banner ad

Killing Telecoms With Multiple Blows

| May 16, 2012 More

As an avid watcher of the telecommunications industry over the past 10 years, one is often tempted to reminisce over the journey so far considering where we were before 2001 when the GSM companies rolled out their networks and services in Nigeria.

I do, however, believe that the industry regulator, the Nigerian Communications Commission (NCC), and the journalists who report the industry are doing an excellent job of it. So there is really nothing more to add than the obvious cliché that Nigeria has indeed come a long way from about 500,000 telephone lines in 2001 to nearly 90 million as at March 2012.

Thanks to the foresight of President Olusegun Obasanjo’s first term government, we have moved from the ignoble position of third lowest teledensity behind Afghanistan and Mongolia to become the fastest growing telecoms market in the world, with more operators jostling for a slice of the lucrative business. Even South Africa’s Vodacom, which spurned a rare opportunity to enter the Nigerian telecommunications market in rather ludicrous circumstances, has “nicodemuously” joined the fray, and many other are packing for the trip to Nigeria.

Indeed, when you juxtapose the average growth of 9 million lines per annum over the past 10 years and the corresponding 5 lines per annum over the 10 years of telecommunications in Nigeria prior to the advent of GSM, you will begin to appreciate the level of growth recorded. Beyond the growth in voice telephony, the country has recorded significant penetration in data with the upsurge in internet services being provided by the GSM operators and broadband internet providers. Of course, contrary to the recent impression created by Renaissance Capital, a financial advisory and investment firm, the telecommunications industry has been a major force in employment creation in the economy-directly and indirectly responsible for over 2.5 million jobs in 10 years. However, we could have done even much better but for several social, political and environmental factors militating against the industry.

Perhaps, the most obvious is power generation, which has been on a steady decline since 2001, in spite of the massive investments which successive administrations have claimed to have made in the sector. The most graphic illustration of the situation is to compare the cost of power generation by a typical telecommunications company with operations in Nigeria and Malawi (one of the poorest countries in the world!) and the statistics are truly eye-watering. While the operator’s OPEX (operating expenses) shows over 80% as power generation in Nigeria, it is a mere 5% in poor Malawi. This means that there’s almost steady power supply from the national grid in Malawi, while the situation in Nigeria is pathetically left at the realm of speculations and pontifications by those concerned.

With over 25,000 base stations across the country by all telecommunications operators, there’s an average of 25,000 generators (some say 50,000 at 2 generators per base station) consuming diesel and other maintenance costs all year round. Needless to say the cost of accessing, delivering and storing diesel is another matter altogether depending on the location in question. Of course, some parts of the country are NOT on the National Grid, so the operations are 100% powered by generators! Even with the resort to solar and hybrid power, the operators have not made any significant savings in costs in this key area. Over N5 billion spent monthly by operators on power generation can be reinvested in further coverage expansion or tariff reduction, you know. With all due respect there doesn’t seem to be any solution in sight until 2015 when the current licenses will be up for renewal. What a huge waste!

Another major impediment to the growth of the industry is multiple taxes. The last time I checked, there are more than 15 different taxes and levies paid to the three tiers of government. These include 1% of the Profit Before Tax (PBT) of operators is paid to the National Information Technology Development Agency (NITDA) annually; annual operating levy of 2.5% of turnover is paid to the Nigerian Communications Commission (NCC); Aviation Height Clearance Certification Fee (AHCF) is paid to the National Civil Aviation Authority (NCAA) irrespective of location and Right of Way (ROW) fees to lay fibre optics imposed by Ministry of Works and Industrial Storage only Permit to the Department of Petroleum Resources for all diesel storage facilities at every telecoms infrastructure and offices across the country renewable every two years. While all these go to Federal Government agencies. The list of taxes and levies from the states and local governments include but are not limited to Planning Permit Fee, Tenement Rate, Business Premises Registration Fee, Effluent Discharge Fee, Environmental Impact Assessment Fee, Advert Rates, Site Analysis Report Fee and Parking Permit.

It may be useful to an interested reader that in the past 10 years, the GSM operators have remitted over N200b ($1.3b) to the NCC alone as Annual Operating License Fee. The remittance to NITDA could conservatively be half that figure. Add another N100b to taxes and levies to other tiers of government, and then you will understand the magnitude of tax burden on the operators. Whatever was gained during the 5-year tax holiday granted the operators on Company Income Tax have been literally wiped away by these insensitive and inordinate taxes and levies. Now, I am referring to taxes which are documented. There are all sorts of taxes or doubtful legality which are imposed on operators by various state and local governments and forcefully collected often leading to lockouts and arrests if resisted. Some states have become more notorious than others in this regard. Imo and Bauchi are good examples of states silently building a curious reputation for high-handedness in the area of “illegal” taxation.

