GASPING FOR BREATH

Telecom operators may embark on load shedding to prevent failure of system, writes SONNY ARAGBA-AKPORE

 Nigerians are commonly used to electricity power load shedding which strategically reduces or cuts off electricity supply to different consumers or areas in a controlled manner. The process helps balance demand with available resources.

 It is often planned and negotiated with local building owners. Utility providers monitor electricity demand and identify when it exceeds supply or nears capacity limits. They then create a load shedding plan that entails rotating power outages, temporary current disconnections and incentives to building owners for complying. Once demand decreases or additional power resources become available, the utility provider restores power to the affected areas.

 Load shedding can also happen without prior planning. Power customers might experience involuntary load shedding when a utility electrical provider lowers or stops electricity distribution across a coverage area for a short period of time. This type of load shedding is commonly referred to as a rolling blackout. Brownouts, another type of involuntary load shedding, are caused by a power supplier lowering voltage distribution during peak usage times to balance supply and demand.

 Load shedding is about survival when telecom operators might start turning off some of their cell sites during less busy times to save on energy and costs. This could help them minimize resources better and keep services running, even when it’s not a perfect solution. If telecom operators implement load-shedding, the quality of service could decline sharply. Load-shedding would likely result in reduced network coverage, slower internet speeds, and an increase in dropped calls according to an analyst.

 According to the Nigerian Communications Commission (NCC), Nigeria had over 164 million million active internet subscriptions as of March 2024,with mobile data accounting for the majority. A reduction in service quality could severely impact these users, leading to widespread frustration.

 An analyst describes load shedding as a deliberate shutdown of telecom services in a part or parts, generally to prevent the failure of the entire system when the demand strains the capacity of available infrastructure.

 Plagued by incessant rising cost of operations, including the increased prices of diesel, infrastructure maintenance, and a depreciating naira,  operators have called on the NCC to approve a tariff increase “to help mitigate their financial burdens.”

 MTN, for instance,with a subscriber base of 81.7million as of March 2024, reported a first loss after tax of N137 billion since its 2019 listing on the Nigerian Stock Exchange in 2023. The telco incurred FX losses of N740 billion ($815.79 million at N907.1/$). Airtel Africa, which had 63.3 million subscribers in Nigeria as of March 2024, reported a loss after tax of $89 million for its full year ended March 2024, primarily due to FX headwinds in Nigeria and Malawi. It lost $1.26 billion to derivative and FX exposures, with $770 million attributed to the naira’s devaluation.

 This has led to dwindled investment in the telecoms sector, Carl Cruz, chief executive officer of Airtel Nigeria, stated, adding that, “The devaluation of the Naira from N420/dollar to N760/dollar to about N1500/dollar today, had indeed affected telecoms industry who rely heavily on importation of infrastructure to grow the sector.’

 In the same vein, Karl Toriola, CEO, MTN Nigeria, said operators are reluctant to invest, simply because of the high operating cost and the devaluation of naira, among other issues that have marred the growth of the sector.  According to him, “the telecoms sector in Nigeria is now in an intensive care unit (ICU) gasping for breath, while calling on the government to intervene. The sector is facing a lot of challenges of which if urgent action is not taken, it will dry up. The truth is that investors are not going to come to invest in the sector if the fundamental issues are not addressed. To rescue the sector from collapsing, there is a need to increase prices of telecom services.”

 However, despite repeated pleas, the regulatory body has remained silent on the issue, causing frustration and uncertainty among industry players.

 ALTON had earlier sent a memo to the telecom regulator (NCC) saying that “the telecommunications industry has been significantly impacted by a myriad of macroeconomic challenges experienced in recent years due to the resulting exponential increase in broad business costs.”

Of particular importance are: the upward trajectory in the inflation rate from 11.98% in 2019 to 21.34% in 2022 and currently 27.33% as at October 2023; •rapid devaluation of the Naira evidenced by the recent upward movement at a rate of 68.5% from N461/$1 in December 2022 to N777/US$ as at the end of September 2023;and now over N1,590/ dollar,

•Sustained rise in energy prices with diesel currently retailing at an average price of N1,400/litre from N250/litre in January 2022.

With energy costs representing 40% of Mobile Network Operators’ operating expenses, tighter external financing conditions, higher debt service payments, and increased pressure on the Nigerian FOREX market, there has been a significant increase in the cost of production which has jeopardized MNOs’ capacity to maintain healthy margins in such a capital-intensive and FOREX- dependent industry.

  ALTON also advocates for the co-creation of policies for the ICT sector, better collaboration between ICT and non-ICT regulators with oversight over the sector (environment and consumer and corporate governance) given the cross-cutting nature of digital services, which span multiple subject areas and regulatory frameworks.

Aragba-Akpore is a member of THISDAY Editorial Board