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Ensuring telecoms’ growth via new MTR regime

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Ensuring telecoms’ growth via new MTR regime

A new mobile termination rate (MTR) regime for voice services among telecoms companies in Nigeria is underway as part of regulatory measures aimed at creating a level-playing field for all operators and ensuring the continuous growth of the nation’s $70 billion telecoms industry. KUNLE AZEEZ reports

 

Globally, interconnection is critical to the growth and development of the telecommunications industry and without it, it would be difficult, if not impossible, for subscribers on one network to call other networks, according to experts.
Till date, a key component of the commercial aspect of interconnection is the determination of interconnection rates amongst network service providers.
Already, the telecommunication regulator, the Nigerian Communications Commission (NCC) has said a new mobile termination rate (MTR) would take effect from March 1.

Processor
Earlier on September 16, 2016, the NCC, had reviewed a somewhat lopsidedness in the voice termination rate for international inbound traffic, which has made telecoms companies in Nigeria to be net payers of higher interconnection to foreign companies.
To address this imbalance, the regulator reviewed the termination rate from N3.90/min to N24.40/min, for all telecoms companies licensed in Nigeria including the Global System for Mobile Communications (GSM), code division multiple access (CDMA) and fixed line networks, thus, representing over 700 per cent increase.
As at that time, the Commission took the decision as part of an ‘interim measure’ to address the lopsidedness in the termination rate for inbound international calls in the nation’s telecommunications sector. Also, the interim rate was designed to subsist pending the conclusion of a study of the determination of cost-based pricing for Mobile Voice Termination Rates (MTR).

Need for cost-based MTR regime
In a proactive move to ensure continuous growth of the industry, the NCC had recently held a stakeholders’ forum on the cost-based study in Lagos for the determination of mobile voice termination rate for the Nigerian telecommunications industry.
Speaking at the forum, the Executive Vice Chairman of the NCC, Prof. Umar Danbatta, who was represented by the Executive Commissioner, Stakeholder Management, Mr. Sunday Dare, noted that apart from the first interconnection rate, which was based on negotiation between the incumbent operator (NITEL) and other operators, all other determinations have been handled by the Commission due largely to two reasons.
One of the reasons, according to Dambatta, was the negotiated interconnection rate fraught with many controversies, secondly, and more importantly, was a need to ensure interconnection rates are cost-oriented in line with international best practice.

Previous MTR regimes
Till date, there have been four interconnect cost determination regimes in 2003, 2006 2009 and 2013.
According to Danbatta, the 2003 regime was determined via a benchmarking exercise, while the 2006, 2009 and 2013 regime were cost-based and a glide-path asymmetric regime was adopted in 2009 and 2013 respectively, with the 2013 regime expected to expire in 2016.
“However, economic factors such as the rapid devaluation of the Naira in 2016 and the fact that Nigerian network service providers became perpetual net payers to their overseas interconnecting partners, led to the commission setting an interim rate of N24.40 kobo per minute for inbound international traffic after carrying out a benchmarking exercise with other jurisdictions and this rate will subsist until a cost-oriented rate is determined by the commission,” Dambatta said.

The consultants
Meanwhile, Danbatta explained that further to the above and the expiration of the 2013 interconnect region in 2016, the commission engaged the services of the consultant PWC, United Kingdom (UK) to review and update the existing model taking into account the changes that have occurred over time and produce an interconnection cause model that is more in line with the current realities in Nigeria,” Dambatta stated.
The EVC disclosed that this project formerly kicked-off with the initial stakeholders’ forum held on February 15, 2017 with the primary aim of introducing the consultant to the industry, informing operators of the objectives of the study, and seeking their active participation by way of providing the requisite data and order Information for the study.
He explained that this was immediately followed by a one-on-one meeting with operators and subsequent visits to the offices of some operators for data collection and re-validation during the course of the study.
Danbatta reiterated that the commission has an obligation to create a level playing field for all operators and ensuring the continuous growth of the industry as such, NCC shall ensure the determination of a mobile voice termination rates that truly really relate the cause of deploying the service and interconnection of networks in Nigeria.
Review long-overdue
Speaking through the President, the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, the telecoms operators agreed with the Commission that the interim MTRs are long overdue for review and especially when the foreign exchange (forex) issue and the devaluation of the Naira against foreign currencies has created a significant disparity in situations when calls are placed off-net.
According to Teniola, “it appears that there isn’t any evidence to support the claims that the MTR is lopsided. In fact, the recent PwC findings indicated that asymmetrical or symmetrical structure hadn’t had any significant impact on the competitiveness of the Nigerian voice market over the period of the current MTR rates.
“So it suggests that the voice market is already saturated and maybe there are needs to be more incentives placed in the market for increased voice penetration in communities that are still yet to make a call that has already been taken for granted by more than 75 per cent of the population.”

Ratification of MTR categories
He, however, noted that NCC hasn’t decided or made any decisions yet about what new rates will apply from 1st March 2018,” he said.
“It appears that the PwC study recommended categories of MTRs depending on the size and shape of the operator and this, as I write, still needs to be fully ratified and agreed by each operator that this makes business sense.
“Again, it appears that if the MTR rates are reviewed more frequently and the retail voice price in the market reflects a reasonable margin for each operator then this exercise is worthwhile, otherwise, it appears that any further retail price decrease, which is inevitable, will further erode some of the players’ business models unless a significant ramp-up in call volumes is witnessed.”

PWC’s tested model
Asked operators expectations from the study, Teniola said, the PwC study was very empirical and evidence-based and “their model is tried and tested against other jurisdictions and they pointed out that this model had been tailored to our unique environment.”
According to him, “ATCON is not privy to the model and as long as our members have provided full and valid cost data (especially national transmission costs and multiple tax charges) to the consultants, then, there are no reasons to doubt the outcome of the study. It appears that the long-term trend is for eventual convergence of the MTR and that each operator may have to negotiate favorable International Terminating Rates (ITR) with their counterparts outside the country – this makes for some interesting scenario developments playing out in the market going forward.

Last line
Meanwhile, as the industry awaits the outcome of the new MTR regime taking off in March, it is believed that the regulator’s effort demonstrates the long-term international benchmarking trends that all operators in the industry will need to take on board going forward towards ensuring a sustainable growth in the industry.

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