Many an operators is currently saddled with several demand notices from all manner of agencies working for the various states with threats of closure and arrest appended to them. For instance, I know an operator which received a notice for N350, 500, 000 from one of the agent of the ENTRACO, the Imo State agency for environment, for pest/vector control fees, fumigation fees and series of demands in September 2011. A month later, while it was trying to engage the outfit, another agent wrote to demand N200, 000, 000 for the same vector/pest control, fumigation and sanitation. Then, ENTRACO wrote a couple of weeks later to directly demand N262, 400, 000 for the same issue.

The Bauchi State Government set up the Bauchi State Signage and Advertisement Agency (BASSAMA), a peer company of the Lagos State Signage and Advertising Agency (LASSAA), to collect advert and signage fees for advertising in the State. One of the operators challenged the law, basically on the point that the Constitution empowers only the Local Governments to collect advert and signage fees. The company lost at the lower court and the Court of Appeal affirmed the decision specifically stating BASSAMA can collect as long as the law does not prevent the Local Governments from collecting directly. We thus continued to deal with Bauchi Local Government Authority. The judgment also stated that BASSAMA can make a demand for signage fee. Then, the company received a demand which basically counted any location with the company’s sticker, parasols, canopies (whether or not the company owns the location) and arrived at a claim of N755 million as owed by the company. As stated, there is no monetary judgment against the company. It was, therefore, surprising that in one fell swoop, BASSAMA got the Chief Justice of Bauchi State based on an ex parte (i.e. without putting the company on Notice) application, stated that BASSAMA was entitled to N755 million and without allowing the mandatory period of 5 days before execution of judgment, immediately gave a garnishee order nisi seeking to attach the company’s bank accounts. The legal battle is ensuing even as effort is being made to settle the matter amicably.

There is one challenge which not only directly affects the operators but also the subscribers: vandalism. Many a time and oft, customers have been inundated by text messages from operators apologising for network outages, some nationwide, some restricted to specific areas. The frequent cutting of fibre by either construction workers or cable thieves is largely responsible for these outages. At other times, base stations are vandalised by hoodlums who either cart away power generators or siphon diesel from the sites. There are also regularly reported cases of base stations being held up by irate communities demanding for one form of gratification or compensation or the other. Even after operators have properly acquired sites backed up with legal documentation, they end up overran by difficult communities waving all kinds of demands. There was a ludicrous case of a community demanding a cow, some wines and spirits and N1m to appease their gods over the desecration of their land by the mere installation of a base station!

While the unreasonableness of certain remote communities can be put down to poverty, how can one explain the extreme cases of extortion in some state capitals by people parading as representatives of the His Excellency? Construction work is often stopped and workers arrested until inexplicable sums are paid to some shady outfit established by whomever to make illegal money for some greedy politicians. They operate with mobile policemen and procure spurious court orders with which they harass contractors and make life difficult for operators.

Perhaps, only a few people are aware that no single approval has been given for the installation of a base station in the Federal Capital Territory, Abuja, since 2005! It is indeed a ridiculous conundrum that the people in the FCT are grumbling about quality of service with spasmodic threats by members of the national assembly over the same issue, yet nothing serious is being done. Somewhere in the statute books of the FCT, it is forbidden to erect any telecommunications infrastructure in the capital city. All effort to engage the authorities have fallen so terribly short of expectation and the status quo remains unchanged with the Federal lawmakers and the regulatory authorities keeping suspiciously silent.

Admittedly, the deregulation of the telecommunications sector and the license auction in 2000 created an enabling environment for the industry to blossom, but the industry is being slowed down by these impediments. I recall that it was said then that the licence fee of $285m per operator would be invested in the development of infrastructure. Regrettably, that did not happen rather the cash was paid into the Federation Account and distributed among the three tiers of government. And so, operators have had to invest in fibre and such like, which could have been provided with prudent investment of the license fees. Beyond and away from the license fees, one wonders what use the AOL fees have been put to over the years. I dare say between NCC and NITDA, there is enough cash to build a world class fibre optic ring around the country, at the very least. Why is that not happening?

Regarding vandalism, the operators have been shouting themselves hoarse asking that telecommunications equipment be declared by law as National Infrastructure. It took a while, but the body language of the regulator suggests this is a worthy cause to be pursued. Hopefully, the enabling laws will be put in place expeditiously to protect the expensive equipment operators are installing across the country and make it a criminal offence to vandalise them. On the multiplicity of taxes and levies, one would hope that the federal government’s sworn commitment to the rule of law as well as good judgment will prevail. The recourse to lawlessness, disregard for court orders and outright connivance with crooked judicial officers to intimidate and frustrate operators should be stopped.

If the telecommunications industry, the geese that lay the golden egg, must survive, the Federal Government must urgently come to its aid. Those superintending over the industry should not play the ostrich and pretend that all is well when all is definitely far from being well.

Oparah writes from Lagos.

Category: Bauchi State News

Comments are closed.