The indigenous telecommunications industry in Nigeria is experiencing a concerning trend, with more than 568 local operators becoming inactive or moribund over the last five years. The causes of this decline include diminishing foreign capital inflow, high energy costs, and a foreign exchange (FX) market crisis, all of which are driving small and local operators out of the market.

These operators span various segments of the country’s telecom sector and are estimated to be worth around $77 billion. They include internet service providers (ISPs), value-added service (VAS) providers, vendors, tower companies, fixed telephony operators, and international data access (IDA) service providers, among others. These operators are often referred to as tier-two and tier-three service providers.

In addition to the declining number of small operators, the telecom sector’s local content is at a mere 16%. A study commissioned by the Nigerian Communications Commission (NCC) has revealed that 84% of the hardware used in the sector is foreign, and 77% of the software comes from foreign manufacturers. Small players in the telecom industry are struggling with challenges such as regulatory voice and data tariff rates that haven’t changed in over 15 years, regardless of rising operational costs.

The issue is exacerbated by Right of Way (RoW) levies and taxes imposed by state governments, some of which far exceed the agreed-upon N145 per linear meter proposed by the Nigerian Governors Forum. This situation prevents smaller operators from accessing services from the major network operators (MNOs) for transmission to other parts of the country, especially in rural areas.

Moreover, small local operators have been hindered by their inability to access foreign exchange (FX) through commercial banks for capital expenditure. The instability of the parallel FX market has added to their woes.

A report titled ‘Subscriber/Network Data Yearly Report for 2022’ by the NCC reveals that the major GSM players—MTN, Globacom, Airtel, and 9mobile—spent N718.3 billion on capital expenditure in 2022, with operating costs of N1.99 trillion and total revenue of N3.329 trillion. The big four GSM operators accounted for 86% of the industry’s revenue last year.

In contrast, small operators like internet service providers (ISPs), value-added service (VAS) providers, and others struggled with challenges such as access to foreign exchange, high diesel costs, and RoW levies. The cost of diesel, a vital component for powering telecom infrastructure, skyrocketed from N350 per liter to N960 per liter in April 2023, increasing operational expenses significantly.

Industry analysts warn that if these challenges persist, 90% of local telecom operators could go out of business within the next four years. They argue that the existing financial disparities between major operators and small players have created an uneven playing field and may lead to further market consolidation. They advocate for greater support for indigenous operators, review of revenue-sharing formulas, and a commitment to local content to level the playing field.

Addressing these issues is vital to the successful implementation of the National Broadband Plan 2020-2025, which aims to achieve widespread broadband access and 90% population penetration.

In conclusion, the Nigerian government, the NCC, and industry stakeholders must work together to protect and support small operators in the telecom sector, ensuring that they can continue to provide services and contribute to the industry’s growth.