On January 20, 2025, the Nigerian Communications Commission (NCC) approved a 50% tariff hike for telecommunications companies, a compromise on the 100% increase they had requested.
While reactions to the hike have been mixed, experts agree that this increase alone may not be enough to resolve the ongoing financial struggles faced by telcos in the country.
Ernest Akinlola, a former executive at global telecom companies such as T-Mobile, Virgin Mobile, and Etisalat Nigeria, described the 50% hike as a “welcomed and balanced outcome” from the NCC, though he emphasized that it would not entirely address the underlying financial challenges.
He suggested that telcos would need to explore alternative revenue streams, including the rapidly growing data centre business.
This sentiment is echoed by Airtel Africa, which, in March 2024, announced plans to launch its first data centre in Lagos, branded as NXtra Data Centres.
Akinlola, now Managing Director of Bboxx, a solar energy company, noted that investment in data centres represents a lucrative opportunity for telcos to optimize revenue and improve operational efficiency.
The need for such measures comes amid mounting financial pressures on Nigerian telecom companies. With rising inflation, devaluation of the naira, and escalating operational costs, telcos have struggled to maintain profitability.
MTN Group, for instance, reported a staggering $414.7 million loss in 2024 due to these factors. MTN Nigeria also recorded significant losses in 2023, driven by increasing diesel costs for cell towers and the challenges of importing equipment amidst foreign exchange scarcity.
While the 50% tariff hike approved by the NCC offers some relief, it remains insufficient in bridging the widening financial gap.
In a recent interview with Arise News, Carl Toriola, CEO of MTN Nigeria, pointed out that the rapid fluctuation of the naira’s value in recent years has been one of the telcos’ biggest challenges, further complicating their financial landscape.
The data centre market in Nigeria has seen a 500% increase in investment, driven by the growing demand for internet services. Telcos, by investing in data centres, can ensure that they are equipped to handle spikes in data demand, offering a more reliable service to their customers.
Mohammed Rufai, MTN’s Chief Technical Officer, noted that increased capacity in data centres would allow telcos to better meet the needs of their subscribers.
Moreover, as the demand for Artificial Intelligence (AI) grows, Akinlola believes AI-powered data centres represent a significant opportunity for telcos. However, the high costs of setting up AI data centres, particularly the purchase of GPUs, remain a barrier for many telcos.
Chris Silberberg, Research Manager at IDC, confirmed that the expense of these technologies is prohibitive for most telecoms. Nevertheless, partnerships with hyperscalers or cloud providers could offer a feasible solution, allowing telcos to provide necessary infrastructure and services while sharing the costs.
To further optimize their operations, Akinlola suggested that telcos explore the use of solar power for their energy needs, reducing reliance on expensive and unreliable diesel generators. The GSM Association (GSMA) reported that telcos could potentially cut their energy costs by 50% by adopting solar solutions.
Despite these potential solutions, the financial outlook for Nigerian telcos remains uncertain. While some may survive by adopting new business strategies, others may struggle to navigate the country’s challenging economic environment.
