TELECOM TARIFF SPIKES AND AVOIDABLE CONTROVERSY
Sonny Aragba-Akpore urges subscribers to brace up for higher tariffs
The proposed spikes of telecom tariffs by Mobile Network Operators (MNOs) may ruffle the sector if not properly handled by the operators and the regulator, Nigerian Communications Commission (NCC).
The operators have proposed a 40% hike to cushion their continuous service provision and the spiraling cost of doing business in Nigeria.
Through their umbrella body, Association of Licenced Telecom Operators of Nigeria (ALTON) the operators say the current tariffs are not sustainable considering operational expenditure and the nightmare of nearly over 30 multiple taxes they have to bear.
While ALTON justifies its quest for tariff hikes on technical ground and the rising cost of doing business, the NCC agrees but insists on the rules being followed.
ALTON sent a working paper signed by its Chairman, Gbenga Adebayo, an engineer to the NCC recently citing the rising cost of doing business in Nigeria. It suggests 40% raise in tariffs for voice and data services and pleads with the regulator to show understanding to its members plight.
ALTON specifically proposes upward review of the price of calls from N6.4 to N8.95, while the price cap of SMS will increase from N4 to N5.61. The group said energy costs have gone up very significantly, and that alone gulps 35% of their operational costs.
Government’s recent introduction of excise duty of five per cent on telecom services had further increased the burden of multiple taxes and levies on the industry.
The power sector under the supervision of Nigerian Electricity Regulatory Commission adjusted tariffs in November 2020 and this weighs heavily on the operators.
“In view of the foregoing, ALTON considers it expedient for the telecommunications sector to undergo periodic cost adjustments through the commission’s intervention to minimise the impact of the challenging economic issues faced by its member. “
In proposing upward review of the price determination for voice and data and SMS, ALTON looks at the state of the economy and the 40 per cent increase in the cost of doing business, and requests an interim administrative review of the mobile termination rate for voice; administrative data floor price, and cost of SMS as reflected in extant instruments.
With respect to voice and SMS cost, ALTON requests the commission to consider a mark-up approach to address the upward price adjustment desirable for the industry.
For data services, ALTON requests that the commission implements the recommendations in the August 2020 KPMG report on the determination of cost-based pricing for wholesale and retail broadband service in Nigeria.
In line with this, ALTON thinks that 40 per cent adjustment in the cost of doing business be factored in to arrive at a cost price in view of the current economic situation. The group also highlighted other demands to the commission such as exploring other penalties for operators other than punitive monetary sanctions, extend the payment timeline of relevant regulatory levies and fees, prevail on the federal government to sign the executive order declaring telecoms infrastructure as a critical national infrastructure to mitigate cost incurred replacing damaged and stolen infrastructure, among others. “For large operators, a new interim MTR of N5.46 from N3.90 reflecting 40 per cent increase in the cost of business, is proposed,” ALTON said,
adding that “for small operators, the new interim MTR of N6.58 from N4.70 reflects a 40 per cent increase in the cost of business.”
Some verifiable taxes by operators include but not limited to 2.5% Annual Operating Levy(AOL) of net income paid to the NCC, Right of Way (RoW) levies paid to states and others. There are also yearly income taxes paid to the government through the Federal Inland Revenue Services (FIRS), among other taxes. Thirty other taxes and levies were also introduced including the proposed 5% excise duty due to flag off on June 1, 2022.
But the NCC says the request by the operators for an upward review of tariff, cannot be addressed in isolation of the enabling law governing the sector if such decision must be fair to the subscribers and engender healthy competition among service providers.
And while assuring subscribers that there is no cause for alarm as it did not approve any increase, the NCC said it remained committed to international best practices and established procedures in its regulatory activities in the country.
The position of the NCC is in consonance with international best practice and established regulatory procedures, by ensuring its regulatory activities are guided by regular cost-based and empirical studies to determine the appropriate cost (upper and floor price) within which service providers are allowed to charge their subscribers for services delivered.
The commission assures that any cost determined, as an outcome of such transparent studies is fair enough to enhance healthy competition among operators, provide wider choices for the subscribers as well as ensure the sustainability of the Nigerian telecoms industry.
NCC says for the avoidance of any doubt, and contrary to MNOs’ agitation to increase tariffs for voice and Short Messaging Services (SMS) by a certain percentage, the commission wishes to categorically inform telecoms subscribers and allay the fears of Nigerians that no tariff increase will be effected by the operators without due regulatory approval by the commission.
The NCC rides on Section 108(1-4) of the Nigerian Communications Act 2003, which gives the overriding powers to determine rates and tariffs. But such tariffs and rates are not determined in silo. Stakeholders engagement is key to this. In reality, it is a tripartite arrangement of the NCC, MNOs and consumers in that order.
NCC however adds that while there could be justifiable reasons for MNOs’ demand for tariff increase, it should be noted that they are not allowed to do such either individually or collectively without recourse to NCC, following the outcome of a cost study.
Adebayo, said, “We do not give a timeline to our regulator. We would only give information as to what is the current state of affairs in the industry. And we know the regulator would either conduct a study or review the data that we provided. So, we can’t give a timeline to our regulator.”
ALTON has equally proposed an interactive session to address this matter, saying the current pricing regime in the telecom industry could not sustain the industry anymore.
But the group stressed that rather than considering the plight of its members, the government went on to introduce an additional five per cent excise said to be effective from June 1. Adebayo lamented that, “We are confronted with different economic realities. And the fact remains that if you look at the economic indices, the current pricing regime is not sustainable.
“But certainly, considering the global energy price challenges we face in our operating environment, if we are not getting any regulatory intervention, it would be a bit difficult to sustain the industry with the current pricing regime that we have.”
Adebayo stated, “We must warn that there is no industry that is immune against failure. For us to avoid any catastrophic situation in our sector we are saying let’s look at the reality of our pricing, let’s look at the challenges we face. Let the government do something in order to mitigate against having this kind of explosion.”
Finance and Budget Minister, Mrs Zainab Ahmed in a circular of March 1,2022 said a further 5% excise tax is to be borne by telecom operators from June 1,2022.
Besides this, the operators met with the NCC on March 24, 2022 during the Industry Working Group (IWG) where it clearly stated its position on the over 30 multiple taxes they were expected to pay. But strangely, no response has come out from the regulator and this according to Adebayo is a major concern to the operators.
He advised the government to look at the challenges being faced by the telecoms operators and intervene by way of using regulatory instruments to address the issues raised.
According to the ALTON chief, the telecoms sector should be declared a national critical infrastructure to make it as important as the oil and gas sector.
The National Bureau of Statistics itself has released information about the trend of inflation in the country since the beginning of the year till now.
This is a battle of two elephants and as it is said, the grass(subscribers) will be at the receiving end.
Aragba-Akpore is a member of THISDAY Editorial Board