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Airtel And MTN Nigeria Pay The Sum of N117.4 Billion to Renew 3G Spectrum Licences

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Telecommunications - Investors King

Telecommunications giants Airtel and MTN Nigeria have paid the sum of N117.4 billion to the Nigerian Communications Commission (NCC) for the renewal of 3G spectrum licenses for 15 years.

This is coming amid their investments in the 4G expansion and the recent 5G rollout in the country.

Airtel Nigeria paid the sum of N58.7 billion for the 2×10 MHz 2100 MHz spectrum license, while MTN paid the same amount for the renewal of the 3G license.

Speaking on its renewal, Airtel said, “This investment to renew the license reflects our continued confidence in the opportunity inherent across the Nigerian market, supporting the local communities and economies through furthering digital inclusion and connectivity”.

On the other hand, MTN said, “Having accepted NCC’s offer to renew our 2100MHz spectrum for a period of 15 years, effective May 1, 2022, to April 20, 2037, MTN Nigeria has paid N58.66 billion to NCC. The 2100MHz spectrum license enables the provision of 3G mobile services on our network”.

Both companies had their previous licenses for the 3G spectrum expired at the end of April 2022. Their recent license renewal will see it valid till April 2037. Despite their investments in 3G, the two operators said they remain committed to forging ahead with the expansion of 4G networks and 5G rollout.

While there had been concerns that the operators might shut down their 3G service to concentrate their investments in the new generation networks, 4G and 5G, the 3G license renewal has no doubt doused the tension.

Investors King also understands that both companies’ recent renewal of the 3G licenses has raised hope for rural connectivity as it is a strategic effort to bridge the rural-urban connectivity gap.

Also, it is worth noting that the Nigerian Communications Commission (NCC) granted MTN Nigeria approval to rent two spectrums, from the Natcom Development and Investment Limited (NTEL), for N4.25 billion, as it plans to widen broadband services in the country.

Notably, while Nigeria and other countries in Africa are planning to pick up the pace of 5G deployment, the continent is the only region where no 2G or 3G shutdowns have been announced so far.

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Telecommunications

Nigeria to Expand Internet Access with 90,000km of Fibre Optic Cable

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In a bid to bridge the digital divide and enhance internet accessibility across Nigeria, the Federal Government has approved an initiative to expand the country’s internet infrastructure by laying an additional 90,000 kilometers of fiber optic cable.

The announcement was made by the Minister of Communications, Innovation, and Digital Economy, Bosun Tijani, who said the project will bolster national connectivity and optimize the utilization of existing submarine cables landed in Nigeria.

Tijani explained that the project will increase Nigeria’s fiber optic cable capacity from the current 35,000 kilometers to 125,000 kilometers.

This expansion positions Nigeria to become the third-largest terrestrial fiber optic backbone in Africa, trailing behind South Africa and Egypt.

The project will be overseen by a special purpose vehicle (SPV), a separate legal entity established to manage the implementation, finances, and operations of the fiber optics initiative.

Drawing inspiration from successful public-private partnership models like the Nigeria Inter-Bank Settlement System Plc (NIBSS) and Nigeria LNG Limited (NLNG), the SPV will ensure efficient governance and operations.

According to Tijani, the extensive fiber optic coverage will enable Nigeria to leverage the benefits of its eight submarine cables more effectively, thereby driving increased utilization of data capacity beyond the current 10 percent usage rate.

Moreover, the enhanced connectivity will facilitate the connection of over 200,000 educational, healthcare, and social institutions across the country, promoting inclusivity and broadening access to internet services.

The minister said the project aims to address the digital exclusion of approximately 50 percent of the 33 million Nigerians currently without internet access.

By expanding internet connectivity, the initiative is poised to contribute significantly to the country’s economic growth, with projected GDP growth of up to 1.5 percent per capita over the next four years.

Last week, a report by the Groupe Special Mobile Association revealed that 71 percent of Nigerians lack regular access to mobile internet.

