Call, SMS Charges May Increase As NCC Reviews Interconnection Tariffs

The Nigerian Communications Commission (NCC) has commenced a review of interconnection rates for telecommunications operators, raising the possibility of higher call and SMS charges for millions of subscribers across the country.

The exercise comes eight years after the last comprehensive review of the Mobile Termination Rate, a key component of the telecommunications industry that determines how much one network pays another when a subscriber places a call that terminates on a different network.

The current interconnection rate stands between ₦3.90 and ₦4.70 per minute.

Industry stakeholders say any upward review of the rates could eventually translate into higher costs for consumers, although the NCC insists the process is aimed at ensuring tariffs remain fair, reasonable and reflective of prevailing market realities.

The review was announced at a stakeholders’ consultative forum on the determination of Mobile Termination Rates held in Lagos on Tuesday.

Speaking at the forum, a partner at KPMG, Wole Adenekan, said the review had become necessary due to major economic and technological changes that have transformed the telecommunications landscape since the last rate determination in 2018.

Naija News reports that KPMG is one of the world’s leading professional services networks and a “Big Four” accounting firm, offering audit, tax, and advisory services.

According to Adenekan, significant naira depreciation, rising inflation, increasing energy costs and the high cost of telecommunications equipment have fundamentally altered operators’ cost structures.

He noted that rates that are set too low could discourage investment in network infrastructure and weaken the sustainability of the industry.

“Rates that are too low would fail to signal the true cost of providing termination services and can deter infrastructure investment,” Adenekan said.

He added that cost-based rates encourage efficient investment and contribute positively to economic growth.

“A mis-set MTR can enable dominant operators to foreclose smaller competitors through high termination barriers. A cost-reflective rate supports a level competitive playing field,” he stated.

End-users May Bear The Burden

While advocating a balanced approach, Adenekan warned that excessively high termination charges could ultimately be passed on to consumers through increased retail pricing.

He explained that the telecommunications sector has witnessed dramatic changes over the past eight years, making the existing framework increasingly outdated.

According to him, the commercial rollout of 5G technology, growing adoption of Artificial Intelligence and Internet of Things solutions, as well as changing patterns of network usage, have altered the economics of telecommunications service delivery.

“5G rollout and AI/IoT adoption are reshaping network usage patterns, cost structures and service delivery models, making legacy interconnection frameworks less representative of current realities,” he said.

He further observed that competition from Over-the-Top service providers, which offer voice and messaging services over the internet, has reduced dependence on traditional telecom interconnection services and weakened legacy wholesale revenue streams.

Adenekan noted that while the NCC reviewed International Termination Rates in 2022, the domestic Mobile Termination Rate framework established in 2018 has remained unchanged.

NCC Promises Consumer Protection

In her welcome address, the Head of Competition and Tariff Unit, Policy Department of the NCC, Omotayo Mohammed, described the review as a major regulatory intervention aimed at aligning the Commission’s framework with rapid developments in the telecommunications industry.

She said the review would not only assess interconnection rates but also examine existing retail price controls and asymmetry arrangements to ensure consumer interests remain protected.

Mohammed explained that the telecommunications market has experienced significant transformation since the current framework was introduced.

“Our existing national interconnection rate regime was set out in the Commission’s Interconnection Rate Determination of June 1, 2018, and was subsequently adjusted through an amendment to the Mobile International Termination Rate in September 2022,” she said.

She noted that the Commission traditionally conducts periodic reviews to keep its regulatory frameworks relevant and responsive to changing market conditions.

“The Commission has historically maintained a regular cycle of periodic reviews to keep its frameworks relevant.

“However, the years since our 2018 determination have been marked by unprecedented and rapid change. The Nigerian telecommunications market has undergone considerable transformation, reflected in swift expansion, shifting market dynamics, the commercial deployment of advanced technologies such as 5G, and the emergence of new ecosystem players including Mobile Virtual Network Operators,” Mohammed said.

Naira Depreciation, Inflation Impact Operators

Mohammed also pointed to the impact of economic realities on telecommunications operators, saying changes in exchange rates and inflation have significantly increased the cost of providing communications services across the country.

“At the same time, both global and domestic macroeconomic conditions have shifted considerably. Changes in exchange rate regimes, and inflation rates have substantially altered the cost structures associated with providing communications services in Nigeria,” she stated.

She stressed that regulatory frameworks must evolve alongside the market to remain effective.

“For regulation to remain effective in a fast-moving market, our frameworks must evolve in step with it.

“Pursuant to Section 108 of the Nigerian Communications Act 2003, the Commission is therefore acting on its mandate to ensure that telecommunications tariffs and charges remain reasonable, cost-reflective, and non-discriminatory,” Mohammed added.