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Concerns as IDAs owe telcos $8m in new termination rate

By Adeyemi Adepetun
27 July 2022   |   2:43 am
The new International Termination Rate (ITR), which took effect at the beginning of this year, is currently unsettling the sector as there are complaints by some Mobile Network Operators (MNOs).

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The new International Termination Rate (ITR), which took effect at the beginning of this year, is currently unsettling the sector as there are complaints by some Mobile Network Operators (MNOs).

Recall that on November 25, 2021, the Nigerian Communications Commission (NCC) announced a new Determination of Mobile Voice International Termination Rate (ITR), which later took effect from January 1, 2022, and pegged the new ITR at $0.045, which should be paid in dollars.

Since the regime took off, there had been serious contention in the industry over the rationale on the part of the NCC for pegging the ITR in dollars.

In fact, some of the IDAs have also raised the alarm that paying ITR in dollars would impact them negatively.

The IDAs, composed largely of indigenous players in the country, claimed that the new ITR favoured the MNOs more than the smaller players in the country.

In March, sources within the IDA, who spoke with The Guardian, claimed that since the new rate took effect, their operations have slowed.

Consequently, in Lagos, on Monday, an official of one of the telecom operators revealed that between January and June, the IDAs owed some of the MNOs close to $8 million on ITR services.

The telco official lamented that the inability to recover the debt from the IDAs has become a serious issue, which if not handled carefully, will negatively impact the sector.

He listed some of the challenges confronting interconnection in Nigeria to include rampant indebtedness on the part of connected service providers and Interconnect exchange, which he said pose a significant challenge, compounded by the stringent disconnection process.

According to him, the increased number of licenses issued by NCC to new operators, who typically seek to interconnect with large operators, is another issue.

Others, according to him, include the creation of new license categories with no proven business case, thereby putting pressure on current licenses and reducing the value of the operators’ licenses and illicit practice of call masking and refilling leading to revenue loss on the part of the operators.

In March, the IDAs, while accusing the NCC on the issue, claimed that President Muhammadu Buhari made the creation of jobs for Nigerians a key focus of his administration, which led to the National Policy for the Promotion of Indigenous Content in the Nigerian Telecommunications Sector where Mr President directed that Nigerians should be encouraged to participate in the telecoms sector by reserving certain sectors for Nigerians.

On this, the IDAs said instead of implementing the aforementioned policy of Mr. President, the actions of the NCC have slowed the development of the sector and frozen Nigerians out of the telecoms market in favour of international players.

They explained that Nigerian companies, which have been licensed by the NCCIDAs to transport international voice calls into Nigeria have been forced to stop operating since Jan 1, 2022, leading to the loss of jobs by a directive of the commission, where they stipulated that these Nigerian companies should pay the MNOs $0.045 per minute in United States Dollars for the international telephone calls they terminate into the mobile networks in Nigeria.

On this, IDAs however, said the law states the legal tender in Nigeria is the Naira and the Central Bank of Nigeria (CBN) reaffirmed it in a 2015 Circular that, it is an illegal, criminal offence to denominate the price for goods and services in Nigeria with any currency other than Naira.

“The MNOs spurred on by this directive by NCC that is against the laws of the Federal Republic of Nigeria have issued a rate of $0.053 rate per minute to overseas-based telecoms operators that enables them to send international telephone calls to them directly at a lower rate than they have offered, which is $0.062per minute to the Nigerian based licensed IDAs.

“This action by the MNOs is against the law, is discriminatory and does not ensure fair competition in the Nigerian telecom industry. This is further compounded by the fact that overseas-based telecom operators do not pay Value Added Tax(VAT) of 7.5 per cent and the Nigerian-based International Data Access Operators must pay the higher per minute rates mandated by the MNOs plus 7.5per cent VAT.”

The indigenous players stressed that by this directive from NCC, indigenous IDAs have been locked out of the market because of the higher rate per minute issued to them by the MNOs, plus the mandatory 7.5 per cent VAT and sundry bank charges incurred from the receipt and transfer of foreign currency within Nigeria.

They stressed that this collectively makes it impossible for these Nigerian-based international telecoms operators to price their termination services in a way that will attract patronage from overseas telecoms operators since the rates issued by the MNOs to the overseas operators are already lower at $0.053 than that issued to the Nigerian international telecoms operators at $0.062 per minute.

“This action by the NCC has also led to significant loss of VAT revenues that should accrue to the Federal Government because these overseas telecom operators, which connect to the MNOs directly, do not pay 7.5 per cent VAT.”

The IDAs called on the Federal Government to intervene urgently and ease the suffering of Nigerians and ensure that its policy directives with respect to local content in the Nigerian telecoms sector are duly implemented to create jobs for Nigeria and for the growth of the economy.

On the matter, which they said is in court, the IDAs claimed that they have jointly sent a letter to the NCC, “but the commission is yet to do anything about it.”

They however appealed that NCC should ensure fair competition and encourage the participation of Nigerians in the telecoms industry; that based on the aforementioned, IDAs should have a discounted ITR rate structure from the$0.045 and that consistent with CBN regulations, the IDAs should pay the MNOs and other telecoms operators ITR in Naira.