The current Termination Rates used in Nigeria for Mobile Network Operators voice calls is N3.90k/ per minute. This Termination Rate was set by the industry regulator, Nigerian Communications Commission (NCC) after a cost-based study which produced a cost-oriented interconnection rate adopted for the sector in 2013.Recall that the industry had experienced four interconnect cost determination regimes beginning from 2003, 2006, 2009 and 2013 and the last 2013 review of interconnection rate was pegged with International Termination Rate (ITR) at $0.03/minute and National Termination Rate at N3.90K/minute.The Commission had its first intervention in the interconnection rate in the telecoms industry with the Telecommunications network Interconnection Regulations 2003; the full liberalization of the sector was still at its infancy stage therefore required data for its determination was not available. The Commission used international benchmarking to set the rates.The Interconnection regulation 2003 was reviewed in 2006 with a view to aligning it with the Nigerian Communications Act 2003 which was enacted after the regulation was made. It also addressed the major challenges faced by the industry at that time taking cognisance of industry best practices.The Commission carried its first detailed cost study by employing LRIC cost model (Long Run Incremental Cost Model). LRIC is a cost model used in telecommunications regulation to determine the price paid by competitors for services provided by operator with significant market power. It assists in the determination of the cost of termination services for an efficient operator.The Commission employed LRIC because it is forward looking, looks at replacement costs and not historical costs. Historical costs are not relevant to decision making. In 2009, the Commission conducted another study and adopted the asymmetrical cost profile. The Commission carried another review in 2013.But, based on unfriendly economic realities in the country, current Termination Rates of N3.90k and $0.03, can no longer sustain operations and expansion of telecommunications industry, especially when juxtaposed with foreign exchange of $1 to less than N500, this, some industry watchers argued.A random market survey can reveal in its entirety, how the excruciating economic recession is changing prices of goods and services, at astronomical rate. Within an era of a year, prices of goods and services have tripled at the mercy of rising inflation.The telecoms market observers noted that operating cost of Mobile Networks Operators has also gone up with the inflationary pace, while the purchasing power of Nigerians is declining speedily.The only way to keep Mobile Network Operators (MNOs) in business, taking into cognizance prevailing negative economy factors, they said, is to review GSM tariffs, especially as it regards mobile voice termination rate, otherwise known as Interconnection Rate.NCCs Policy on Mobile Termination RatesThe Mobile Termination Rate (MTR) has been a major tool of regulation used by the Nigerian Communications Commission (NCC), in formulation of its policies. The commission has been using Mobile Termination Rate as an incentive to encourage new entrants into the industry and create conducive environment of expansion for smaller operators, by ensuring a level playing field for all.For instance, Mobile Termination Rate for new entrants Mobile Network Operators (MNOs) can be cheaper when compared with big MNOs. This is deliberately initiated by the regulator, the NCC, in other to create room for growth, encourage healthy competition in the sector and checkmate monopoly in the system.International Termination Rates PolicyAnother aspect of Interconnection Rate is called International Termination Rates (ITRs). International Termination Rate (ITRs) which is interconnection charges set by international mobile traffic carriers as carrier-to-carrier charges, whenever international call is established.The ITRs are assessed by mobile carriers on calls originating from other networks, including both fixed-line networks and rival mobile networks, with identical charges usually applied to all off-net calls, irrespective of whether they are local, long-dance, or international calls.The ITRs becomes effective when a subscriber put a call across to a different network in other countries. The originating calls pass through the National Switch to International Gateway, where it is transmitted via International Gateway to National Switch of the intending country, from where it is transmitted again to the terminal endthe receiver.This international voice call is made possible, as a result of agreed terms of sharing revenues among the Mobile Network Operators (MNOs) in different countries of the world. The terms or sharing formula is called International Termination Rate (ITRs).Interconnection Rates in African countriesAccording to data obtained International Telecommunications Union (ITU) that compared Interconnection Rates in African countries after well-articulated survey and research, one of the results of the survey observed that Nigeria has one of the lowest International Terminal Rate (ITR) in the continent. The Nigerias ITR is put at $0.03/min for In-bound and out-bound calls. The $0.03/min International Terminal Rate became effective in 2013 Regime when the last determination was carried out for mobile voice terminal ratesfor national; N3.90k/min and international calls$0.03.The International Terminal Rate (ITR) for some African countries, according ITU data are as follows: Kenya-0.11 dollars per min; Ghana-0.21 dollars per min; Benin-0.17 dollars per min; Senegal-0.30 dollars per min; Togo-0.31 dollars; Ethiopia-0.20 dollars; Tanzania-0.31 dollars/min; Uganda-0.25 dollars/min; Zambia-0.14 dollars/min; Rwanda-$0.23/min; Niger-$0.27/min; Chad-$0.50/min; South Africa-$0.03; Burkina Faso-$0.27/min; Gambia-$0.70/min; Guinea Bissau-$0.50/min; Somalia-$0.44/min; Nigeria-$0.03/min; Liberia-$0.38/min; Cameroon-$0.28/min; Angola-$0.20; Egypt-$0.09/min and so on.Present Termination Charges In NigeriaThe current Termination Rates being used in Nigeria for voice calls is N3.90k/minute. This Termination Rate was set in 