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Telecoms Need Right Policies, FOREX Access To Avert Collapse – ALTON

*Telecoms need right policies.
*FOREX access is just one of the many problems facing the Industry

IT NEWS NIGERIA:

Association of Licensed Telecoms Operators of Nigreria (ALTON) has said Friday the Industry needs right Policies and access to foreign exchange (FOREX) to avert collapse of the subsector.

Speaking at a Break Fast organized by National Information Technolonogy Reporters Association (NITRA) in Lagos, ALTON Chairman, Mr Gbenga Adebayo said the current state of the Telecoms industry is a matter of great concern with the devaluation in the value of our currency to lack of access to foreign exchange to the issue of data floor price.

He noted that the Telecom industry is facing major challenges in purchasing Foreign Exchange to fulfil contractual obligations to Equipment Suppliers and Foreign Vendors.

“This situation is adversely impacting our network operations and also some recent developments in the industry have alluded very clearly to the risks at hand. The prevailing scarcity of FX has occasioned a situation where the Banks are unable to obtain FX for an upward period of six months.”

“We hope our Telecom industry will not become railway Industry that was one time successful but later collapse”

He also noted that Telecoms service Providers are similar to manufacturing firms and deserve to be treated in the same manner.

The core network equipment and other auxiliary equipment procured for providing Voice and Data Services are equivalent to plant and machinery acquired by the manufacturing firms for the production of goods and services in the country, he said.

Telecommunications Sector is termed “infrastructure of infrastructures” and Social Overhead Capital which propels productivity in other sectors of the economy. The multiplier effects of efficient and reliable telecommunications services on other spheres of the economy, such as banking, aviation and hospitality cannot be overemphasized.

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ALTON is of the opinion that Telecommunications Sector deserves to be supported through direct FX allocation from the CBN interventions. This will facilitate the deployment of pervasive broadband network nationwide and ensure that the country retains its prime position, as the largest Telecommunications market in Africa.

Impact of the Subsisting FX Regime on Telecommunications Sector

The exemption of Telecommunications Equipment and Services from items to be accorded priority in the allocation of FX by the Banks has adversely impacted the industry as follows:

Increased Operating Cost: In the absence of local substitutes for its plant and machinery, the Telecommunications Service Providers are constrained to source FX from interbank market at higher rates compared to other sectors such as Manufacturing, Aviation and Agriculture accorded priority in FX allocation at reduced rates by the CBN. Owing to the prevailing economic situation in the country, ALTON members cannot transfer the increased cost burden to the consumers, thereby contracting profitability and ability to make further investment to drive growth in the industry.

Unfavourable Credit Terms: The situation has made it very challenging for operators to honour their obligations to foreign vendors as at when due. This has occasioned delayed payment to Equipment Suppliers and other foreign vendors, who have now resorted to imposing unfavourable payment terms on Telecommunications Service Providers in Nigeria. Some of the Foreign Vendors had issued Notice of Disconnection of service, which could disrupt service availability with attendant impact on customers’ experience.

Delayed implementation of Network Enhancement and Improvement Initiatives: Recall that ALTON members made commitments intended to ensure the implementation of National Quality of Service (QoS) Fixing Project. This is a coordinated network investment plan supervised by the Commission at designated locations nationwide over a period of time by the Telecommunications Service Providers to ensure improved QoS. The continuity of this initiative is dependent on obtaining FX to import equipment required to carry out the intended National QoS Fixing Project. ALTON is of the view that if proactive measures are not taken to ensure easy access to FX, the National QoS Fixing Project is likely to be adversely impacted to the detriment of the citizenry and economy.

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In the light of the foregoing, ALTON respectfully requests the CBN to include Telecommunications Equipment and Invisibles among the list of items/Sectors to be allocated from the 60% FX availability by the Banks. This is to ensure the continued provision of world-class telecommunications services to the consumers.

THE DATA FLOOR PRICE
Furthermore, Data Floor Plan: the Floor price is a partial price control measure, which is the lower limit price to check unhealthy but foster healthy competition among players.
The price floor is a means of controlling anti-competitive behaviors by operators considered to have attained the dominant status in the industry.
Earlier, there was a limit to how low ISPs could charge for data services, the regulator in October 2015, approved the removal of data floor price, giving internet service providers opportunity to drop their data prices as low as they can in order to survive.
However, before then, NCC had set the data floor price limit as a way of ensuring smaller ISPs and ‘upcoming’ telcos had the chance to compete with the bigger, already established ones. The ISPs could compete for customers with low prices. This has now come to hurt the industry very badly, as the smaller operators are finding difficult in a recessed economy to survive due to the ‘heavy weight of the bigger players who are able to cross-subsidize the array of services they offer.
Statistics available has shown that bigger players lost some market share when the floor price was set and smaller operators got some space in the market place.
The Internet service providers have been badly hurt by the none determination of a floor price as they are left to compete at prices below their costs.
Demand for data have increased in recent times following a rapid growth of mobile phone subscribers in the country as there has been an influx of smartphones and other data consuming gadgets into the Nigerian market in recent years.

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The social media Over the Top (OTT) like the Facebook, Whatapp, Instagram, etc have taken over the voice revenues. The activities of the social media operators have greatly eroded the revenue of the legacy operators.

The industry is going through a lot of challenges; it is now inevitable for the NCC to review the Data Floor Price that was suspended. This is necessary to save the industry.

Mobile data revenue is growing while the growth of mobile voice revenue is declining.
More subscribers are dropping the voice call to embrace the OTT operations which are offered free of charge on data services. Since the OTT operators do not have any regulatory obligations, no taxes and no operational levy, there is the need to revisit the suspended Data Floor Price in order to save the telecom industry.

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