Telcoms’ revenues to decline this year, experts predict

The Nigerian currency began plunging after the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, announced the devaluation of the Naira in November last year.The Naira which traded at N187 to $1 last month, compared to N175 in November, according to reports now stands at N168 as official rate and sells N192 to […]

The Nigerian currency began plunging after the Governor of the Central Bank of Nigeria, Mr Godwin Emefiele, announced the devaluation of the Naira in November last year.
The Naira which traded at N187 to $1 last month, compared to N175 in November, according to reports now stands at N168 as official rate and sells N192 to $1 in the open market.
The development has also put Nigeria as having third worse currency in Africa after Ghana and Zambia, according to a January 1st 2015, ýBloomberg report.
Observers in the telecoms industry however are of the opinion that the depreciation in the value of Naira will affect the revenue generation of telecoms firms.
They observed that the dwindling crude oil prices has the propensity of weakening the purchasing power of Nigerian telecoms subscribers.
In his view, a telecoms engineer, Mr Akin Akinbo, said, “Telecoms operators are likely going to face multiple pressures from high cost of importation, increased cost of infrastructure rollout and weak purchasing power of telecoms consumers in 2015.
Also, the President, Association of Telecommunications Companies of Nigeria (ATCON), Mr Lanre Ajayi, said telecoms should prepare for “a probable worse case” in 2015.
According to Ajayi, the declining crude oil price is definitely going to have implications on telecoms sector, especially on the purchasing power of individual and corporate telecoms consumers.
He said: “The purchasing power of telecoms consumers will dwindle and this will have negative implications on operators’ revenue generation, since subscribers restructure their spending on airtime and payment for internet services.
“Subscribers are also most likely to look for cheaper tariff service and, in the face of lowering spending by subscribers; some operators are likely going to be forced into reducing their tariffs as bait to retain their customers from switching to other networks.”
He explained that if the current situation regarding the declining crude oil prices and the lowering value of Naira, is properly managed, “I don’t think there will be cause for alarm.”
Another telecoms industry analyst and the Vice President of Nigeria Internet Group (NIG), Destiny Amana informed that telcoms are already facing increased expenditure and declining revenue, making them outsource or sell their infrastructure to a third party to manage while they, in turn, lease such infrastructure to run their operations in order to cut down their growing expenditure and be more efficient.
Amana said, “Average Revenue Per User (ARPU) for telecoms services has fallen from N1500 to N1020, the purchasing power of telecoms consumers is going to wane, resulting in declining revenue for telcos, even as telecoms firms face increased cost of rolling out infrastructures. So, the industry should expect a tough time in 2015.”
In the same vein, the Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr Gbenga Adebayo, said the challenges of the operators might become more complicated due to the case of multiple taxations and, sometimes, frivolous levies, imposed on them.
According to him, “Telecoms companies are facing increased capital expenditure, diclining revenue and yet consumption power of subscribers may wane in 2015. As if these are not enough, they also face multiple taxations from all manners of government agencies which have seen telecoms as cash cow.”
The Managing Director, MainOne, Ms Funke Opeke confirmed that value of the naira is definitely putting pressure on margins for telecommunications operators.
She said, “As you all know, lots of the technology inputs into the sector are imported and so they are dollar denominated and most of the operators have their long term supplies and service contracts on dollar base those cost of it and the values of naira receivables are against those who could not go as far. So, it’s going to put a lot of preassure at the same time.
Opeke stated further that, “we expect consumers to see inflationary trends not as much as to spend some discretionary income to spend on telecommunications it’s two sided equations. We are all hoping that there will be additional stimuli instituted by the government to advance the economy in stimulating the growth and spending and diversify the economy from oil so that the economy can actually recover.”