In a interview on AIT news “Money line with Nancy TV” segment , Mr. Modupe Kadri, the Chief Financial Officer of MTN Nigeria Communications PLC, provided valuable insights into the highly debated proposal for a 100% telecom tariff increase in Nigeria’s telecom sector. During the exclusive interview, he explored the economic rationale behind the proposed hike, shedding light on the operational challenges faced by telecom companies and the broader implications for consumers and the Nigerian economy. He offered a comprehensive analysis of how this significant policy shift could impact the telecom industry, addressing the delicate balance between sustaining business operations and ensuring affordability for the average Nigerian.
The Economic Imperative for Tariff Hikes
Mr. Modupe Kadri highlighted that the telecom sector has not seen a tariff increase for over a decade, positioning the current proposal as a necessary adjustment to an unchanged revenue structure amidst rising costs. “We’ve not got a tariff increase in the past 10 years, it’s now 11 years and counting,” he noted, emphasizing the urgency.
He also revealed staggering figures, stating, “We have incurred over N900 billion in Forex losses,” due to the significant devaluation of the Naira. With inflation at over 34%, costs like tower leasing, which has increased by 102% in a year, are indexed to the dollar, making local operations increasingly expensive.
Government Policies and Their Impact
Mr. Modupe Kadri linked the tariff hike to broader governmental economic policies, particularly the removal of subsidies on PMS (petrol) and electricity. He pointed out, “These two items impact our operating costs,” illustrating how telecom companies are caught in the crossfire of macroeconomic adjustments.
Service Quality vs. Tariff Adjustments
He addressed consumer concerns head-on, acknowledging the public’s frustration with service quality, like dropped calls. However, he argued that without the financial viability provided by a tariff increase, “There will be no investments to enhance service quality.” He mentioned how vandalism often disrupt service, explaining, “Vandalism of equipment and infrastructure is a significant issue,” which not only affects service but also adds to the cost of repairs.
He stressed that without appropriate pricing, the sector cannot sustain or expand its infrastructure, which is critical for service improvement and meeting growing demand.
Economic Sustainability and Employment
The telecom sector’s health is not just about corporate profitability; it’s about sustaining an ecosystem that supports over two million jobs. “Having the right prices ensures the sustainability of the industry and guarantees those 2 million jobs,” he remarked, highlighting the broader economic implications.
Consumer Behavior and Market Resilience
Mr. Modupe Kadri drew parallels with other sectors where price increases did not lead to reduced consumption, suggesting, “People did not abandon their cars when petrol prices went up,” to argue that telecom services are integral to daily life. He reassured that even with past economic downturns, like during Covid, telecom usage has shown resilience.
Future Outlook and Policy Expectations
With optimism, Mr. Modupe Kadri discussed the potential for recovery, “If there is no further devaluation or no devaluation to that extent, then that number [Forex losses] goes away,” suggesting that government policy stabilization could lead to sector revival. He also expressed hope for a regulatory environment that allows for timely tariff adjustments.
Mr. Modupe Kadri’s discussion paints a picture of a telecom industry at a crossroads, where the proposed tariff hike is not merely a business strategy but a survival mechanism to ensure continued service provision, infrastructure growth, and economic contribution. As Nigeria navigates these economic waters, the telecom sector’s role remains pivotal, with the tariff increase potentially setting the course for sustainable growth or further challenges.
Through his insights, Mr. Modupe Kadri calls for a nuanced understanding of the economic pressures on telecom companies, urging a balance between consumer affordability and the sector’s operational sustainability.
