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Unstable Forex, Multiple Taxes Cost Telecoms N660bn – Investigation

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The Nigerian Communications Commission (NCC), the regulatory body for the Nigerian telecommunications industry, has said it is having talks and discussions with various levels of government to roll out measures that will yield the growth, development and increase in gross domestic product (GDP) that is necessary for Nigeria to take her place among ICT savvy nations.

Disclosing this recently, NCC executive vice chairman, Professor Umar Danbatta, said the commission was also working on other strategies, which include revised/updated Nigerian Telecom Policy; national and regional infrastructure development (fibre cabling, power, road network, security, etc); repositioning of Internet Exchange Point (IXP), and spectrum availability and other national resources, among others.

Danbatta said the aim is to create business/investment opportunities in Nigeria in areas such as human capital development, partnership with notable companies in Nigeria, equipment manufacture, vendor, sales and installation of telecom, value added service (trenching and fibre laying), and fibre manufacture and installation, among others.

Danbatta noted that the Nigerian broadband market has the potential to explode in this decade just as the voice market did in the last decade.

He said: “The solid metro and backbone ICT infrastructure required to carry and sustain the huge amount of data to be generated is already being planned to be put in place. This will yield the growth, development and increase in gross domestic product (GDP) that is necessary for Nigeria to take her place among ICT-savvy nations. We are really living in interesting times.”

Meanwhile, industry experts have decried the scarcity of foreign exchange, vandalisation of telecom equipment, poor electricity, harsh operating environment caused by excruciating taxes and levies from three tiers of government which, they said, are impacting negatively on telecommunications companies and, by extension, on the growth of infrastructure as telecom companies have lost no less than N660 billion since the beginning of the year.

Investigations by LEADERSHIP showed that the speed at which telecom companies were rolling out their network infrastructure across cities, towns and under-served areas has reduced as forex scarcity, which has affected every business in the country, has also hit the telecom industry, with operators and other original equipment manufacturers (OEMs) unable to meet their forex needs to import telecom equipment.

It was also gathered that operators are now doing subdued rollouts to few targets as against widespread infrastructure build-outs as arbitrary pricing of transmission cable infrastructure has stunted the growth of broadband bandwidth across the country.

LEADERSHIP findings also showed that the war unleashed by Boko Haram in the North East and sporadic bombings in some key cities, including the Federal Capital Territory, Abuja, in the past few years, also contributed to the slow growth of Nigeria’s telecom industry as mobile operators decided to redirect their resources to states not affected by the war.

Telecommunications analysts said these multifarious issues have become drawbacks on the desire of the federal government to surpass the 30 per cent target set in the National Broadband Plan by the year 2018.

They called for the protection of telecom investments by way of the creation of enabling environment for all the players in the industry.

The president, Association of Telecoms Companies of Nigeria (ATCON), Engr. Olusola Teniola, lamented the situation.

He said, “The free fall of naira against dollar has constituted a serious source of worry to our sector and, as a matter of fact, our member companies have tried to make sure that Nigerians have access to qualitative communications service, but the continuous depreciation of the naira is not encouraging, from a capital expenditure (capex) roll out perspective.”

LEADERSHIP checks revealed that MTN, Globacom, Airtel, Etisalat, Ntel, Spectranet, Smile Communications and other remaining smaller operators are finding it difficult to roll out telecom infrastructure as a result of the unavailability of foreign exchange. The operators’ infrastructure rollout milestones are being affected. Other operators are worse off as they cannot compete with the likes of MTN.

Post-2014, mobile operators were denied direct access to foreign exchange sold by the Central Bank of Nigeria (CBN). The apex bank, however, urged them to source their forex from the deposit money banks. This policy has limited their access to dollars and has in turn affected telecom infrastructure rollout targets on a yearly basis.

For instance, MTN Nigeria’s capital expenditure budget for the first six months of 2016 was N55.874 billion but it was impacted by the limited availability of US dollars.

“Over the six-month period, 428 3G sites and 507 LTE sites were rolled out. The operation experienced some delays in the network re-planning as well as delays with equipment purchases as a result of foreign exchange limitations.

“Capex for the period increased by 78.9 per cent to N55.874 billion (Rand 2.534 billion).Improving the quality of the 3G co-located network and the rollout of LTE remains a priority. During the period, the operation purchased additional LTE spectrum for a consideration of R1 billion,” the operator said. Mobile operators are losing billions due to volatility of the naira to the dollar.

LEADERSHIP Friday observed that since the advent of Global System for Mobile Communications (GSM) technology about 16 years, one critical issue that has hindered efficient telecommunications service has been poor quality of service (QoS) occasioned by inadequate power supply. Operators have had to grapple with building their own power networks, installing generators, buying diesel and policing the base stations.

