₦airaland Forum

That Nigeria’s telecommunications industry is the largest and fastest growing sector in Africa is no longer news. However, sustaining this achievement remains a concern considering expectations from customers and investors.

The rapid growth of the industry from about 400,000 telephone lines in 2001 to nearly 155 million voice customers as of August according to figures released by the regulator is attributable to many reasons. Perhaps, the most critical of the reasons is the dogged determination of the operators to grow telecoms services across Nigeria, using a combination of aggressive measures, despite odd business climate, unfriendly policies, witch-hunting from some government quarters and tough competition.

All the major operators deserve full marks in this area, as they have all since the commencement of GSM service in Nigeria continued to improve on their investments in the country.

Agreed, the fact on ground showed that the services are still not perfect, especially when it comes to getting a call through or surfing the Internet, a challenge, which is not limited to the country alone, but also observable in other climes, even the develop economies.

Worrisome is the fact that even with their claims of 4G/LTE service offerings lately, the quality of service has not improved. This will however, not take away the quantum of investments by the players, which is now put at about $68 billion, with $35 billion coming through Foreign Direct Investments (FDIs).

Besides, the second quarter report of the National Bureau of Statistics (NBS) showed that in the quarter, the sector contributed N1.58 trillion to the country’s GDP, putting its growth at about 9.8 per cent. This is even as the country’s teledensity increased to 109 per cent.

Embattled telecommunications firm, MTN Nigeria, claimed that it has contributed over N1.8 trillion to the Nigerian government by ways of taxes, levies and sundry regulation payments, since it commenced operations in Nigeria in 2001. It added that the firm directly and indirectly has employed over 500,000 Nigerians.

Globacom too has increased its investment in the sector, especially with the recent launch of its 4G/LTE services, which is running on its massive 10,000 kilometres $800 million Glo 1 submarine cable system. Other operators including Airtel, Etislat, Smile, Spectranet, ntel, Intercellular have boosted their investments in the sector by over 60 per cent. However, there are still limitations.

Challenges

Indeed, despite all these investments and additions brought to the economy, the sector and players are seriously challenged. These include attacks from social miscreants, who willfully destroy telecommunications facilities in the country to multiple taxation from government agencies at all levels, erratic power supply, multiple regulation, refusal of right of ways, and lately accusation from the Upper Legislative Chamber. The Senate recently alleged that, one of the operators, MTN in this case, of repatriating illegally about $13.9 billion out of Nigeria to South Africa, its origin from 2006 to 2016, without obtaining Certificate of Capital a Importation (CCI).

The upper legislative chamber, according to a motion moved by Dino Melaye, the senator representing Kogi West in the Senate, alleged that the telecommunications firm beat the nation’s financial regulatory laws by failing to obtain a CCI as authorised by Central Bank of Nigeria (CBN) Financial and Miscellaneous Act within 24 hours between 2006 and 2016 before moving the money out of the country. He alleged that this was done in connivance with the Minister of Industry, Trade and Investment, Okechukwu Enelamah, and four commercial banks in the country.

Response from operator
Commenting on the point of CCI before the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja, Moolman said that no dividends were declared or paid until the CCIs were issued and finalised.

Moolman added that MTN Nigeria only requested for CCIs for foreign capital that was imported into Nigeria and dividends were externalised on CCIs.

“Often for various reasons (such as not having all the required documentation for instance), it is not possible to issue a CCI within 24 hours, and the CBN’s Forex Manual contemplates such situations by asking that the banks refer to the apex bank for approval. Besides, the requirement to issue a CCI within 24 hours of conversion is an administrative requirement. As such, the CBN has the authority, and indeed we believe, approved the banks’ applications to issue CCIs outside the recommended time frame,” Moolman said.

He said MTN Nigeria remains committed to global best practices which include paying dividends to its foreign investors as provided under the Nigerian law.

