By Obinna Chima
The total number of active mobile phone subscribers in Nigeria recorded a decline of 6.15 per cent to 143 million in the second quarter of 2017, a report by the Financial Derivatives Company Limited (FDC) has shown.
This followed an earlier decline by 1.38 per cent to 152 million in the first quarter of 2017, after increasing by 0.84 per cent to 154 million in the last quarter of 2016.
The decline in the past two quarters was attributed to a shift in product options, as the report stated that telecom subscribers were moving away from traditional cellular services to data bundle packs, which allows them to use Over the Top (OTT) services.
It pointed out that telecom operators and Internet service providers are currently at loggerheads to deliver data at relatively cheaper prices.
â€œThe fierce price competition among telecom operators on their voice and internet data has led to the contraction in the sector revenue over time. Consumers benefit from tem- porary low prices only in the short run. The sector has also contended with OTT players that utilise technology to convey voice/video calls at a fraction of traditional voice call costs.
â€œWhile Nigeriaâ€™s data bundle prices are the lowest in sub-Saharan Africa, they are priced below actual costs which can harm the sector and puts long-term customer benefits at risk. Smaller mobile network operators find it hard to survive in the market which leaves an industry dominated by few players. These few players will increase their market share and have the power to influence prices. Prices can more than double which can have a negative effect on the levels of consumption,â€ it explained.
In recent years, Nigerian companies have had difficulties accessing foreign currency (FX) to finance their dollar/FX debt. The telecommunications sector was no exception.
Etisalat Nigeria (now 9Mobile)Â was adversely affected by both a financial and management crisis. The telco had obtained a $1.2 billion foreign- backed guarantee bond in 2013 to upgrade and expand its operations, but was unable to meet its obligations since 2016.
Its outstanding loan adversely affected 13 Nigerian banks.
â€œGiven the macroeconomic climate, it is expected that banks will record a substantial amount of non-performing loans (NPLs) due to the debt crisis. Such a scenario will adversely affect their profits (a 12 per cent decline is expected in 2017) and their ability to meet their activities.
â€œThe 2017 half year results of most banks have shown a substantial decline in their loans to customers in order to minimise and stabilise risk assets. In a bid to prevent high NPLs in the future, banks are expected to further reduce their loans to retail clients and firms.
â€œGlobal influence gives a company easy access to revenue. Raising capital in international markets helps to grow the busi- ness, meet daily obligations and minimize cost. It strengthens the business through exposure to new relationships. It diversifies business risks across a broader customer base. The recent exit of one of the major foreign investors from the tele-com sector raised concerns about the reluctance of other investors entering into the market,â€ the report added.
In order to ensure sustainable growth, the report stressed the need for reform in the sector.
It stated that the focus in the sector should be competition. It noted that the current government has shown its commitments in creating an enabling environment for the private sector to contribute innovative solutions to allow consumers to benefit from Information Communication Technology (ICT) advancements.
â€œThis will in turn bring about efficiency and productivity in the telecom sector and eventually enhance economic growth. To solve the issue of artificial low prices, a regulated minimum price level has to be put in place by the government and regulators. Big and small telecom operators can compete on the quality of the network and customer services they provide,â€ it added.