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Nigeria telecommunications industry outlook
Olusola Teniola, President of the Association of Telecommunications Companies of Nigeria joins CNBC Africa to discuss this and other issues around affecting Nigeria's telecoms space.
Fri, 22 Mar 2019 07:56:27 GMT
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AI Generated Summary
- The industry is now considered mature, and there is a need for alternative forms of funding to support the necessary capital expenditure (CAPEX) required for digital transformation. IPOs are seen as a way to bring in new capital and widen the shareholder base.
- Rumors of a potential increase in core tariffs by telecommunications operators are largely unfounded, with any price adjustments likely to be linked to changes in Value Added Tax (VAT) rates. Dialogue with the government is essential to address tax harmonization and eliminate barriers to investment.
- The NCC has set ambitious targets for broadband penetration, aiming to reach 70% by 2024. Some experts believe that a target of 80% penetration would be more beneficial for Nigeria's economy, as it could lead to higher GDP growth rates and greater economic diversification.
The telecommunications industry in Nigeria has been a topic of much discussion, especially in regards to the possible listing of major operators on the Nigerian Stock Exchange (NSE). The industry is now considered mature, and there is a need for alternative forms of funding to support the necessary capital expenditure (CAPEX) required for digital transformation. One way to fund this transformation is through Initial Public Offerings (IPOs), which can help bring in new capital and widen the shareholder base. The recent settlement between MTN and the NSE is seen as a positive indicator for the future of the industry, with other operators likely to follow suit. The NSE is expected to benefit greatly from these developments, as more listings will contribute to market growth and competition. However, amidst the optimism surrounding these IPO discussions, concerns have been raised about a potential increase in core tariffs by telecommunications operators. The Nigerian Communications Commission (NCC) is the only body authorized to approve price hikes, and rumors of a tariff increase are largely unfounded. Any price adjustments would likely be linked to changes in Value Added Tax (VAT) rates, rather than arbitrary tariff hikes. The industry has faced challenges such as base station shutdowns in conflict-affected areas, but these issues should not lead to price increases. Instead, there is a need for ongoing dialogue with the government to address tax harmonization and eliminate barriers to investment. Despite these challenges, companies like MTN have reported positive financial results, demonstrating the industry's potential for growth. Moving forward, the NCC has set ambitious targets for broadband penetration, aiming to reach 70% by 2024. This goal is seen as achievable, given the current subscription rates and the impact of broadband on economic growth. However, some industry experts believe that a target of 80% penetration would be more beneficial for Nigeria's economy, as it could lead to higher GDP growth rates. Broadband penetration is crucial for driving economic development and diversification in Nigeria, as it has the potential to transform various sectors and improve overall productivity. By focusing on expanding broadband access and creating an enabling environment for investment, the telecommunications industry can play a significant role in Nigeria's economic development and transformation.