Investments and the Act
The Nigerian Investment Promotion Council (NIPC) Act and Foreign Exchange (Monitoring and Miscellaneous Provisions Act) are very clear on what the right of an investor is in Nigeria. Section 24 of the NIPC Act states: “… A foreign investor in an enterprise to which this Act applies shall be guaranteed unconditional transferability of funds through any authorised dealer in freely convertible currency of (a) dividend and profits (net of all taxes) attributable to the investment…”

Section 15 of the Foreign Exchange (Monitoring and Miscellaneous Provisions Act) states, similarly, in addition to spelling out whose responsibility it is to issue the CCI, “Foreign currency imported into Nigeria and invested in any enterprise pursuant to subsection (1) of this section shall be guaranteed unconditional transferability of funds, through an authorised dealer in freely convertible currency, relating to— (a) dividends or profits (net of taxes) attributable to the investment…”

Before the advent of Global System for Mobile Communications (GSM) in Nigeria in 2001, the telecoms industry in Nigeria was not an industry to reckon with in terms of contribution to Gross Domestic Product (GDP) and impact to economic development. Then the total number of telecoms subscribers was less than 400,000, with a teledensity of 0.4 per cent, and its contribution to GDP was less than two per cent.

But in 2003, indications began to emerge that the telecoms sector could turn out to become the sector that will contribute more to GDP, above oil and gas, if special attention was given to it. Then subscriber number was fast growing and teledensity, which is the growth of a country, measured in percentage, was fast rising, which led to the auction of the Second National Operator (SNO) licence that brought Globacom into the telecoms space, after MTN and Econet Wireless (now Airtel Nigeria).

Today telecoms subscribers are well over 150 million across networks, with a teledensity of 107 per cent, contributing N1.58 trillion to GDP as at the second quarter of 2016, which is about 9.8 per cent growth, according to the recent statistics released by the National Bureau of Statistics (NBS). The industry has recently become the highest in job creation, employing millions of Nigerians directly and indirectly.

In spite of the appreciable growth and contributions of the telecoms industry, the sector is still faced with challenges that are likely to retard its further growth should government decides not to protect it.
The telecoms industry is faced with serious challenges ranging from willful destruction of telecoms facilities to multiple taxation, regulatory fines, and of recent, the probe by the Senate on matters of alleged repatriation of revenue genuinely generated from Nigeria by MTN.

Telecoms contribution to GDP

National Bureau of Statistics (NBS), in its latest figures released, said telecommunication sector is contributing so much to GDP.

According to NBS, the telecommunications sector contributed N1.58 trillion billion to GDP in the second quarter of 2016, a 9.8 per cent growth, which represents an increase of 1.0 per cent points relative to the previous quarter.
According to the statistics from NBS, this is the largest contribution to GDP made from this sector in the rebased period, which emphasises that growth in telecommunications has remained robust when compared to total GDP.
The last time that telecoms contribution to GDP as high as nine per cent, was in the second quarter of 2015, when it recorded 9.46 per cent growth.

MTN, for example, has continued to empower its Nigerian workforce and has employed over 500,000 Nigerians directly and indirectly in the MTN services and distribution chain.
The Chief Executive Officer (CEO) of MTN Nigeria, Ferdinard Moolman said the telecoms company has invested so much in Nigeria and has contributed over N1.8 trillion to the Nigeria government by ways of taxes, levies and sundry regulation payments, since it commenced operations in Nigeria in 2001. According to him, in spite of contributions, the industry is faced with serious challenges from social miscreants, who willfully destroy telecoms facilities in the country, multiple taxation from government agencies, as well as the challenges of the Senate, that is currently investigating it for alleged repatriation of N13.9 billion out of Nigeria from 2006 to 2016, without obtaining Certificate of Capital a Importation (CCI).

The challenges

Telecommunication operators have continued to groan under difficult and harsh business environment, which include poor telecoms infrastructure, refusal of right of ways, multiple taxation, willful destruction of telecoms facilities, leading to poor telecom service delivery, among others.
In the area of poor telecoms infrastructure, the operators were forced to re-invest their revenue into telecoms infrastructure rollout and network expansion.

The operators were of the opinion that Nigeria would have been fully developed in terms of telecoms infrastructure, and become fully ready to host global Information and Communications Technology (ICT) events if government had started long ago to invest in telecoms infrastructure.
Telecoms operators that participated in the Digital Mobile Licence auction in 2001 in Nigeria, paid $285 million each, when at that time, the exchange rate was N100 to $1. But the proceeds were not used by government to rollout telecoms infrastructure in the country. Instead, the proceeds were shared among the three tiers of government and telecoms operators were left to rollout out network infrastructure by themselves, a situation they affected the growth and development of telecoms infrastructure in the country till date.

