Nigerian demands may push up costs for users, MTN warns

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MTN Group, Africa’s biggest phone operator, has said that if Nigeria’s government made its licence conditions more stringent, costs for customers might rise.

The government of Africa’s largest economy would probably revalue MTN’s phone spectrum and would press to have better service and infrastructure written into the contracts, Nigeria’s Information and Communication Technology Minister, Omobola Johnson, said.

In February, its telecoms regulator fined the three biggest mobile operators, including MTN, for the quality of their service and prohibited them from selling new SIM cards in March, the first time the punishment was imposed along with a financial penalty.

MTN’s licence expires in 2016.

“Tougher rules, tougher regulations, greater demands ultimately will impact price,” the chief financial officer of MTN’s Nigerian unit, Andrew Bing, said on Tuesday.

“The more you charge upfront or the more you demand over time, somebody has to pay for it. Ultimately, the subscribers are the people who will have to pay.”

Nigeria had 167 million cellphone subscriptions in February last year, according to the Nigerian Communications Commission. With many subscribers owning more than one phone, user numbers will probably grow to more than 200 million in 2017, London-based research company Informa Telecoms & Media estimates. The population is about 170 million.

MTN shares rose 1.48 percent to close at R216 on Tuesday. They have lost 1.4 percent this year, giving MTN a market value of R401 billion.

Prices had fallen in the past three years in Nigeria, MTN Nigeria’s chief executive, Michael Ikpoki, said. Over the same period, the company had spent between $5bn (R52bn) and $6bn in expanding capacity.

“It’s bigger than the power sector combined, it’s bigger than the cement industry, but they get away with everything,” said Bing. “Yet everybody wants a piece of us.”

Nigeria’s regulators had to allow phone companies to make “decent margins” to avoid hurting investment, said Ikpoki. “We are already operating under fairly stringent conditions. I don’t know what can be tougher than this.”

The company struggles with power supply and cuts to its fibre-optic network, making it a challenge to meet the regulator’s standards.

Hundreds of cuts were made every week to MTN’s cables because of negligence as roads were constructed or dug up, as well as a result of malicious damage, said Bing.

Last year MTN spent about 34 billion naira (R2.2bn) on diesel to power its base stations across the country due to a lack of regular electricity in Nigeria, said Ikpoki.

The government of President Goodluck Jonathan sold 15 state-owned power generation and distribution companies last year and is spending $3.5bn to boost transmission capacity this year by 50 percent.

“We are very concerned and keen to see that the whole power privatisation succeeds because it’s going to be really, really critical for our business,” Ikpoki said.

MTN is looking to grow revenue from data as the use of smartphones, tablets and TVs increases in Africa’s most populous nation to offset a slowdown in the growth in subscription numbers.

While users in Nigeria, MTN’s biggest market, rose only “marginally” to 57.2 million in the quarter to March, data revenue in local currency rose 21 percent. At the end of last year, 15 percent of MTN Nigeria’s revenue came from data, said Ikpoki.

“Voice is getting cheaper and people are now using more data,” said Bing. “Will it ever overtake? It probably will, but it’s going to be a long way, because a lot of people in this country still haven’t made a phone call.” – Bloomberg


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