NCC rejects telcos’ request, saying it has no money do do a cost-based study
By Jeph Ajobaju, Chief Copy Editor
A request for a 40 per cent tariff hike by telecom firms – because of crippling multiple taxation and escalating operational costs, such as the price of diesel – has been turned down by the Nigerian Communications Commission (NCC).
The Association of Licensed Telecommunication Operators of Nigeria (ALTON) wrote to the NCC earlier this month proposing the rise in the cost of calls, short message service (SMS), and data because of the rising cost of doing business.
ALTON requested to raise the price of call from N6.4 to N8.95 and SMS from N4 to N5.61 as the NCC Act 2003 says operators cannot increase charges without approval from the regulator.
NCC Chief Executive Officer Garba Danbatta this week acknowledged receipt of the letter but explained that action cannot be taken on it this year because a lack of funds for a cost-based study to determine whether or not a tariff hike is justified.
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Rising operational costs
“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, per reporting by The Nation.
ALTON had in the letter, titled “Impact of the Economic and Security Issues on the Telecommunications Sector”, cited a 40 per cent increase in the cost of doing business, triggered by the recession in 2020 and the ongoing war in Ukraine.
It also cited high energy costs, a 35 per cent rise in operating expenses, as well as multiple taxes and levies.
“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.
“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,” the letter pleaded.
Case for upward review of prices
“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 an 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 as ‘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 said in order to help the telecom sector, the NCC should, among others,
- Explore and provide other means of penalising operators rather than punitive monetary sanctions
- Extend the payment timeline of regulatory levies and fees
- Prevail on the government to issue an Executive Order declaring telecom infrastructure as a critical national infrastructure to mitigate the cost of replacing damaged and stolen infrastructure, among other things.
- Raise mobile termination rate (MTR) by 40 per cent.
ALTON recommended that
“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.”