But among all these, the most disturbing challenge that could pull down the telecoms sector and create fears in the minds of would-be telecoms investors, is the issue of alleged repatriation of N13.9 billion by MTN, that is currently been investigated by the Senate.
The Senate has accused MTN of an alleged connivance with the Minister of Industry, Trade and Investment, Okechukwu Enelamah, and four commercial banks to have taken advantage of the porous Nigerian financial system to move the sum $13.9 billion out of the country without the required authorisation.
The upper legislative chamber, according to a motion moved by Dino Melaye, the senator representing Kogi West in the Senate, alleged that MTN beat the nation’s financial regulatory laws by failing to obtain a CCI as authorised by Central Bank of Nigeria (CBN) Financial and Miscellaneous Act within 24 hours between 2006 and 2016 before moving the money out of the country.

Financial experts’ views

Despite the allegation by the Senate, some financial experts have absolved MTN of any wrong doing, insisting that institutions like the CBN, the Nigerian Communications Commission (NCC) and the Nigeria Investment Promotion Council (NIPC), should come out to explain better since they are the regulators that control the activities of MTN operations and also regulate cash transfers in Nigeria.
Economist to Lagos Business School, Opeyemi Agbaje, who spoke on the MTN issue, said MTN demonstrated its love for Nigeria by investing in the Nigerian economy since 2001 and that the telecoms company showed respect for the laws of the country guiding repatriation of money. He said it is worrisome that the same company that has invested so much in the country and has been law abiding by paying its taxes, is being heavily criticised and investigated by the Senate for repatriating its profit.

“In my view, the action of MTN in generating and repatriating its revenue from 2006 to 2016, was legal and acceptable because the money we are talking about is MTN’s profit and the company has legal right to repatriate its profit to its parent company in South Africa,” Agbaje said.
He explained that four banks were legally involved in the transfer of the said money and that the banks must have gotten the approval of the Nigerian Investment Promotion Council (NIPC) before the money was repatriated, irrespective of whether the CCI was issued or not.
He said the investigation by Senate is either an act of mischief or ignorance and that the NCC, the NIPC and the CBN must rise to defend MTN and save the telecoms company from total collapse, which he said could affect the Nigerian economy negatively.

Financial Management Consultant, Bisi Ogunwale called on the Senate to be cautious in its investigation in order to save MTN’s business in Nigeria that is benefiting millions of Nigerians and the Nigerian economy. He said the action of the Senate negates the spirit of promoting ease of doing business by the federal government and that such an action is capable of discouraging foreign investors from investing in Nigeria.

MTN’s position

Commenting specifically on the point of CCI before the Senate Committee on Banking, Insurance and other Financial Institutions in Abuja recently, Moolman said that no dividends were declared or paid until the CCIs were issued and finalised.
Moolman added that MTN Nigeria only requested for CCIs for foreign capital that was imported into Nigeria and dividends were externalised on CCIs.
“Often for various reasons (such as not having all the required documentation for instance), it is not possible to issue a CCI within 24 hours, and the Central Bank of Nigeria’s Forex Manual contemplates such situations by asking that the banks refer to the CBN for approval. Besides, the requirement to issue a CCI within 24 hours of conversion is an administrative requirement. As such, the CBN has the authority, and indeed we believe, approved the banks’ applications to issue CCIs outside the recommended time frame,” Moolman said.

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Contrary to the federal government’s expectations, audited and unaudited financial results of MTN Communications Nigeria Limited have revealed that it may be impossible for the telecoms firm to pay the N1.04 trillion fine imposed on it by the Nigerian Communications Commission (NCC) in one tranche.

Last October, NCC, the telecoms industry regulator, imposed the fine on the Nigerian subsidiary of the South African firm for failing to deactivate 5.2 million unregistered subscribers on its network.
Following pleas to the federal government, NCC reduced the sanction by 25 per cent to N780 billion and gave MTN till December 31, 2015 to pay the fine.
But instead of paying the revised fine, MTN sued NCC and the Attorney General of the Federation, challenging the regulator’s powers to impose the fine.
On this basis, the federal government reversed the concession it had granted MTN on the fine and is now demanding that the company pays the entire N1.04 trillion.