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Naira Devaluation Spurs Airtel Africa’s $549 Million Forex Loss

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Airtel Financial Results - Investors King

Telecommunications giant Airtel Africa Plc reported foreign exchange loss of $549 million that contributing to an overall loss after tax of $89 million for its full fiscal year ending March 2024.

The telecom company’s latest financial report, released on Thursday, highlighted the significant impact of currency devaluations on its bottom line.

The devaluations of both the naira in June 2024 and the Malawian kwacha in November 2023 resulted in substantial forex losses, exacerbating the financial challenges faced by the company.

The $89 million loss after tax was primarily attributed to the $549 million net of tax impact of exceptional derivative and foreign exchange losses.

This setback underscores the vulnerability of companies operating in economies with volatile currency markets.

Despite the forex challenges, Airtel Africa’s reported revenue decline by 5.3 percent to $4.98 billion. The depreciation of the naira played a significant role in this decline.

However, the company noted that its revenue in constant currency actually grew by 20.9 percent, with fourth-quarter growth accelerating to 23.1 percent.

Airtel Africa emphasized that Nigerian constant currency revenue growth saw a notable acceleration to 34.2 percent in the fourth quarter of the fiscal year, despite the challenging economic backdrop marked by currency fluctuations.

The telecommunications sector, like many others, is sensitive to currency devaluations, as it impacts the cost of imported equipment, infrastructure, and services.

Airtel Africa’s experience underscores the importance for multinational corporations to navigate and mitigate currency risks effectively in markets prone to volatility.

As Nigeria and other countries grapple with economic uncertainties and currency fluctuations, companies operating within these environments must employ robust risk management strategies to safeguard against potential forex losses and maintain financial stability.

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Telecom Tax, Other Levies Back on the Table for $750m Loan

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world bank - Investors King

In a bid to secure a $750 million loan from the World Bank, Nigeria is considering the reintroduction of previously suspended telecom taxes and other fiscal measures.

This potential move comes as part of the Stakeholder Engagement Plan for Nigeria – Accelerating Resource Mobilisation Reforms program between the country and the World Bank.

The program, aimed at strengthening the government’s financial position by enhancing its capacity to manage and mobilize domestic resources effectively, outlines plans to improve tax and customs compliance and safeguard oil revenues.

Among the proposed measures are the reintroduction of excises on telecom services and the EMT levy on electronic money transfers through the Nigerian Banking System.

President Bola Tinubu had previously ordered the suspension of the five percent excise duty on telecommunications and the Import Tax Adjustment levy on certain vehicles in July 2023.

However, negotiations between the government and the World Bank suggest that this suspension may be lifted to meet the targets of the new loan program.

The World Bank’s contribution of $750 million constitutes a significant portion of the program’s budget, with the government expected to contribute $1.17 billion through annual budgetary allocations.

The proposed tax reforms under the ARMOR program are expected to have far-reaching implications across various economic sectors.

Stakeholders that would be affected by these measures include telecom and banking service providers, manufacturers of goods such as alcoholic beverages, tobacco products, and sugar-sweetened beverages, as well as the general tax-paying public, importers, and international traders.

Key industry groups, such as the Association of Licensed Telecom Operators of Nigeria, are being engaged regarding the excise duties on telecom services.

The planned reintroduction of these taxes is part of a larger governmental initiative aimed at reforming tax and excise regimes, enhancing the administrative capabilities of tax and customs, and ensuring transparency in oil and gas revenue management from 2024 to 2028.

The program also emphasizes the importance of engaging vulnerable groups to mitigate any disproportionate impact of these changes.

Additionally, the program outlines specific allocations for technical assistance, including investments in better data sharing systems, risk-based audits, compliance processes, and capacity building for institutions such as the Federal Inland Revenue Service and the Nigeria Customs Service.

While the reintroduction of telecom taxes and other levies may face resistance from some stakeholders, the government sees them as essential steps toward achieving its fiscal targets and unlocking much-needed financing for development projects.

As negotiations with the World Bank continue, Nigeria must balance its revenue needs with the potential impact on businesses and consumers.

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