The rising number and volume of interconnect indebtedness amongst mobile telephony operators, amplified by unsavoury industry practices, is threatening the stability of Nigeria’s telecommunications market.
An interconnection charge is a fee levied by a network operator on another service provider for terminating calls on its network.
Industry analysts are of the view that the recent surge in interconnect debts, totalling over N30 billion is alarming, and perharps a smoke signal of distress in the telecoms industry.
MTN, the nation’s largest operator, with 60 million subscribers, says it is being owed a cumulative figure of N13.6 billion. “If the trend is not curbed, industry sustainability is at risk, most especially from the imbalanced equation of higher CAPEX/higher OPEX versus lower revenues”, said Funmi Onajide, general manager, corporate affairs at MTN Nigeria. Similar debt profile in the financial services industry due to lapses in the clearing systems, could ultimately lead to a bank run.
It would be recalled that about seven years ago, when the Private Telephony Operators (PTOs) who deployed the Code Division Multiple Access (CDMA) technology started to go into distress, one of the first signs was a rising wave of interconnect debts which they piled up.
The cost of doing business in Nigeria remains high as the telecoms industry is extremely FX (Foreign Exchange) and capital dependent. This situation is further exacerbated by the recent ban on import of telecoms equipment with official FX by the Central Bank of Nigeria (CBN) – a direct fallout of the continued free fall in crude oil prices and naira devaluation.
There is a renewed wave of anxiety amongst big mobile operators, considering the prevalent economic conditions. “The rising cost of capital coupled with the tough economic climate and the dynamics of market forces have made it imperative that prudent businesses manage all cash flow expectations”, said Onajide in an interview.
According to her, many operators are not adhering to good corporate governance by their failure to meet financial obligations, more so in a predominantly pre-paid market, where revenues are collected upfront from subscribers.
In recent times some networks have been overtly exuberant in the market, according to industry watchers, lowering mobile call tariffs and giving away lots of free minutes in an attempt to lure new subscribers and retain existing ones.
“The increasing free minutes without commensurate returns are the main cause of the accumulating interconnects debts in Nigeria”, said Emmanuel Ekpenyong, senior associate in litigation at Strachan Partners, a commercial law firm based in Lagos and Abuja.
According to Ekpeyong, despite the growth in alternative disputes mechanisms, many mobile operators still enter into Interconnection Agreements without inserting dispute resolution or arbitration clauses in their agreements. “Once a claim arises out of or in connection with such Interconnection Agreement, especially recovery of interconnect debts, the creditor telecom operator is bound to be at a loss as to how to recover its outstanding debts”, he added.
In 2012, the Nigerian Communications Commission (NCC) okayed new guidelines for disconnecting telcos that default in meeting their interconnect payment obligations, as part of new measures to ensure sustainable development in the nation’s telecoms sector.
The guideline provide that where operators have fully exhausted all the options contained in their Interconnection Agreement for resolving Interconnect disputes, an aggrieved telecom provider may apply to the Nigerian Communications Commission (NCC) for disconnection of the services of the debtor telecom operator.
“But the procedure for granting approval for disconnection is still too cumbersome. Little wonder no telecom provider has been disconnected in recent times on account of default in paying outstanding interconnect debts”, said Ekpenyong in a recent note. Telecoms companies have continued to trade tackles over interconnection debt owed to one another.
Speaking at a high-powered stakeholders forum in Lagos recently, Abimbola Akeredolu, partner in the law firm of Banwo and Ighodalo, pointed out that approximately 60 percent of these debts are disputed, as many telecoms operators alleged that the figures are inflated.
Akeredolu further explained that the large volume of interconnect debts was often linked to sharp difference in revenue sharing ratios between mobile operators and other landline network owners and fixed wireless operators. BusinessDay checks reveal that most of these interconnect debts are being owed indirectly by the clearing houses.
A clearinghouse is a company or association that transfers billing records and/or performs financial clearing functions between carriers that allow their customers to use each other’s networks.
Due to this high level of indebtedness, majority of the mobile operators are now opting out of interconnect clearing houses and now dealing with each other on individual basis.
A source at one of the major interconnect exchange firms licensed by the telecoms regulator said that interconnection debt among telecoms operators is a major problem in the industry.
“If I terminate my call on your network and you give me termination bill for interconnection, I may disagree with you that the bill you are giving me is far more than what I calculated on my own as payable to you,” the source had said.
He further said, “The operators thus disagree and the payment obligation is neglected, yet the NCC rule is that no operator should deny another the right to interconnect with its network. So, this is how the bill piles up.”
According to the source, “About 95 per cent of the interconnection traffic is handled by the telecoms operators, while only about five per cent pass through interconnect exchange licensees which should handle such rate.” He said, “Until we allow the interconnect clearing houses to work as the middle men to handle all the traffic for interconnection and then prepare the bills, which one operator is owing another, operators will continue to dispute any debt figure given to them by other operators.” The clearing house receives, validates and accounts for telephone bills for several telephone service providers. Clearinghouses are particularly important for international billing because they convert different data record formats that may be used by some service providers and convert for the currency exchange rate.
BEN UZOR
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