For many Nigerians, the first time they came across the phrase “interconnection charges” was when MTN announced in July 2019 that it was being owed over N4 billion by Glomobile and hence would be forced to disconnect subscribers from the network unless the Nigerian telecom pays it.
Although that debt was settled, it was to return on October 18 when Airtel also put over 47 million subscribers of Glomobile network on disconnection notice if the debt owed it was not settled in 10 days. That deadline ended on Monday, October 28, without an official word from Glomobile as to whether it paid or not.
The sector regulator, the Nigerian Communications Commission (NCC), said it was compelled to support Airtel’s claim given that Glomobile was notified of the application for disconnection and was allowed to state its case.
“The Commission having examined the application and circumstances surrounding the indebtedness determined that the affected operator does not have sufficient reason for non-payment of interconnect charges,” the regulator said.
If Glomobile has not settled, it risks leaving millions of subscribers partially disconnected and frustrated, and more subscribers may leave its platform in the next couple of weeks, which could lead to a loss in revenue. The telco, which used to be the second-largest GSM network in Nigeria in terms of subscriber base, was displaced in July by Airtel. Glomobile is yet to regain its position as Airtel even moved further up from its position in August.
The disconnection order could also set back its plans for mobile money in Nigeria. The telco’s subsidiary, First Money, was one of the three recipients of the Central Bank of Nigeria’s ‘Approval in Principle’ for Payment Service Bank licence recently.
A source in Glomobile, however, told BusinessDay that the telco may have settled the debt before the deadline, and it may well be so as subscribers have yet to complain of disconnection. In any case, when Glomobile finally confirms it has paid, who is to say that another debt complaint will not rear its head soon?
What is Interconnection charges?
First, telecom players use the word ‘interconnection’ to refer to an arrangement in which players connect their equipment, networks, and services with other telecom service providers. The NCC currently addresses everything related to interconnection and it also regulates interconnection charges.
Interconnection charges are the fees telecom service providers collect from another operator for completing calls originating from their network but terminating in another network. For instance, if you originate a call, you pay your access provider, who in turn pays termination charges to the network you placed the call. Telecom companies in Nigeria charge for connecting the call and terminating it. The charges are used to cover the network usage costs as the operator on whose network the call terminates carries the call on its network to the customers, and this requires infrastructure investment.
Thus, interconnection represents a major source of revenue for telecom companies. Other components of the interconnection charges include international termination charges, transit charges, international settlement rates, carriage charges, and origination charges.
Interconnection charges go back to the early days of mobile telephony service when it was generally seen as a rich people’s market rather than for everyone. The technology was new and fairly costly and licensed service providers were significantly very few. In that scenario, it was easy for providers to set high fixed-to-mobile interconnection (or termination) charges as a means of transferring funds internally to their startup subsidiaries. The practice continued when new service providers were licensed and has become a way of doing business in the market
According to the International Telecommunication Union (ITU), many countries rank interconnection-related issues as the single most important problem in the development of a competitive marketplace for telecommunication services.
The operators with a large subscriber base usually tend to make money from this charge, while smaller operators end up paying on a net basis.
Why not deregulate?
Following a 2018 review agreed with stakeholders, the NCC set the interconnection rates at N3.90 per minute for 2G, 3G, and 4G operators; N4.70 for the LTE operators; while the international termination rate of N24.40 was sustained.
Nonetheless, many operators have often complained that the rates are high and force them to accumulate significant debts from unsettled voice termination. Some telcos have allegedly attempted to manipulate the rate through call masking – when an international calling number is cloaked as a local number.
In July when MTN was owed, a notification letter sent by the NCC to the affected parties had asked the South African telecom, Airtel and IHS to disconnect, on a partial basis, services to Globacom, Ntel and some interconnect exchange points. 9Mobile, the fourth largest telecom which has seen subscriber numbers dip significantly in 2019, has also struggled to pay disconnection charges.
“I believe NCC took the short route on this,” said Oluseyi Akinyeyenu, executive director and COO Oryx Africa. “A garnishee court order would have been better – Airtel gets the right to Glomobile’s assets to the tune of the amount owed. The value of what will be lost due to this response by NCC may end up being more than the amount being owed.”
A permanent solution could be to ask operators to negotiate freely what they would pay and a flexible payment plan. That way those with smaller subscriber numbers can get some relief and pay what they can pay within their capacity.
Nigeria can also learn from India, which is considering scrapping the charges entirely to reduce cost on subscribers by 2020. The NCC can incentivise the telecom operators by helping to fast-track their entrance into Nigeria’s mobile money space.
