Automated interconnection settlement payment scheme, way out of mounting debt – Teniola
settlement payment scheme is key to preventing future accumulation of debts.
It is understood that it is not only interconnect debt that has leapt to N165b.
What are the other issues and how did we get to such huge sum?
INTERCONNECT debt represents payments that have not been made by an operator for voice calls terminating in a network that does not belong to the operator.
In the case of Nigeria, the debt referred to also includes collocation debts owed by operators that are renting space to host their radio antenna(s) and base stations from a tower operator.
The majority of the debt is related to overdue and outstanding payments to be fulfilled to the tower companies as rental and collocation fees.
Approximately N25b is related to interconnect payments that are undisputed and yet to be settled for voice calls terminating on other networks in the ecosystem.
The accumulation of this amount has compounded since operators have been interconnecting their calls in the ecosystem over a 10-year period or thereabouts.
Unfortunately, previous attempts by our regulator to intervene in getting debts relevant to voice interconnection have only addressed the symptom and not the underlying cause.
How critical are these underlying causes and to what extent are the operators burdened?
Majority of the calls are terminated on the largest networks which belong to the Mobile Network Operators (MNOs) and hence all operators end up owing these networks in one way or the other on the net value corresponding to the volume of calls terminated on these large networks.
Unfortunately, the ability of these operators to pay also depends on outstanding payments owed to them to settle some of their indebtedness.
On the collocation debt side, most of the players have a debt position with their tower company.
Would there not be hope at least if these debts were being serviced?
Actually owing debt is not the problem, the major issue is whether the debt is being properly serviced to allow a healthy industry to exist.
The fact that both type of debts are increasing is a cause for concern, as the ability to fully settle them becomes a challenge if the quantum figure is too large to manage. N165b is a quantum figure that is of concern.
What would be the simplest and most effective way to defray this indebtedness?
Repayment plans that are complied with are the simplest form of creating trust and settling outstanding liabilities.
The better option is to introduce an automated payment settlement scheme that enforces deductions of interconnect fees due immediately from calls made across different networks in a seamless manner.
Any manual system is subject to human error and delays.
What options are available in the event of a difficult operator not wanting, or willing to pay the debt?
There are sanctions for these kinds of situations and a process under NCC’s interconnection guidelines that each operator is fully aware of.
The real issue is that even with these guidelines corporate governance is still required to be adhered to that ensures that contracts are upheld to avoid non-payment of liabilities becoming a corporate failure issue.
How is the sector bogged down by this growing debts?
Obviously, the impact is great and may lead to disconnection of some networks due to prevalence of bad debt.
This, then impacts negatively on the quality of service, loss of service to consumers both on voice and data services in some cases and a serious loss of revenue for the networks that are disconnected.
What is the best way to mitigate debt accumulation?
The industry requires an automated interconnection settlement payment scheme to be introduced to prevent future accumulation of this type of debt, especially as our industry operates a predominant prepayment charging tariff system, hence the collection of the interconnect fee where it applies is already available to be deducted and paid to the terminating network at the point of the call being made.
Of all the operators, which are the major culprits?
This is not important to stress as the information is commercially sensitive and doesn’t solve the issue.
Each operator has an exposure that adds to the cumulative overall interconnect debt.
Can interconnect debt lead to the death of any of the operators?
Yes. In the past some operators, especially Code Division Multiple Access and FWA operators have not been able to recover from being disconnected and have had to exit the market.
However, the point that has to be stressed is that this is not peculiar to Nigeria as it also happens at the international traffic level, but arbitration exists both in the courts and via a worldwide telco settlement scheme.
Are interconnect debts treated like other corporate debts?
Yes, interconnect debts are treated like any other corporate debt.
Accounting treats it as either provisional or bad debt and can be written off as per and under General Acceptable Accounting Principles (GAAP) rules relevant to the jurisdiction and laws of the land where it occurs.