Case Study: Electricity Cost Reduction in Jordan
Electricity cost reduction on MNOs by the Jordanian government will drive increased investment and better access to mobile services.
In May 2012, faced with disruption of cheap LNG supplies from Egypt, Jordan’s government raised the electricity rates on banks and telecom companies by 150% overnight. The new rate of 0.265 JODs (0.37 USD) per kWh was close to 40% above the cost of generation at the time. The rate hike increased the 3 MNOs electricity cost by around 40 million JODs (56.3 million USD) per year. The hike, which did not have an expiry date nor any condition related to the actual cost of generation, allowed the government to subsidise electricity costs for other sectors at the expense of the telecom sector.
Mobile operators chose to absorb costs rather than passing onto their customers and the combined effects of high electricity costs, spectrum costs, taxation and increased competition resulted in a massive drop in the sector’s profitability. To mitigate the pressures of electricity costs, operators studied moving towards solar farms allowing them to then further invest in network upgrades. As such, Jordan’s Government decided to reduce the costs of electricity for mobile operators progressively starting from July 2018.