is not good has no other name and I think as a user myself the expectation of the public for undisrupted services is fair. But where operators face the problems that we face, it’s difficult to guarantee good quality of service, that’s the truth. In the face of all what I have mentioned, it’s a bit difficult to guarantee that there will be 100% availability of services. From vandalisation to behaviour of public actors, even the behaviour as subscribers and the rest of them, it’s a bit difficult. It’s now more worrisome if the sector is not attracting new investment because that means that machines will go old, they will not be replaced, exchanges will go down, they will not be replaced, software will go out of version, they will not be replaced and all of that. So, there are issues that we need to look at holistically. Why the public demand for good quality of services, operators demand support from government; government should do its own part otherwise sanctions and penalties will not solve the problem. You can penalise operators for not meeting good quality of service index but the fact is that in many cases, these factors are beyond the operators. If you look at the numbers, fibre cuts last year translate to several billions of naira. The cost of replacing that can be ploughed back into rebuilding the infrastructure if that didn’t happen in the first instance. Who cuts the fibre? Contractors of government during road construction. We don’t want the gains we have seen in telecoms sector in last 20 years reversed.
How soon are you looking to get these things in place so we can begin to look at a healthier telecoms industry?
That’s why we’re engaging all the stakeholders. We are making a plea for intervention, we can’t be the advocate, or we can’t be the judge, so we need to put this question to government. These are issues enumerated by the operators, these are their problems: ‘What will government do about it?’
How much time do we have before things go comatose?
If you ask me, I will say the time is because people are no longer investing. Given what has happened the economy in the last months, people are no longer investing and when the big players are not investing, system will go out of service, system will become of age, new things will not happen. If you don’t invest in a sector you can’t talk about quality of service, you can’t talk about right pricing and the rest of it. When the people in the energy sector came, they licensed the DisCos, they sold them those companies and all of that and everybody thought that would solve the problem. The answer is ‘no’ because when the DisCos came, they didn’t invest in infrastructure. That’s why when you go to some of those substations today, it’s awful, the only thing you see that are new on the network are these metres they are using in collecting money, the backend infrastructure are awful. You look at the transformers, some of them are 25 years, 30 years of age and all of that, and we don’t want to come to a time where telecom sector become like that, so we need to continue to put the right policy in place, right regulation in place to attract investment. It’s only when we attract investment that we can demand minimum level of performance. The issue of leaving operators to solve their own problems themselves is something that is not acceptable. The government must help, and the time is now.
