The Nigerian telecommunications industry is not insulated from the global telecom market. The impacts and reverberations of shocks from one part of the market affects the other. As politics and economy collide, the aftershock impacts the regulatory, financial and consumer sides of the telecom industry across climes.
This is evident in the risks the telecom industry faces. In Nigeria like in other jurisdictions, telecommunications operators are faced with the risks of rising capital expenditure, changing regulatory environment, slow or ineffective digital transformation, shortage of workforce, cybercrime, business interruptions, etc.
According to Allianz Risk Barometer 2022, the top risks facing telecoms industry are: Cyber incidents, business interruption, pandemic outbreak, new technologies, changes in legislation and regulation, natural catastrophes and shortage of skilled workforce.
In the light of the above, the Nigerian Communications Commission (NCC) last week hosted a two-day maiden conference at its headquarters in Abuja, to minimize risks in the telecoms industry to ensure that services are not disrupted, and that consumers obtain the best services that are globally available.
The conference with the theme: “Nigerian Telecommunications Industry: Managing the Emerging Risks and Embracing Risk Opportunities,” called for collaboration between the regulator and other stakeholders in the industry, to achieve multi-stakeholder strategies aimed at identifying and addressing emerging risks in the telecommunications sector to ensure sustainable and impacting growth.
Danbatta’s Message to Telcos
The Executive Vice Chairman, NCC, Prof. Umar Danbatta, represented by Director of Policy, Competition and Economic Analysis, NCC, Yetunde Akinloye, said the essence of the forum was to examine myriads of issues that challenge the implementation of the National Digital Economy Policy & Strategy (NDEPS) 2020-2030, and to enhance the development of a sustainable ICT sector in Nigeria.
“The focus of this conference is to bring to the fore the ever-rising uncertainties in the global economy and the attendant regulatory/operational risks in the areas of increased data security regulations, new partnerships and transforming business models, fast-changing mix of mounting capital expenditure (CAPEX) burdens, shifting market structures, newly emerging disruption scenarios, regulatory and policy challenges amongst others,” Danbatta said.
“While risk management has been critical in our regulatory service delivery, we acknowledge that all stakeholders must be concerned about the varied uncertainties that confront the industry. There is no gainsaying the fact that the Information and Communication Technologies Sector is inherently filled with several business and technology risks,“ Danbatta said.
“It is, therefore, important that regulatory risks be minimised to ensure that services are not disrupted, and consumers obtain the best and latest services that are globally available. The Commission in a bid to ensure that operators in the industry enjoy a conducive operating environment has had cause to seek government interventions and collaborate with other Agencies of Government in addressing major sectoral risks.
“These risks include cybersecurity and online fraud, regulatory burden, multiple taxation, vandalism of telecommunication infrastructure, right of way challenges, access to foreign exchange, inter-industry indebtedness, among others,” he said.
In his paper presentation titled ‘X-raying Telecommunications Risk Radar: The Operators’ Perspective’, a facilitator at the event, who spoke to issues of concern to operators, Eniola Olugboyega, said that risk-taking can have positive or negative impact on businesses.
He also stated that most common losses from improper management of risk in the sector include customer dissatisfaction, fines and litigation, product failure, and loss of business opportunities, among others.
According to him, effective risk management aids effective decision making, prevents financial and reputational loss and addresses potential threats. Thus, telecommunication risk from the operators’ perspective includes regulatory risk, insecurity, data breach risk, foreign exchange risk, rising capital expenditure risk, human resource risk, and the inability to take advantage of new business models.
Recently, an Ernst and Young (E&Y) Global Telecommunications sector study suggests that telcos need to consider new risks and opportunities across customer priorities, workforce, supply chain, cybersecurity, portfolio management, ecosystem relationships, sustainability and business model innovation.
It identified the 10 biggest risks across the sector as: Failure to ensure infrastructure reach and resilience; Underestimating changing imperatives in privacy, security and trust; Failure to improve workforce structure and skillsets; Failure to mitigate supply chain disruption; Poor management of the sustainability agenda; Inability to scale internal digitization initiatives; Ineffective engagement with external ecosystems; Failure to maximize the value of infrastructure assets; Inability to take advantage of new business models; and Inability to adapt to changing regulatory landscape.
Jody Yee, the Global Industry Solutions Director for Technology, Media & Telecoms at AGCS, said regulatory changes often lag behind technological advances, which can inhibit the adoption of innovations. They can also affect a company’s bottom line as they require new ways of working and incur fines and penalties for businesses that do not comply.
“Changes in legislation are being driven by a combination of factors, including advancing technology and high-profile cyber incidents. Data security and privacy laws are top concerns in tech with a number of companies receiving significant fines for falling foul of the General Data Protection Regulation (GDPR). At the same time, society is changing.”
Similarly, experts from market intelligence firm Infiniti Research, posits that to overcome roadblocks to growth, telecom companies should aim to lay increased focus on efficiency, agility, and customer-centricity in their services. However, this may not be enough to sustain growth in the long run.
They recommend that “developing innovative business models, seizing opportunities for inorganic growth, new service inclusions, and diversification through M&A and strategic alliances can prove useful to capitalize on growth opportunities; making the right choices for infrastructure switch-off, spin-off, and sharing is increasingly important; navigate the changing policy landscape; undertake a holistic approach to workforce design; and establish more flexible integration road maps and smarter management of their business portfolios.
„Currently, the telecom sector is at the center of digital transformation. One of the key questions that telecom companies now need to address is whether they are embracing the right opportunities coming their way and focusing on the right risks that need to be overcome,“ adds Infiniti Research.
Prof Danbatta said notwithstanding these daunting challenges, there is hope, adding that the Commission will not relent until these risk elements are properly identified and adequate mitigation strategies communicated to all stakeholders. “We will constructively collaborate with all stakeholders in sustaining a conducive environment that will continuously attract both local and foreign investors.
“This is the only way we can continue to increase our contribution to the Gross Domestic Product (GDP) of the Nigerian Economy and ensure that investors have a higher Return on Investment (ROI),” he assured.”