ISPs, VAS operators, others bear COVID-19 brunt as telcos flourish

• Experts rally support for ailing IT players

By Omobayo Azeez

In the wake of the Coronavirus pandemic, the Nigerian telecoms industry has produced both gainers and losers among operators, Business A.M. has gathered.

However, the loud cheering noise from the gainers’ camp has overwhelmed the groans of those belonging to the other side of the divide.

Industry operatives revealed that operators that cashed in on the back of the pandemic are actually fewer in number than their counterparts, whose operations have been pared by the impacts of the pandemic.

General impression since the virus brought the global economy to its knees is that of boom and bumper harvest for telecoms operators as majority of people resorted to increased consumption of ICT solutions, data and calls, especially.

As this newspaper gathered however, only few operators offer these basic services and benefit from the ugly situation, while others outside this category have been counting their losses.

Business A.M. found that operators, especially those in the Global Service for Mobile communications (GSM) segment of the market, have recorded noticeable growths  in their subscriber numbers during the pandemic period even as per Average revenue Per User (ARPU).

The ARPU is a measure used primarily by consumer communications, digital media, and networking companies, as the total revenue divided by the number of subscribers.

Operators revealed that consumers’ spending has increased for two consecutive quarters as ARPU went up by 20 per cent to hit $4.25 in Q1, 2020 from $3.87 in Q4 of 2019; and that this was sustained to settle at $4.50 in Q2, 2020.

The development is in contrast with the conventional trend whereby rise in the number of active lines often distributes estimated revenue to total subscriptions and thus trigger contraction in ARPU.

However, Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), was quick to caution that the increase in active subscriber base to 192.27 million in May, which is the latest industry update by the Nigerian Communications Commission (NCC), and the rise in ARPU, do not present the general outlook of the industry.

He warned that while operators, whose services focus more on individual subscribers, such as the four Mobile Network Operators – MTN, Glo, 9Mobile and Airtel – may be benefiting more from the pandemic-triggered by the increase in telecoms service consumption, some other operators have actually had their businesses grounded for the same reason.

Similarly, sources told our correspondent that the Internet service providers (ISPs) and value added service operators in the market are groaning due to the impact of the pandemic.

It was gathered that with ISPs focusing on enterprise services, the lockdown, which put many of their corporate customers under locks during the period, has created a lull in their market.

A source within an ISP, who did not want his name mentioned, told Business A.M. that it would be safe to say “We did not have any business at all in between April and May this year. We recorded 80 per cent decline in revenue and I believe the situation is not different from our colleagues in the market.”

He added that the only thing that could helpe any operator in the ISP category is to run a system with more residential customers than enterprise subscribers. “However, this is unlikely,” he said.

Corroborating this, Wale Owoeye, chief executive officer of Cedarview Communications, said aside from the MNOs and other players in the fintech industry, almost every other segment of the ICT industry, ranging from ISPs to VAS players, to equipment manufacturer, among others, have been negatively impacted.

“In terms of revenue, the MNOs are the largest within the ICT market but they are not the only ones there. We have the likes of equipment dealers. Their businesses are not smiling because of the pandemic.

“They deal in phones, accessories and hardware. They are still feeling the brunt of the pandemic. Their shops are still locked for certain days of the week. So, they are not able to trade the way they used to.

“Also, importation of equipment is limited. Although goods still come in, not at the same frequency as it used to come in prior to the pandemic.

“Another segment to look at is that of the ISPs. Majority of the ISPs designed their networks to serve the enterprise market. With offices shunned and a lot of people working from home, just a few of the ISPs have a large amount of residential customers that are able to sustain during the period,” he said.

He added that many of the enterprise customers have shut down their link and they have also reduced their capacity which is taking a serious toll on the ISPs.

He also cited the VAS segment of the ICT market, saying that these subsectors are also feeling the heat because people are not subscribing to services like they used to.

“Even with the DND, a lot of customers are now corporate. And that is also affecting the businesses and the economy,” he added.

Owoeye, who is also the VAS coordinator for ATCON, noted however that tower operators may not be affected badly because their customers are the MNOs.

“It may be closed to business as usual for them because many of the MNOs still have to keep sites up and running like they used to before the pandemic,” he said.

Owoeye called on the government to step in with palliatives and support funds for operators to weather the storm. “One thing that is sure is that telecoms will always bounce back and that is why we need every help that we can get at the moment to sail through.”

However, reacting to the matter, Ikechuckwu Nnamani, president of Medallion Communications, who spoke on improving the general outlook of the sector, said the COVID-19 crisis has presented a great opportunity for telecom and ICT services in Nigeria as more services have now gone digital and moved online.

“There has been a noticeable increase in the uptake of telecom and ICT services.  But it has also introduced some challenges.

“The current telecom infrastructure was not properly sized for the volume of traffic and activities going on and this has impacted on the quality of service.

“The cost of running operations has also gone up and operators [need to] adjust to the challenges introduced by COVID-19,” he said.

Nnamani, who doubles as the first vice president of ATCON, explained that to ensure constant availability of service, operators have to pay a premium for diesel supply and maintain inventory of equipment in case there is a lockdown imposed.

“Several expansion projects have also been put on hold as a result of equipment manufacturers not being able to send needed upgrades and the cost of forex has gone up significantly.

“There is a need for government intervention in granting operators waivers on import duties, granting access to forex at an avoidable rate, and extending cheap financing to service providers,” he said.