However, the Consolidated Statement of MTN Niger and its subsidiary as at December 31, 2014, which was exclusively obtained by THISDAY at the weekend from an official in NCC, showed that the company had current assets comprising inventories, trade and other receivables, current investment, restricted cash, and cash and cash equivalents of N402 billion.
The amount is far less than the reduced fine of N780 billion or even the higher fine of N1.04 trillion.
MTN’s 2014 financial result was audited by PricewaterhouseCoopers (PwC).
Conventionally, if a company is faced with a fine or levy, it would not be expected to sell any of its non-current assets such as property, plant and equipment, or to borrow to pay the fine, but would be reasonable to generate such sums from its current assets which are liquid in nature.
However, its profit and loss accounts showed that it posted revenues of N824.8 billion, a profit before tax of N290.6 billion and profit after tax of N209 billion in 2014.

Furthermore, in the documents obtained from the NCC source, MTN Nigeria’s unaudited (management) accounts up till December 31, 2015, showed that its total cash and investment available stood at N355 billion.
It was gathered that the documents were present by the telecoms company to NCC when it pleaded for leniency on the fine.
In the presentation to NCC, MTN explained that the N355 billion was available to run the business, of which N100 billion has to be paid to banks in less than 12 months with the balance payable in 2017.
In the documents, MTN showed it had a shareholders’ fund (capital of the business) of about N260 billion, including the 2015 profit after income tax of about N190 billion (unaudited) and historical profit of about N6 billion.
Its loan repayments and annual capital re-investments (which averaged about N200 billion in the past five years) are funded with the profit and loans obtained from local and foreign banks.

Precisely, MTN Nigeria currently has a loan portfolio of about N350 billion, of which as indicated earlier, N100 billion is payable in less than 12 months and a tax liability of N90 billion, payable in full by June 30, 2016.
This implies that the telecoms giant’s available cash as at December 31, 2015, can fund the loan repayment (N100 billion) and tax obligation (N90 billion) due in less than 12 months, which is usually the cycle every year.
In addition, it revealed that MTN Nigeria keeps a working capital (in cash) of between N40 billion and N50 billion to ensure the smooth running of its business at any point in time.

When contacted on its financial statements, an MTN official confirmed that the company had made the presentation to NCC and the federal government, adding, however, that the Nigerian government had remained adamant that the fine must be paid.
He acknowledged that MTN had acted with impunity and brought this problem on itself, but was concerned that the fine could bankrupt the company, which should not be the intention of NCC or the federal government.
“We hope that we can get a reprieve and will keep meeting with the federal government while the matter is in court to arrive at an amicable settlement. We have learnt our lesson, but the government should not kill the business and throw thousands in the job market at a time like this,” he said.

Since the fine was imposed, MTN’s parent company in South Africa has lost 25 per cent of its market value and faces lower revenue, as the economic downturn takes its toll on subscribers in Nigeria, its biggest market in Africa.
Meanwhile, the founder and retired Chairman of Visafone Communications Limited, Mr. Jim Ovia, has said that Visafone remains open for business and will be leveraged to expand the MTN’s roll out of its LTE broadband services.
In a statement at the weekend, he said this would ensure the continuity of the Visafone trademark broadband, enterprise solutions and voice services to its customer base.
According to Ovia, the acquisition of Visafone by MTN was clearly a very healthy development that would further accelerate the growth of ICT in Nigeria.

“The advent of mobile telecommunication services into the country over a decade ago has impacted Nigeria positively and created a new industry powered by technology and innovation.
“Looking back, we have recorded progress and achievements that have positively impacted the growth of other sectors such as banking, e-commerce and entertainment.
“We recognise that the industry holds greater potential that can further catalyse Nigeria’s economic growth generally,” he said.
With regard to manpower development, Ovia stated that contrary to media reports, MTN did not sack any staff of Visafone after the acquisition.

He said of the 350 professional staff that Visafone had prior to the acquisition, some voluntarily resigned and were adequately compensated.
Ovia further revealed that in a bid to ensure a seamless transition of the process and maintain business continuity, some staff of Visafone are being re-engaged by MTN in order to maximise the use of key assets such as network and technology