NCC says no 40% telecom rate hike just yet

Executive Vice President of the NCC, Umar Danbatta

FIRS

The Nigerian Communications Commission (NCC) has said the telecom operators’ proposal for a 40% end-user tariff on services is unrealistic this year.

The operators, acting under the Association of Licensed Telecommunication Operators of Nigeria (ALTON), in a letter to the NCC, had proposed a 40% increase in the cost of calls, short message service (SMS) and data as a consequence of the rising cost of running a business.

Based on their proposal, the floor price for calls will rise from N6.4 to N8.95 while the ceiling price for SMS will rise from N4 to N5.61.

This is what emerges from a letter entitled: “Impact of economic and security issues on the telecommunications sector”.

In accordance with Section 108 of the Nigerian Communications Act 2003 (NCA 2003), the NCC is responsible for approving tariffs and other charges for the provision of services by licensed telecommunications service providers.

NCC Director General Professor Garba Umar Danbatta who said the Commission had received the request explained that no action would be taken this year as funds are not available to undertake a cost based study , which will determine whether or not any rate increase is appropriate.

“The proposal is currently being examined by the Commission and it is necessary to carry out a study based on the costs of the market segments. There is, however, no provision to do so in the 2022 budget,” Danbatta wrote in an email.

The request had been rejected by the actors of the sector with the exception of the operators.

In the letter, the telecom companies said there had been a 40% increase in the cost of doing business.

According to them, the telecom industry has been financially impacted by the 2020 recession and the effect of the ongoing Ukrainian/Russian crisis which has led to higher energy costs, increasing their operating expenses by 35%. .

They added that the recent introduction of a 5% excise duty on telecommunications services had further increased the burden of multiple taxes and levies on the industry.

“As the Commission may be aware, the electricity sector, under the supervision of its Nigerian Electricity Regulatory Commission of the Electricity Sector, in November 2020 undertook a review of electricity tariffs to weather the economic headwinds flagged above,” he added.

“In light of the above, ALTON considers it timely that the telecommunications industry undergo periodic cost adjustments through the intervention of the commission to minimize the impact of the difficult economic issues facing our members. The details are below:

“Upward revision of pricing for voice and data and SMS. Given the state of the economy and the approximately 40% increase in the cost of doing business, we would like to request an interim administrative review of the mobile termination (voice) rate for voice; floor price of administrative data and cost of SMS as reflected in existing instruments.

“With respect to the cost of voice and SMS, ALTON respectfully requests that the commission consider a mark-up approach to address the desirable upward price adjustment for the industry. We attach herewith and marked “Annex 1” our proposal in this regard.

“For data services, we wish to ask the commission to implement the recommendations of the August 2020 KPMG report on determining cost-based pricing for wholesale and retail broadband services in Nigeria. Excerpts from the report are attached and marked “Appendix 2” to provide additional illustration.

“In implementing said recommendations, however, we recommend that the 40% increase in the cost of doing business be taken into account to arrive at a cost price per GB given the current economic situation.”

Also read: New Telcos subscribers hit 6.18 million in four months – NCC

ALTON added that to further assist operators during this economic crisis, the Commission should explore and provide other means of punishing operators rather than punitive monetary sanctions; extend the deadline for payment of relevant regulatory levies and fees; compel the federal government to sign the executive order declaring telecommunications infrastructure as critical national infrastructure to mitigate the costs of replacing damaged and stolen infrastructure, among other things.

Attached to a section of the letter, the organization requested an upward adjustment of the MTR by 40%.

“For large operators, a new intermediate MTR of N5.46 from N3.90 reflecting a 40% increase in cost of doing business.

“For smaller operators, a new intermediate MTR of N6.58 from N4.70 reflecting a 40% increase in cost of doing business,” the operators had said.

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