2013 by the NCC after a cost-based study which produced cost-oriented interconnection rate. The 2013 review of interconnection rate pegged International Termination Rate (ITR) at $0.03/minute and National Termination Rate at N3.90K/minute. Based on bedevilling economic realities in the country, current Termination Rates of N3.90k and $0.03, can no longer sustain operations and expansion of telecommunications industry, especially when juxtaposed with foreign exchange of $1 to less than N500.Forex Bottlenecks and MNOs RevenueDepreciation of Naira has contributed immensely in the reduction of foreign exchange earned, as result of In-bound International Termination Rate (ITR) into the economy and invariably loss of revenue being suffered by the Mobile Network Operators (MNOs). The devaluation of the local currencythe Naira by market forces, has drastically weakened the revenue strengths of MNOs, as regards to their contemporary overseas.This development has affected the capacity of the MNOs in Nigeria to meet up with the contractual agreements to pay Termination Rates for international voice calls made from their networks to other networks abroad. And this incapacitation has grossly affected in-bound international calls coming into Nigerian networks. It has also reduced Foreign Direct Investment in the industry.In the foregoing context, the MNOs need to convert the tariffs paid to them in local currency by Nigerian subscribers, to foreign exchangedollar, in other to meet up with contractual responsibility with foreign MNOs, as stipulated by International Telecommunications Union (ITU)s settlement procedures.It is practically impossible, for MNOs to provide quality services, payment of staff salaries, expansion of telecommunications infrastructure, and fulfilling other financial obligations, under this strangulating present forex price regime; which has become retrogressive in all ramifications to sector and investors.Naira Devaluation ChallengeBetween 2015 and now, naira has lost over 250 per cent of its original market value in foreign exchange. The unmitigated free fall of the nations legal tender is mortgaging the sustainability and growth of the telecom industry. A pathetic situation where MNOs charges their tariffs in local currency, that is depreciating at the speed of light, while importing most of their equipment with foreign exchange, does not argue well for the sector.The present Mobile Voice Termination Rate of N3.90k/minute does not conform to economic realities on ground today. Be that as it may, unless there is an upward review in the MTRs charged by MNOs to be in tandem with market realities, MNOs will find it very difficult to operate in the economy.TSA & Bank Interest Rate ChallengeHigher interest rate of above 25 per cent charged by Deposit Money Banks (DMBs) when lending to MNOs, is also part of the economic indices forcing an imminent review of mobile voice termination rate, otherwise known as Interconnect Rate. The commercial banks are no longer favourably disposed to giving long term loans to Mobile Network Operators (MNOs). This is as a result of inability of the MNOs to repay those loans in time, due to low tariffs in the sector. Introduction of Treasury Single Account (TSA) by the present government has made matters worse for banks. Deposit Money Banks (DMBs) have reduced rate at which they engage in non-profitable long-term credit facility, especially as it relates to investment in telecommunications infrastructure. DMBs, in the quest to remain in business, consider the merits and demerits of any financial facility before granting it.What NCC Should DoThe Nigerian Communications Commission (NCC) should step in at this juncture to prevent mass exodus of multi-billion dollar telecom investments from the industry. Nigerian economy will dip into depression, if Mobile Network Operators (MNOs) starts closing shops, as a result of low Interconnect Rate, which has become anti-growth. The resultant effects cannot be imagined; let alone witnessed. Hundreds of thousands of highly paying jobs are at stake here. Inflation rate of 18.7% (official), which is up to 40% unofficially, has conspired with mindboggling exchange of $1 to almost N500, to drive liquidity out of the telecom market.One of the fundamental responsibilities of the NCC is to serve the interests of both MNOs and subscribers in the country, because each party is indispensable to the other. Without subscribers, there will be no networks and telecom market. To stimulate the market, a slight higher Interconnect Rate that attracts foreign exchange, encourage investment, expand domestic network, fund innovation and enhance quality of service, should be proposed by the regulatory commission. Though, Tariff increment wills inconvenient consumers for the meantime. But its long term benefits will obviously outweigh its demerits.Danbattas Submissions on Voice Termination RatesIn light of current market realities, NCC is set to review the interconnection rates for voice services, which has been fixed in 2013. Danbatta said at a Stakeholders Forum on Cost-Based Study for the Determination of Mobile Voice Termination Rate that the commission had carried out an in-depth cost study.He said that since the last determination, which took effect April 2013, the countrys communication market had witnessed tremendous growth in both subscriber numbers as well as traffic volumes. The sector has witnessed changes in available technologies (2G, 2.5G, 3G and 4G) and other network elements, including global financial markets, which have an impact over inputs such as cost of capital.The scale of changes will inevitably affect the unit cost of providing services, including interconnection, and may lead to differences between regulated interconnection rates and underlying costs. This, in turn, may result in differences between on-net and off- net retail tariffs.It is very important we ensure that interconnection services are not only fairly-priced and non-discriminative, but should reflect the cost of providing such services in the market. It is in this regard that the commission has decided to review the rates set in its 2013
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