The Nigerian Communications Commission (NCC) has said the proposal of telecom operators for a 40 per cent end user tariff on services is not realistic this year.
The operators, acting under the aegis of the Association of Licensed Telecommunication Operators of Nigeria (ALTON), in a letter to the NCC, had proposed a 40 per cent increase in the cost of calls, short messages service (SMS) and data as a result of the rising cost of running a business.
Based on their proposal, the price floor of calls will increase from N6.4 to N8.95 while the price cap of SMS will increase from N4 to N5.61.
This was shown in a letter entitled: ‘Impact of the economic and security issues on the telecommunications sector’.
Consistent with Section 108 of the Nigerian Communications Act 2003 (NCA 2003), the NCC is responsible for the approval of tariffs and other charges for the provision of service by licensed telecoms service providers.
The Chief Executive Officer, NCC, Prof Garba Umar Danbatta, who said the Commission was in receipt of the request explained that no action would be carried out on it this year because funds are not available to undertake cost-based study, which will determine the suitability or otherwise of any hike in tariff.
“The proposal is under consideration by the Commission and there is a need to do a cost-based study on the market segments. There is, however, no provision for doing this in the 2022 budget,” Danbatta wrote in an e-mail.
The request had been rejected by stakeholders in the industry except the operators.
In the letter, the telecom companies had said there had been a 40 per cent increase in the cost of doing business.
According to them, the telecom industry has been financially impacted by the recession of 2020 and the effect of the ongoing Ukraine/Russia crisis which had resulted in an increase in energy costs, increasing their operating expenses by 35 per cent.
They added that the 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.
“As the Commission may be aware, the power sector under the supervision of its Nigerian Electricity Regulatory Commission of the power sector in November 2020 undertook a review of electricity tariffs to cater for the economic headwinds reported above,’’ he added.
“In view of the foregoing, ALTON considers it expedient for the telecommunications sector to undergo periodic cost adjustments through the commission’s intervention in order to minimise the impact of the challenging economic issues faced by our members. Details are hereunder:
“Upward review of the price determination for voice and data and SMS. Given the state of the economy and the circa 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 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 the industry. We have enclosed herein and marked ‘Annexure 1’our proposal in that regard.
“For data services, we wish to request 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. Excerpts from the report are attached and marked ‘Annexure 2’ to provide a further illustration.
“In implementing the said recommendations, however, we recommend that the 40 per cent increase in the cost of doing business be factored in to arrive at a cost price per GB in view of the current economic situation.”
ALTON added that to further help the operators during this economic crisis, the Commission should explore and provide other means of punishing operators rather 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 spent replacing damaged and stolen infrastructures, among other things.
In annexure one section of the letter, the body requested an upward adjustment of the MTR by 40 per cent.
“For large operators, new interim MTR of N5.46 from N3.90 reflecting 40 per cent increase in the cost of business.
“For small operators, new interim MTR of N6.58 from N4.70 reflecting 40 per cent increase in the cost of business,” the operators had stated.