Finance

Battle against Hike in telecom service delivery

Battle against Hike in Telecom Service Delivery
Fidelis2013

The persistent call to hike telecom services by telecom operators and the federal government, is gradually drawing a battle line for the telecom industry regulator, the operators and the government, writes Emma Okonji

Telecom operators and the federal government have consistently pushed for an increase in the cost of delivering telecom services, a development that is gradually drawing a battle line between the telecom industry regulator and the telecom operators on one hand and with the federal government on the other hand.

It first started in April this year, when telecom operators, under the aegis of the Association of Licensed Telecom Operators of Nigeria (ALTON), wrote the Nigerian Communications Commission (NCC), demanding for a 40 per cent hike in voice call, Short Message Service (SMS) and data services, after they had reviewed the high cost of buying diesel to power their base stations, among others, but NCC turned down the request with a view to maintaining cost-effective regulation across the telecom sector.

Next, was the proposed five per cent excise duty on telecom services by the federal government, through the Federal Ministry of Finance, Budget and National Planning.

Last month, the Minister of Finance, Budget and National Planning, Mrs. Zainab Ahmed, announced the plan of the Finance Ministry to begin the implementation of five per cent excise duty on telecom services, which she claimed had been in the Finance Act: 2020 but has not been implemented. Shortly after it was announced, the NCC aligned with the Ministry of Communications and Digital Economy to resist any move by the federal government to impose five per cent excise duty on telecom services, insisting it will lead to hike in the cost of telecom service delivery.  

NCC, from inception, has been a vanguard of consistent reduction in the cost of telecom services amid rising cost of telecom operations faced by the telecom operators.  NCC had over the years battled various state governments over multiple taxes in telecom operations, which has yielded results. Analysts have said that the telecom sector is the only sector that is experiencing continuous reduction in cost of service delivery, when other sectors have maintained consistent rise in the cost of service offerings and sales.

Proposed 40% Hike

Telecom operators, through its umbrella body, the Association of Licensed Telecommunications Operators of Nigeria (ALTON), have called for increase in the cost of delivering voice calls, short message services (SMS), and data services by 40 per cent. 

They expressed their worries over the negative impact of the economic and security issues on the Nigerian telecommunications industry, which they said had adversely affected the cost of telecoms service delivery across networks. 

To drive home their points, they wrote a letter to the NCC in April this year, asking for upward review of the cost of delivering most telecom services to subscribers. 

The telecom operators (Telcos) made their intention for an upward review known to NCC in a letter dated April 25, 2022, which was received and acknowledged by NCC on April 27, 2022. 

According to the letter, “The cost of diesel required to power operators’ Towers, Base Stations and offices rose by a staggering 233 per cent from N225 per litre in January 2022 to over N750 per litre in March 2022. Additionally, the introduction of new lines of fiscal obligations via the recent Excise Duty of 5 per cent on telecommunications services further exacerbates the burden of multiple taxes and levies in the sector. The power sector under the supervision of the Nigerian Electricity Regulatory Commission (“NERC”), in November 2020 undertook a review of electricity tariffs to cater for the economic headwinds.”

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In the letter, the telcos demanded for upward review of the price determination for Voice and Data and SMS. They said: “Given the state of the economy and the 40 per cent increase in the cost of doing business, we wish to request for an interim administrative review of the Mobile (Voice) Termination Rate (“MTR”) for Voice; Administrative Data floor price and cost of SMS as reflected in extant instruments. With respect to Voice and SMS cost, ALTON respectfully requests the commission to consider a mark-up approach to address the upward price adjustment desirable for industry.”

The 5% Excise Duty 

The excise duty is a special form of tax imposed on specific kind of goods, like alcohol beverages, tobacco and fuel. They are specifically imposed by government on products, during production and distribution stages, but it is being considered for services rendered in the telecom sector by the Ministry of Finance, Budget and National Planning, which telecom subscribers have described as detrimental to the telecom sector, since telecom operators do not manufacture, but only offer telecom services.

Aside the 7.5 per cent Value Added Tax that all sectors of the economy pay for goods and services rendered, the five per cent excise duty, when fully implemented, would compel telecoms subscribers to pay additional five per cent tax, in addition to the 7.5 per cent VAT, which they are already paying. 

With the planned introduction of five per cent excise duty, it means that for every call made by telecom subscribers, they will pay five per cent of the total cost of the voice call, which will be deducted from the subscriber’s account by the telecom operator, and remit same to government.

The Federal Ministry of Finance, Budget and National Planning, revealed its plan to impose five per cent excise duty on telecoms services during a stakeholders’ meeting, organised by the Nigerian Communications Commission (NCC).

“It is public knowledge that our revenue cannot run our financial obligations, so to that effect we are to shift our attention to non oil revenue. The responsibility of generating revenue to run government lies with us all,” Finance Ministry said.

