Operators Fear New Telecom Tax May Endanger Services

[Richard Akindele]

Subscribers may have to pay more for telecom services. The gains in the telecom industry since the coming of the Obasanjo administration may be reversed hurtfully if the coalition against the efforts of Lagos State Government to collect money from all masts in the state does not yield needed results.

The gas, power sector and some multinationals are not spared in the new action of the state to impose charges on masts, cables and pipeline among others.

The operators have 30 days from June 7, to submit details of their masts, towers, pipelines, underground cables in Lagos, especially along Lekki Epe Expressway for the purpose of evaluation to determine which each of them will pay.

The tax may peg at N3m per mast.

To properly effect the Lagos State Government's new revenue agenda, a special agency Infrastructure Maintenance Regulatory Agency, IMRA, has been set up. The Agency has been in communications with various organization in Lagos acquainting them with the plans of government while seeking th eir cooperation.

Concerned operatives in the various industries have raised alarm that this development in the State may just be a dress rehearsal for the bizarre drama that could play out in the other states of the federation should Lagos succeed. They are worried that price escalation arising from multiple taxation will be passed on to the service providers.

Expressing this worry in a communication with the Association of Telecommunications Companies of Nigeria, ATCON, headed by Dr Emmanuel Ekuwem, MTN which has received several letters from IMRA pointed out that: "Specifically, the Lagos State Infrastructure Maintenance and Regulatory Agency, is now seeking to use MTN as a primary target to harness the rest of the industry and has required that we provide details of our infrastructure in Lagos State with a view to demanding its unacceptable fees from each operator in Lagos.

In a similar letter to the regulator, the Nigerian Communications Commission, NCC, MTN also explained that "we are particularly concerned that not withstanding the fact that Post, telegraphs and telephones are on item 46 of the Exclusive Legislative List of the Constitution of the Federal Republic of Nigeria and thus outside the legislative competence of any of the State Government, IMRA now seeks to enforce the Lagos Infrastructure Maintenance and Regulatory Law under which threats are being made. We firmly believe that the implementation of this law will amount to unlawful incursion into the primary jurisdiction of the NCC in Lagos State allegedly to regulate the operations of telecommunications operators. It is a primary example of multiple taxation and regulation contrary to the policy thrust of NEEDS."

Raising a cry against what they call a legislative overkill are the Association of Telecommunications Companies of Nigeria, ATCON, Internet Service Providers, ISPAN, Cybercafe Operators, the banks, and the National Petroleum Corporation, NNPC among others. They fear that the action of the state is a dangerous signal to investors and consumers as it was capable of creating additional operating costs to operators which in turn could be passed on to consumers of such services who will now bear an additional burden.

This could be the reason the operators are heading for the law courts saying that only the laws of the land could explain the real situation and perhaps redeem them from a dire situation that could frustrate all efforts of the Federal government and other operatives from delivery essential services to the Nigerian people.

Apart from the service providers, the NCC and the Attorney General of the Federation may join in all this important suit to interpret a major impasse between operator and the state and the laws of the Federation. Speaking to Vanguard sometime ago, the Executive Chairman of the NCC, Engr Ernest Ndukwe had said that the Commission would embark on a road show to educate organizations and agencies on modern telecom practices and the relationship that the state should have with the operators. He was reacting to the action of the Federal Airport Authority of Nigeria, FAAN and the planned action of the Lagos State government.

Specifically, Engr Ndukwe noted that it is the governments that should attract investors like telecom companies to their states instead of imposing extraneous costs that will serve as disincentives that could drive them away.

That now doesn't appear to have worked, looking at the unfolding burden before the regulator and the operators. vThis may be the first real battle for the new ATCON president, Dr. Ekuwen. Reacting to the development, Ekuwen exploded: "The law is punitive. This may lead to the hiking of tariffs since they may be made to cough out a yearly fee of N3million per mast site and this adds up to operational costs. Where does the money come from?" he asked rhetorically.

Pointing fingers at a similar development, Ekuwen explained that a similar scenario is playing out in Abuja where the Federal Capital Territory Ministry has imposed as fee of N3m per tower belonging to operators in that territory. Each of the operators may spend as much as N1.2bn on this alone and the ripple effects will be passed to the consumers," he expressed his worries.

Looking at the way ahead, a Vmobile source told Vanguard: "If it succeeds, then other states will follow suit and this may lead to a chaotic situation for users of these services. Operators are already plagued by extra costs especially for power supply for their operational bases, including base stations, and the security of such sites.

"While we have been able to bear these costs all alone and still remain in business, more costs especially the ones being introduced by the Lagos State government may be too harsh for us to bear."

This seems to be the defining moment for the telecom industry. Some experts are of the opinion that allied services in the industry are about to face a serious crunch. Affected may be Very Small Aperture Terminals, VSAT, installations, cybercafés and banks. While in most underdeveloped countries, states see telecom services as a goldmine to feast on, wiser countries allow tax liberalization and permit even free entry of equipment into their countries, knowing that employees of those companies will pay tax to the state.

In spite of a great regulatory environment, Nigeria belongs to the group with very harsh tax regime. Any additions may not only break the back of operators, such additions may impair some services and put some preventable burden on Nigerians who were beginning to exit that dream era where telephone belonged only to the rich.

Vanguard.