Poor quality of service can be seen in dropped calls, undelivered short message service (SMS), poor mobile internet service, infrastructure vandalisation, and theft of diesel at base stations by hoodlums, etc. According to the Association of Telecommunications Companies of Nigeria (ATCON), telecom subscribers in Nigeria lose an average of N730 billion annually to poor quality service.

The operators are powering over 25,000 base stations, procuring diesel and securing the locations with private security. A telecom expert said Nigeria’s patchy power infrastructure has long been an obstacle for the country’s telecoms operators. In a country with about 25,000-30,000 Base Transceiver Station (BTS) and a need for around twice that number over the next 10 years, the power infrastructure challenge is especially nagging.

Telecom companies in Nigeria said one of the biggest challenges facing telecom growth and infrastructure rollouts is severe imposition of taxes, levies and duties by multiple government agencies as well as miscreants who obstruct infrastructure works until certain illegal payments are made to them. The operators are also worried about the proposed nine per cent Communications Service Tax (CST) bill before national assembly.

The telecom operators have seen their base stations, Right of Way (RoW) infrastructure work delayed or outrightly stopped unless fees are paid. Apart from the Nigerian Communications Commission (NCC), which is authorised to regulator the telecom industry, other agencies of government at federal and state levels have come up to regulate certain aspects of the industry such as mast siting and deployment.

Engr. Olusola Teniola, president of Association of Telecommunications Companies of Nigeria (ATCON), said “the telecom companies are barely making any money from voice (due to ARPU rates dropping considerably) and the direct implication of this is that the revenue that is generated from data is now being challenged by the cost of operating the business which is increasing on a daily basis and may lead to laying off (of further) staff.”

Engr. Gbenga Adebayo, national chairman, Association of Licenced Telecommunications Operators of Nigeria (ALTON) said.

“We think the introduction of additional nine percent of the communication service tax will be detrimental to the wheel of progress and it will be against the wheel of development. We think that it will work contrary to the expectation of government for 30 percent of broadband penetration by 2018.

“What it also means is that when services become available it may not be affordable. We are very concerned about that. We do hope that all concerned will thread very softly on this bill so that we don’t do something that will be a cloak in the wheel of progress,” he said.

On his part, Teniola, advised both the House of Representatives and the Senate to discontinue with the bill.

He said, “Any calculated actions that have the potential to stifle further contribution of the telecom industry to our GDP must be avoided by all tiers of government in Nigeria as the perceived benefits of imposing a Communication Service tax on telecom subscribers has the potential to erode, if not destroy, the achievements that have been made since the telecom sector was liberated.

“The general rule of investment or principle of investment is that institutional investors will take their investible funds to countries where the tax rate is low or lowest. As we all know, Nigerian telecom subscribers are already paying tax because VAT is embedded in calls made and data consumed,” Teniola said.

 

Vandalisation of Telecom Services

Telecom operators have, for a while, called for a law that will criminalise the destruction of telecommunication infrastructure and secure the billions of investments made by the private sector players in the economy. The operators have lost several infrastructural facilities to vandals at many locations, including the destruction of fibre cables by road construction equipment.

The operators said the effect of the vandalisation of the base stations and fibre optic cables is also felt by the banking industry as, sometimes, bank customers find it difficult to make withdrawals at the automated teller machines (ATMs).

“This could be due to a base station that has been vandalised. We need to leverage on ICT infrastructure to help fight crime,” one of the operators said, even as it called for community policing.

The telecom operators also said the effect of the insurgency slowed down the pace of infrastructure rollouts in the north east. The good news is the restoration of services following the reclamation of local government areas previously controlled by Boko Haram. Operators’ base transceiver stations (BTS), Mobile Switching Centres (MSC), Transit Switching Centres (TSC), and thousands of generating sets supporting their networks were susceptible to bomb blasts.

Engr. Gbenga Adebayo noted that the attacks on telecom infrastructure affected the rollout of telecom services nationwide which may impede the 30 per cent target of the National Broadband Policy of the federal government by 2018.

“The good thing is that we have comfort from the security agencies that more attention will be paid to the security of our infrastructure there. As we are gaining access, our members are going back to install services in those area, and I am also glad to say that areas that have been restored, we have not have any case of damage on them.

“So, we are hopeful that as services are being restored, there will also be stability of services in those areas,” Adebayo said.

He, however, assured that the industry and the country were making very good progress as far as ICT is concerned today, stating that the most functional public infrastructure that Nigeria has is telecommunications, which is affecting positively the lives of everyone and the life of every business in the country.

 

 

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