High Operating Cost Forces 146 Internet Service Providers Out Of Business – Report

Only 106 Internet Service Providers (ISPs) are currently active, out of the 252 companies licensed as ISPs as of fourth quarter (Q4), 2023, the Nigerian Communications Commission, NCC’s data revealed.

NCC data showed the 106 ISPs had a total of 262,206 active customers, during the period under review.

However, when compared to the four mobile network operators in the nation’s internet customer base, this number is still relatively low. Recall that 163.8 million internet subscribers were in use as of December 2023 across MTN, Airtel, Globacom, and 9mobile.

A number of factors, including the high cost of operating in Nigeria, difficulties with right of way (RoW), low internet access in the country’s northern region due to security concerns, the completion of standardisation with state governments, and various taxes, were cited by stakeholders as reasons for the ISPs’ inactiveness.

For instance, ISPs made a total revenue of N92,079,251,596.26, spent N5,243,381,710.22, to acquire, upgrade, and maintain physical assets such as property, plants, buildings, technology, or equipment, with operating cost engulfing N71,200,884,440.55, according to the 2022 year end performance report.

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WTES Projects Limited’s chief operating officer, Chidi Ajuzie, responded to this by saying that Nigerian ISPs are facing a significant survival challenge, even as he urged them to broaden their operations and search for additional opportunities for growth and profitability in addition to sustainability.

Highlighting some critical challenges faced by ISPs such as vandalisation, competition, tariffs, taxes and duties, power availability and cost, Ajuzie said this sub-sector needs regulatory support in terms of licensing issues, spectrum availability and price, inter-sector policies framework, Right of Way intervention, human security and safety at the plants.

“The past two years have been very challenging for the ISPs, with lots of damages done to infrastructures, particularly in Lagos state. Federal government needs to put out laws to enforce the protection of critical telecoms infrastructure. ISP’s business in Nigeria is viable but we need to watch out and look out for governmental support at the federal, state and local levels for enabling business environment”, he stressed.

Although ISPs play an important role in providing internet connectivity and achieving the National Broadband Plan (NBP 2020- 2025), Ajuzie emphasised that they do not need to be static to ensure their survival. According to him, silos are the bane of ISPs operations in Nigeria consuming both OPEX and CAPEX.

“ISPs need to be highly innovative, by going beyond typical connectivity to embracing Value Added Services and providing solutions on fibre infrastructure. ISPs need to understand their market, take informed deliberate steps to increase their revenue turnover.

“Collaboration is key for ISPs to successfully play across all the tiers. ISPs need to find key players to collaborate with for wider broadband reach as well as save costs. They must consolidate and expand serviceable footprints. ISPs also need to monetize and stabilise existing infrastructure; provide End-to-End solutions and service but focus on end-users wallets.

In essence, ISPs should look into other areas to sustain their business. They can leverage on open access-rollouts and partnership, reduce legacy CAPEX and OPEX, expand serviceable footprint, consolidate multi-vendor maintenance, reduce risk and high cost and maintain integration for end-to-end broadband, among others”, he advised.

Still on the challenges faced by ISPs in Nigeria, the chief operating officer, eStream Networks Limited, Martins Akingba explained to LEADERSHIP that almost all equipment used in the industry are 100 per cent imported, so access to Forex is a major obstacle.

“Connection to the internet is challenging for several local providers. We are competing in a market where the other players have access to foreign support in terms of funds and expertise. We also have to deal with a government at all levels that sees IT more as the goose that lays the golden egg rather than an economic enabler,” Akingba cried out.

The federal government had realised that broadband penetration is key to reducing the cost of data, hence the reason it has targeted 70 per cent broadband penetration to cover 90 per cent of the population by 2025, Akingba stated, even as he applauded the federal government for reducing the right of way tariff to N150 per meter.

He however appealed to state governors who are yet to implement the N150 per meter tariff, to do so.

In the same vein, head of sales, FibreOne Broadband, Dr Kenny, Joda disclosed that the federal government has given ISPs a lot of assistance, as an effort to boost broadband penetration in Nigeria.

“The federal government has urged state governors to reduce the right of way tariff to N150 per meter. While some states have complied, others like Lagos are yet to comply. For instance, Lagos state is still charging us as high as N1500 per meter,” Joda lamented.

He however appealed to state governors to comply with the federal government’s directive. “We should be protected from harassment from area boys, police and estate agents. Government can also come in by reducing tax on imported equipment,” he appealed.