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Arbitrary charges: Telecom firms withhold N979bn investment

By on September 30, 2015

Global System for Mobile operators in the country on Thursday said that the huge financial burden imposed on them by state governments was a major hindrance to further investment in network expansion.

The GSM operators said that if the taxes charged them were not harmonised and arbitrary Right-of-Way charges abolished, they might hold back in terms of making necessary investments in network expansion.

Our correspondent learnt that multiple taxation was hindering the operators from spending an estimated $6.2bn (N979bn) on network expansion, which was initiated in 2014 to improve the quality of service mandates of the Nigerian Communications Commission.

An employee of one of the major operators said, “Part of the N979bn investment not already spent will be held back until state governments across the country address the imposition of unstructured fees and charges by the various layers of government and service interruptions arising from collection attempts.

“We took that step because we cannot keep investing; yet, multiple taxation as well as other challenges continue to have a negative impact on our operations and is fast eating deep into our revenue.”

The Public Relations and Protocol Manager, MTN Nigeria, Mr. Funso Aina, said illegal taxation was altering incentives for production and consumption, “and so, economic distortions will be prevalent in states where the burden of taxation is high.”

“The burden is subsequently transferred to end users, which makes costs higher and non-affordability slows penetration,” he added.

Aina stated the telecom firms were battling with state governments on the issue of multiple taxation, especially in some states of the South East and that this was affecting the companies’ Average Revenue per User.

“In spite of the increasing demand for telecommunication services, which has been driven by the sharp decline in tariffs over the last three years, and stimulating increasing minutes of usage and activity on the networks by a growing number of people, the ARPU has steadily been on the decline because of the value erosion in the industry,” he said.

The MTN official said that that “the fierce battle by operators for the wallet share of subscribers and the fact that Nigeria is largely a multi-SIM market have also led to a decline in the ARPU.”

The former Director, Regulatory Services, Airtel Nigeria, Mr. Osondu Nwokoro, had in the past said multiple taxation was a huge threat to investments in network expansion.

“No matter how much operators invest, if the enabling environment is not in place, the output will not be seen. Subscribers will feel that the operators are not making any effort to address the issue of poor quality of service,” he said.

However, our correspondent gathered that the operators were lining up big budgets and signing new contracts for network expansion, with high optimism that the issue of multiple taxation would soon be resolved.

The United Arab Emirates-based Etisalat recently announced plans to spend $500m (N99bn) in network expansion in Nigeria before the end of this year.

MTN Nigeria in the past secured a medium-term loan facility of $3bn (N591bn) from a consortium of 17 local and seven foreign banks.

The second national carrier, Globacom, signed contracts with two Chinese companies, Hauwei ($750m) and ZTE ($500m), totalling $1.2bn (N236bn), for network optimisation and upgrades.

In the last 42 months, Airtel Nigeria said it had invested $1.5bn (N295bn) in network upgrades.

Estimation are that there are over 22,000 Base Transceiver Stations in Nigeria to meet the communication needs of the 114 million active mobile lines.

To meet the QoS mandates of the telecom industry regulator and analysts said the mobile operators would need to deploy additional 50,000 BTS sites.

“The delays in the Right-of-Way and the inconsistency of approach and fees levied across the different states of the federation are currently delaying the roll out of the BTS infrastructure, which have direct consequences for quality of service,” Ms. Funmi Omogbenigun, the former General Manager, Corporate Affairs, MTN Nigeria, told our correspondent shortly before she resigned two weeks ago.

“The same applies to approvals for site building. These are all issues that continue to pose challenges for the telecoms industry because of the multiple taxation and arbitrary Right-of-Way charges by state governments,” she added.