Multiple Taxes

The NCC had in the past, intervened on behalf of telecoms operators to stop state governments and federal parastatals from imposing arbitrary taxes on telecoms operations, amounting to multiple taxes on telecom operators..

Telecoms operators had raised the concern over what they described as imminent shutdown of telecommunications facilities in Kogi State as a result of disputes arising from unusual taxes and levies demanded by the state government through the Kogi State Internal Revenue Service (KIRS). 

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ALTON, the umbrella body for all licensed telecom operators, had in a statement, said the issue could lead to a total shutdown of telecoms facilities in the entire Kogi State, that would affect parts of Federal Capital Territory in Abuja, with possible impact on service availability in nine other states close to Kogi State, which include Nassarawa, Benue, Enugu, Anambra, Edo, Ondo, Ekiti, Kwara, and Niger states.  The states listed are sharing borders with Kogi State.

ALTON listed some of the charges from the statement government to include: Annual Right of Way (ROW) renewal; Social Services contribution; Employee Economic Development Levy; Mast site premises renewal; and Fire service yearly renewal, among others.

NCC had to intervene and addressed the situation.

NCC’s Resistance

In all of the agitations from telecom operators, the state and the federal government to hike cost of telecom services, NCC has continued to show some resistance, in a bid to protect the telecoms industry and the subscribers from undue taxes, levies and planned hike, and to also make its position known to all that it is a consumer-centric regulator.  

Reacting to ALTON’s letter that called for 40 per cent rise in the cost of telecom service delivery, the NCC, in a statement, allayed subscribers’ fears over the suggested hike.

NCC’s statement read in part: “Consistent with international best practice and established regulatory procedures, the NCC ensures its regulatory activities are guided by regular cost-based and empirical studies to determine appropriate cost (upper and floor price) within which service providers are allowed to charge their subscribers for services delivered

“The Commission ensures that any cost determined, as an outcome of such transparent studies is fair enough as to enhance healthy competition among operators, provide wider choices for the subscribers as well as ensure sustainability of the Nigerian telecoms industry.”

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 implemented by the operators without due regulatory approval by the Commission, the statement further said. 

NCC noted that tariff regulations and determinations are made by the Commission in line with the provisions of Sections 4, 90 and 92 of the Nigerian Communications Act (NCA) 2003, which entrusts the Commission with the protection and promotion of the interests of subscribers against unfair practices including but not limited to; matters relating to tariffs and charges. 

The Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, said the current tarriff regime being administered by the service providers had been a product of NCC’s determination both for voice and SMS in the past.

He however said 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.

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Minister’s Opposition 

The NCC, in agreement with the Minister of Communications and Digital Economy, Dr. Isa Ibrahim Pantami, has also opposed to the planned five per cent excise duty in telecom services, insisting that such plan is detrimental to the growth of telecom in Nigeria.

Pantami who kicked against the plan at a telecom forum in Lagos, organised by the Nigeria Office for Developing the Indigenous Telecoms Sector (NODITS), an agency domiciled in the Nigeria Communications Commission, said he would explore every legitimate means to stop the planned five per cent excise duty tax on the telecom sector. 

Pantami faulted the timing and process of imposing the five per cent tax on the telecom industry, insisting that part of the responsibility of a responsive government is not to increase the problems of the citizens.

According to Pantami, “I have not been contacted officially. If we are, we surely will state our case. The sector that contributes to the economy should be encouraged. You introduce excise duty to discourage luxury goods like alcohol, but broadband in the telecom sector is a necessity.

“If you look at it carefully the sector contributes two per cent excise duty, 7.5 per cent VAT to the economy and you want to add more to create additional hardship. This cannot be tolerated at this time and it will be resisted.”

Pantami urged the tax masters to expand the scope of other sectors that are not contributing to the economy to do so.

“We must come together and salvage the sector. Only telecom sector contributed 13 per cent and you want to add more. This is unacceptable,” Pantami added.

Pantami who also faulted the lawmaking process that produced the five per cent tax, said the Chairman of the House Committee on Communications, was not aware of such tax and that it must be rejected for the benefit of telecom subscribers, the telecom industry and the Nigerian economy. 

Pantami was of the view that further tax on the sector would impact negatively on its contribution to the country’s Gross Domestic Product (GDP).

 “We will explore other means to reverse it. As a minister, based on the provision of the Constitution of Nigeria, Section 148, we are exercising powers of Mr. President. That is what the constitution says. At least, I am a major stakeholder, when VAT was increased to 7.5 per cent, we were informed. I was not consulted on the five per cent excise duty. 

“I only heard the announcement and I think there is something questionable and I am glad that we are on the same page with our National Assembly members that are here. They have not been consulted and they are part of the committees. 

“So, may be beyond making our position known, we would go behind the scene and go against any policy that will destroy the digital economy sector. This is a sector, which we cherish and we will go any length to legitimately and legally defend its interest,” Pantami added. 

Thisday

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