Telecommunication operators have begun to cut their operating costs and may begin to lay off staff members in the coming months if the naira depreciation is not addressed, findings by The PUNCH have revealed.
A source in the Association of Licensed Telecommunications Operators of Nigeria said small telecom operators would be affected the most.
The source noted that some small operators had begun to sack workers to survive worsening economic realities.
The source said, “Even some smaller operators have started to lay off their staff (members) because they can’t meet up, and they must survive.”
According to the source, telcos may upwardly review their prices to survive any time to remain operational.
The source stated, “The issue of traffic hike is just a matter of time. We are not isolated from the ecosystem; everything has gone up.”
In their second quarter results for 2023, MTN Nigeria and Airtel Africa revealed that they lost a combined N485.69bn to naira devaluation.
The telcos noted that the sharp devaluation of the naira following the Central Bank of Nigeria’s move to close the gap between the official and parallel exchange rates had negatively affected their businesses.
According to MTN, there was a 60 per cent movement in the exchange rate in the second quarter of 2023 and it led to a N131.50bn forex loss for the firm.
It noted that its overall profit after tax fell by 29.3 per cent due to the loss.
It added, “These policy reforms are expected to be positive for the economy in the medium to long term.
“However, in the short term, they have created additional financial burdens on consumers and businesses, and these will be fully reflected in the pressures on our margins in H2.”
Airtel on its part recorded N354.19bn ($471m) in forex loss and said, “Profit after tax was negative ($151m) driven largely by a foreign exchange loss of $471m recorded in finance cost before tax and $317m after tax because of the devaluation of the Nigerian naira in the month of June 2023.”
Commenting on the impact of the naira’s fall, the National President, Association of Telecommunication Companies of Nigeria, Tony Emoekpere, told The PUNCH that the operating cost of many operators had increased by 43 per cent because a sizeable component of their capital expenditure is dollar-denominated.
He said, “A sizeable component of CAPEX expenditure of operators is dollar-denominated. Most of the contracts were signed based on the old exchange rate.
“When the exchange rate changed, it numerically impacted their budget. The expense of operators has increased by upwards of 43 per cent over what they planned to spend in the current budget cycle.”
He stated that he was not aware of any current layoffs in the industry, adding that the skill gap in the sector made it a tough call.
He, however, noted that the new reality would affect the profitability of many operators with telecom service operators needing to shift their operational strategies.
He noted, “There are other costs that can be cut. Possibly, it might have a multiplier effect on the downline. Everyone will have to rethink their plans for the year and plan for the coming years.”
“At some point, conversations about increasing prices will be inevitable because if the cost of production continues to increase, prices might have to go up.”
The chief executive officer of a telecom company, who did not want his name in print, noted that the industry was hoping for a convergence of the naira rates.
He stated that if that didn’t happen, operators may begin to let people go by the end of Q3, 2023.
He said, “Our services are denominated in dollars; it is worrisome. It was enough issue to get Form A before. Paying Google for cloud services is expensive now. It is a challenge. The convergence is what we are hoping for. I do not know what the dynamics are.
“… People are looking for what happens after this quarter. If nothing is done, people will be left with no choice but to lay off, because whatever naira you are making is not enough to carry your dollar costs.”
