₦airaland Forum

…mulls new capital structure for operators

The telecoms regulator, Nigerian Communications Commission (NCC) has expressed worry over the financial state of telecommunications companies in the country. According to the commission, an audit of the financial status of the telcos revealed that some of them are not in good health financially.

The audit, which was propelled by the lingering interconnect debt, which the regulator said had risen to N70 billion last year, was said to have revealed the true status of the operators, leading to the increasing debt in the industry. “The commission recently conducted a review of the financial health of its licensees as a fallout from the systematic crisis faced by some of them, mostly associated with huge indebtedness and huge deficits in shareholders’ funds.

“The outcome of the review raised concerns and accentuated the widespread issues on capital structures and unsustainable debt to equity ratios of a substantial number of the licensees. “This requires a mechanism that will pre-emptily set parameters and monitor compliance; this is both imperative and a necessity that will protect the market,” the commission disclosed in a document proposing a new capital structure for the operators.

Late last year, the Executive Vice Chairman of the NCC, Prof. Umar Danbatta, had urged the telecom operators to settle the huge interconnect debts among themselves, noting that this should be resolved in the wider interest of the industry. Danbatta said the “interconnectivity indebtedness, valued at over N70 billion, is a big challenge to infrastructure expansion and inimical to healthy competition” which are needed for facilitating the digital economy in Nigeria.

Meanwhile, to forestall a collapse of the industry, the regulator said there is an urgent need for a new capital structure for the telecom companies. According to the document titled: ‘Consultation Paper on Determination of Capital Structure for Licensees in the Communications Sector in Nigeria’, the commission had set up a committee in March 2020 to review the existing capital structure in the sector and determine whether there is a need to set any benchmarks or parameters.

The committee was said to have conducted a technical review of a sampled population of current licensees, cutting across 15 licensing categories. “It is clear from the outcome of the technical review that the commission needs to act in a timely manner, to forestall a systematic and sector-wide collapse and its possible impact on the economy and national security of Nigeria. Clearly, the outcome of the technical review of the sampled licensees supports the need for a consultation process that will facilitate a determination of an ideal capital structure that will protect and sustain the communications sector in Nigeria,” the commission stated.

The commission said it intends to set out an optimal capital structure for its licensees, as the proportion of debt and equity that results in the lowest weighted average cost of capital. “In order to optimise its capital structure, a licensee can issue either more debt or equity and the new capital that is acquired may be used to invest in new assets/infrastructure or may be used to repurchase debt/equity that is currently outstanding, as a form of recapitalisation.

“Although there are many contextual issues in relation to the determination of capital structures, the commission is focused on investments, shareholders’ funding, and the ratio of debt to equity of all its licensees. Thus, capital structure in this context refers to the proportions or combinations of equity share capital, preference share capital, debentures, long-term loans, retained earnings and other longterm sources of funds in the total amount of capital that a licensee should raise to run its business,” the commission said in the document.

https://www.newtelegraphng.com/n70bn-debt-ncc-frets-over-telcos-finances/

I believe it is those with majority Nigerian share holders that are suffering the crisis, Nigerians just believe in starting a business and taking profit instead of reinvesting to improve the quality of service to customers. MTN had been declaring excessive profits year on year in the Nigerian telecom space.

The same is playing out in the DISCOs, They just saw investing in the power sector is put in little and collect profit. No new equipment no expansion just milking the existing customers. If they need more profit, increase price. It as simple as ABC.

Who will rescue the consumers, nobody.

The commission is only sounding the alarm because nothing is coming to the from those people due to the huge debt of the other Telcos apart from MTN.

Wetin concern NCC with the financial viability of tele- communication companies? Abi they want to take loan for them again ni? The companies may not tell the whole truth during their audit exercise to beat government choking taxation policies.So dont be deceive.

When you see this kind of report, it's only because they have finished their assignment but doesn't want the mews to hit you as a shock.

Expect hike in tariff

What's your own if they aren't in good financial health. Is government part of the shareholders or did government borrow them money.

If not, dying is part of capitalism. The telco market is a multi billion dollar industry - let other qualified players come in.

Why won't they be in serious debt when they're bedeviled with series of issues including: multiple taxation, high licence renewal, erratic power supply, high cost of diesel to power their base stations, regulatory cost, etc. Nigeria is not a conducive place for business to survive.

JidennaJason:
N70 billion debt and the commission was letting it raise without any action?

This country get as E dey go....

Everything is on a standstill.

The only thing working in this country are the marauding Fulani herdsmen.... Killing and raping.

The Netherlands government should please answer me.

I don taya.

Billions everywhere...by God grace they will....howbeit make sure you act and live like an international citizen.

Proactivity Leads To Productivity!!!!
@SeniorWriter

adeyemipelu:
Reading

Have you finished?

it's like they wan to borrow from them or wan borrow to pay for them

NCC, you expect the Telcos to tell/show you the true state of their financial health?

So you can kill them with taxes and more charges?

No coy in Nigeria reveals the true state of their finance to government or any regulator.

Nothing is working in this country

Remember to stay and eat healthy.order your soyabean powder today. It is good for both adults and infants.

It's is well....that's all I can say for our dear country

dre11:
…mulls new capital structure for operators



https://www.newtelegraphng.com/n70bn-debt-ncc-frets-over-telcos-finances/

Telecoms is a cash cow. An industry-wide liquidity crisis only means the regulatory bodies are either compromised or not doing their jobs (mostly the same thing in Nigeria)...which was why a career crook like Keem was able to waltz into the sector and plunder etisalat back then...

Buhari has finally destroyed the Telecom industry

We move

Alright

Nigeria is on a self destruct mission. When bad people are in government, everything crumbles!

I know say glo and 9mobile na dem dey owe dat debt.
anything owned by Nigerians get as e dey be.

DJ10rounds:
Remember to stay and eat healthy.order your soyabean powder today. It is good for both adults and infants.

I be seeing you advertise for soybeans,so I decided I'll go for one.

I wan stay healthy through out the long year




Meanwhile, don't mind the container,but the content.

We move

Since aboki become president, na New New problems everyday. Dem curse that guy lol

Bmaster:
I be seeing you advertise for soybeans,so I decided I'll go for one.

I wan stay healthy through out the long year




Meanwhile, don't mind the container,but the content.

We move

Thats a very good decision, stay healthy bro and remember to exercise also

70billion what