Telecoms operators in Nigeria are likely to lose part of their estimated N108.5bn revenue realised monthly from phone services, as the new termination rate regime for the industry kicked off yesterday.
The revenue is generated mostly by the Global System for Mobile communications companies, which are the big operators and also by the Code Division Multiple Access operators as well as the fixed line networks in the country, as smaller players. The operators’ monthly revenue, which is conservative, is determined using the industry’s blended Average Revenue Per User (ARPU) and the current industry’s active subscriber base.
While ARPU in Nigeria has been put at around N949 by research firm, Business Monitor International Limited, latest data from the Nigerian Communications Commission also showed active subscriber base in the country has hit 114.4 million. With 114.4 million active subscriptions and an ARPU of N949, operating firms are estimated to be making about N108.5bn as monthly revenue for voice services.
Telecoms firms ended 2012 with
monthly average revenue of N107.3bn from voice telephony services provided for their 113.1 million active subscriber base as at December.
This means the increase in subscriber base from 113.1 million as at December 2012 to 114.4 million in the latest industry data has led to increase in revenue by the telecoms firms. It was, however, gathered that the current monthly revenue figure may experience a reduction, as the new mobile termination rates regime introduced by the Nigerian Communications Commission became effective. The commission recently announced new telephone interconnection rates, which can practically reduce cost of telephone calls in Nigeria.
According to the new rates, the termination rates for voice services provided by major mobile operators in Nigeria irrespective of the originating network shall be N4.90k from April 1, 2013. Analysts say this means that a network that is completing a telephone call will charge N4.90 to the network that originates the call. Up till now, the operating rate in the industry has been N8.2k.
The Commission said this rate will change to N4.40k from April 1, 2014; and N3.90k from April 1, 2015. For smaller operators and new entrants, the termination rate is N6.40 from April1, 2013. This rate will change to N5.20k from April 1, 2014; and N3.90 from April 1, 2015.
Smaller operators are those that have less than 7.5 per cent market share in terms of subscriber base while new entrants are those telecoms firms that entered the market in less than three years.
Meanwhile, the rates will remain in force for three years except the Commission reviews them. The last review of the termination rates was made on December 31, 2009. The downward review of the interconnection rate in 2009 led to a decline of more than 50 per cent in tariff as cost of making calls per minute fell from around N25 per minute to the current average tariff of N10 per minutes.
Industry experts, who spoke with National Mirror, however, expressed mixed reactions over the possibility of the new termination rate leading to lower tariffs for subscribers or decline in operators’ revenue. According to the Chief Executive Officer, AAA Infotek Limited, Mr. Akinlabi Akinbo: “The implication of the new interconnection rates would mean that telecoms subscribers will pay less for telecoms services in the next three years.” He said the new rates would also put pressure on the operators’ revenue, especially the bigger ones.
“Big operators have large subscriber base and in the event that they reduce tariff, they will pay more to other operators. As such, they may face close to 10 per cent reduction in their voice revenue,” he said. He, however, said smaller operators may experience marginal decline in their revenue “since they do not have many subscriber base as the big operators do.” But the President, Association of Telecoms Companies of Nigeria (ATCON), Mr. Lanre Ajayi, said the reduction in termination rates “does not necessarily mean that the tariff will drop automatically.”
Rather, he said whether or not tariff will crash for subscribers was a function of reduction in other cost elements. “From the way I understand the interconnect rates, I do not think that the new rates would automatically translate to lower tariffs because there are other cost elements such as cost of infrastructure, personnel and all that which work together to determine whether or not a tariff will be reduced or not.
“Naturally, you cannot offer services below the termination rates. So, we should not go out with the notion that the new rates would automatically crash cost of making calls. “It only means that tariff may come down if other cost elements reduce also,” he said.
He also noted that even in the face of declining ARPU from voice, operators already were working on leveraging data service as next frontier for revenue generation. “I’m sure operators are paying attention to data service.
If you have noticed, most of the adverts currently being run by the operators have more to do with internet services than voice.” However, President, Association of Licensed Telecom Operators of Nigeria, ALTON, Mr. Gbenga Adebayo, said for data revenue to be enhanced as voice service revenue declines, government needs to assist in addressing the many challenges impeding extension of broadband infrastructure to the nooks and crannies.
He said top on the list of such challenges include the problem of Right of Way, multiple taxation and multiple regulation. President, National Association of Telecoms Subscribers, NATCOMS, Mr. Deolu Ogunbanjo, said the new termination rates would spark off increased competition among operators in providing quality of service to the growing telecoms consumers.
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