New Telegraph

ITR: Telcos to receive revenue in USD

…as NCC pegs rate at $0.045

 

From January 1, 2022, mobile network operators in Nigeria are to receive revenue from all international calls in U.S. dollar, New Telegraph has learnt. This forms part of the major changes in the International Termination Rate (ITR) review carried out by the Nigerian Communications Commission (NCC). The Commission also fixed $0.045 as the floor price for all ITR.

 

This means that no operator can charge lower than that amount for international call termination. ITR is the rate paid to local operators by international operators to terminate calls in Nigeria as contrasted with Mobile Termination Rate (MTR), which is the rate local operators pay to another local operator to terminate calls within the country.

 

The new ITR replaces the existing one which was fixed at N24.40k and, which is being received in naira by the operators.

 

According to NCC, the International Termination Rate being denominated in naira had multiple negative impacts on Operators, which was further exacerbated by a series of devaluation of naira, which ultimately left Nigeria from being a net receiver of international minutes to a net payer.

A study on the ITR regime in Nigeria’s telecom sector, which was conducted in 2018 by PricewaterhouseCoopers (PwC), had established that the Nigerian operators were being underpaid, thus recommending that NCC come up to adopt a cost-based approach, among other options.

 

To redeem the situation, the Commission had engaged a consultant, Messrs’ Payday Advance and Support Services Limited, to undertake a cost-based study of Mobile (Voice) International Termination Rates (ITR) that is most suitable for the Nigerian Telecommunications Industry. Recommendations of the consultant were also presented to the MNOs at a forum, where they were requested to also make their inputs.

 

In the new ITR document, NCC states: “The International Termination Rate for voice services paid by overseas carriers for terminating international calls on local networks in Nigeria shall be 0.045 United States Dollars (USD- US$) b) The 0.045 US$ is the floor price for ITR services.

 

“The ITR will be paid in US$ and so operators will receive an increasing rate in naira terms should devaluation continue. ITR rate (US$) only pertains to the cost of bringing traffic into Nigeria. Operators will continue to pay the regulated MTR.

 

The ITR of 0.045 US$ is the floor which is the minimum that can be charged. Operators will be free to negotiate a rate above the floor rate and is dependent on commercial negotiations between the operators and international carriers/partners.”

 

The Commission added that the Mobile Termination Rates of N3.90 (for Generic 2G/3G/4G Operators) and N4.70 (For New Entrant (LTE) operators determined in 2018 would continue to apply for local call terminations until a new Determination is made by the regulator.

 

“This determination shall take effect from the first day of January 2022 and remains valid and  binding on Licensees until further reviewed by the Commission,” it added. NCC, in the regulatory document, warned that “no licensee shall charge and / or receive effective rate per minute below the ITR floor rate determined.

 

For the avoidance of doubt, payment discounts, volume discounts, and any other concession that has the effect of bringing the effective ITR lower than the rate determined above shall be deemed a contravention of this Determination and will attract sanctions in line with the Nigerian Communications (Enforcement Process, etc.) Regulations, 2019.”

 

It noted that while the ITR floor is the minimum that can be charged, the operators will be free to negotiate a rate above the floor, adding that this would be left to commercial negotiations between the operators and international carriers/partners.

 

Speaking at a forum on the ITR, the Executive Vice Chairman of the NCC, Prof. Umar Danbatta had noted that regulating the ITR is imperative for developing countries, such as Nigeria, with volatile currencies to prevent or mitigate the imbalance of payments with international operators.

 

He also said the Commission was faced with the challenge of arriving at a rate that would balance the competing objectives of economic efficiency while, at the same time, allowing operators the latitude to generate reasonable revenues.

 

He added that “where ITR is not regulated, it tends to converge to the MTR and for a market like Nigeria with major supply-side challenges, the socio-economic implications, and attendant backlash can only be imagined.”

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