Telcos cutting costs and jobs, forced by worsening business environment
By Jeph Ajobaju, Chief Copy Editor
Telecom networks are cutting operating costs and may also lay off workers in the coming months, if naira devaluation continues.
The Association of Licensed Telecommunications Operators of Nigeria (ALTON) warned small operators will be affected the most, and are already firing staff to stay afloat the worsening realities in the harsh business environment.
“Some smaller operators have started to lay off their staff (members) because they can’t meet up, and they must survive” which may trigger hikes in tariffs, an industry source said.
“The issue of tariff hike is just a matter of time. We are not isolated from the ecosystem; everything has gone up.”
MTN Nigeria and Airtel Africa disclosed they lost a combined N485.69 billion in the second quarter of 2023 (Q2 2023) due to naira devaluation.
Telcos complain the rapid devaluation of naira is the result of moves by the Central Bank of Nigeria (CBN) to close the gap between the official and parallel exchange rates, which negatively affect businesses.
MTN said there was a 60 per cent movement in foreign exchange (forex) rate in Q2 2023 which caused it N131.50 billion forex loss and 29.3 per cent drop in overall profit after tax.
“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,” MTN explained.
Airtel recorded N354.19 billion ($471 million) in forex loss.
“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,” it said.
ALTON National President Tony Emoekpere lamented the operating costs of many operators have increased 43 per cent because part of of their capital expenditure is dollarised.
His words: “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.”
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Skill gap makes it a tough call
Emoekpere denied knowledge of current layoffs, saying the skill gap in the sector makes it a tough call, per reporting by The PUNCH.
“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,” he warned.
The Chief Executive Officer of a telecom firm, who did not want his name published, disclosed the sector is hoping for a convergence of naira rates without which operators may begin to shed workers by the end of Q3 2023.
“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,” he stressed.
“People are looking for what happens after this quarter. If nothing is done, people will be left with no choice but to lay off [workers], because whatever naira you are making is not enough to carry your dollar costs.”