The President of the Association of Telecoms Companies of Nigeria, Mr. Olusola Teniola, speaks on the opportunities and challenges brought about by COVID-19. Emma Okonji presents the excerpts:
What can you say that has been the general impact of COVID-19 pandemic on telecoms companies in Nigeria?
COVID-19 has presented the industry with vast opportunities from the impacts caused by the government’s stay-at-home lockdown and recent relaxation of the same. Specifically, it has meant that data usage patterns and consumptions have placed considerable pressure on our members’ networks, traffic demand has presented a need for improvements in already deployed infrastructure and capacity and with the ongoing dependence on virtual online collaborative tools, it is evident that an opportunity presents itself to the industry to expedite the digital transformation that addresses the many gaps that have been identified over this period.
What major roles do Association of Telecoms Companies of Nigeria (ATCON) and ALTON play as industry bodies for telecoms operators in Nigeria?
ATCON is an advocacy body and it has been the voice of influence on behalf of its members since December 10, 1993 and that includes more than 160 member companies to date. Both ATCON and ALTON are very much instrumental in protecting the telecoms industry’s more than $70 billion investments made since the liberalization of the sector back in 2001. We provide our members with regulatory and government policy information in a timely manner and have contributed to the development of the Nigerian Broadband Plan 2020-2025. Over the years both bodies have spearheaded many initiatives with the most recent critical national infrastructure (CNI) and Right of Way (RoW) pushes that have begun to yield positive results.
The COVID-19 pandemic has altered plans and slowed business growth for industries in Nigeria. What will you say has been the challenges faced by telecoms operators?
The recent release by the National Bureau of Statistics (NBS) first quarter (Q1) 2020 data of ICT contribution to GDP at 14.07 per cent, demonstrates the potential of ICT to be a driver for continued growth post-COVID-19 and the new normal. However, many economists and health experts have cautioned that this pandemic like the common flu in the United Kingdom and other colder climes is here to stay with us and this fact needs to be priced into the business plans of corporate Nigeria. The negatives to deal with and highlighted in the recent sustainability report submitted to President Muhammadu Buhari by our Vice President Yemi Osinbajo, is that consumer purchasing power due to millions of forecast job losses will have an impact on the propensity of consumers to spend household income on non-essential items. This will mean a potential reduction in the monthly spend on voice and data with a resulting impact on the positive results observed in Q1 for the telecoms sector. The forecast is for a ‘U’ shaped recovery for Nigeria by Q3 2021 if all recommendations noted in the recovery plan are implemented. The opportunity from COVID-19 for the industry is to ensure innovative funding, innovative pricing, and innovative financing of capital expenditure (capex) programmes are introduced to weather the imminent tough times ahead.
Do you think COVID-19 will have negative effect on the telecoms sector in the long run?
It is difficult to predict what will happen in 12-24 months’ time and no one knows the future. However, a likely scenario play that is prominent is that the price of data will be a determinant of where the industry takes a cue from. The arrival of potentially two more undersea cables berthing in Lagos by year 2022, suggests a likely wholesale data price shakeup especially in the middle mile, with Over the Top Technology (OTT) players seeking potential opportunities to increase the audience they can reach. Consolidation is a thematic that will also play out to bring some economies of scale to provide the impetus for further infrastructure development as indicated in the Nigerian Broadband Plan 2020-25. The realisation of a digital economy signifies a positive upside in the long run.
Bearing in mind the effect of the COVID-19 pandemic on business, do you think this will affect the payment of tax by companies especially Telcos?
Yes, most definitely. Cashflow has been seriously impacted as seen by recent refinancing by some of our bigger players and members of ATCON. The fact that most of our members are focused on providing services to the enterprise market, it is very apparent that any cash in operations has been used to sustain their businesses despite the fact that a majority of their clients were shut down during the lockdown period and had their staff operating or staying at home. So in some cases clients cancelled contracts or simply put things on hold on new businesses and hence most of our members are strapped for cash. Those that have their heads above water are having to approach alternative sources of funding in the way of debt facilities to fund working capital. 2019 annual returns and taxes due will be under serious pressures and in most cases at least expected tax payment delayed and this requires a full understanding by the Federal Inland Revenue Service (FIRS) to work with those of our members under serious financial strain.
Recently, the FIRS said the telecom sector is among a few other sectors, currently experiencing a ‘boom’ due to increased transactions as a result of the lockdown. Is this statement correct, and in what ways has the sector grown this period?
This is not true in all cases. As already highlighted previously. There are only a handful of our members that purely rely on the consumer market alone. Most of our members focus on business-to-business (B2B) and it is to this segment where there was a ‘bust’ in business and where the greatest negative impact was felt. Remember every member has had to pay their staff salaries and keep their networks running 24/7 over the lockdown period. So, the statement made by the FIRS is incorrect and I believe they are also aware of this as the statement was removed from social media platforms shortly after it was made public.
Globally, there is a supply chain challenge across the industry. How has this hindered the supply of critical equipment for optimal network usage?
We, as a country, are reliant on imports of finished products and goods and in the case of our industry this means 100 per cent import reliance on critical equipment. Sources for these were impacted by the shutdown of the supply chain management (SCM) during the lockdown period and as I speak, there is a backlog of at least 3-6 months at best for this critical equipment. It is also worth noting that further delays and backlogs will occur at our ports as only essential items were prioritized and telecoms equipment is not deemed essential by government.
There are insinuations that even the mobile network operators (MNOs) and InfraCos have had to take up additional costs as a result of the lockdown to ensure business continues smoothly as expected. What is your take on the effect of the costs, and what are these costs?
The biggest cost has been Right of Way (RoW) charges applied by certain states, followed by additional security cover costs due to interstate movement restrictions despite the Right of Passage that we were granted from the Office of the National Security Adviser (ONSA). Additional costs associated with personnel movement, which are not usual as part of everyday operations must be a factor in the overall costs to maintain and keep critical infrastructure up and running throughout the lockdown period. No exact figure has been released by our members; however, I am sure that Q2 figures will highlight these additional costs when they are released in July-August 2020.
We saw bigger commercial clients of smaller ISPs shutting down their offices for an extended lockdown. How did this impact the sector?
We note that those members have seen a drastic decline in their revenue line, as their clients either cancelled their contracts outright or put them on hold. The impact is likely to represent a 5-8 per cent decline on overall data services revenue for the industry and further negative impact on cloud-based service revenues in the enterprise segment.
In what ways do you think this pandemic will affect the overall performance of the Nigerian economy?
It is more than likely to have accelerated the pace at which the government has had to borrow to shore up its revenue. It also places a significant burden on FIRS to achieve its ambitious revenue targets and hence it suggests the economy will more than likely dip into negative GDP contraction alongside a negative growth rate. The COVID-19 pandemic has meant a slowdown in business activity as we know it and hence a review and focus on the way we do business will be defined as we transition into a digital economy.