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TMCNet:  Tax Rebate for Telcos Should Pave Way for Improved Performance

[February 06, 2014]

Tax Rebate for Telcos Should Pave Way for Improved Performance

(AllAfrica Via Acquire Media NewsEdge) The recent signing of a memorandum of understanding between telecoms operators and the Lagos State Government on a tax rebate does show the commitment of the state to creating the enabling environment for them to operate. The gesture also throws up a challenge for the telcos to improve their services.


Last week, Lagos State finally put a seal to the earlier agreement it had with telecoms operators that are operating in the state. The agreement which was reached in a meeting brokered by the Minister of Communications Technology, Mrs. Omobola Johnson, in November 2013, had the state slashing telecoms taxes, including right of ways.

Lagos State Government, through its Commissioner of Science and Technology, Mr. Biyi Mabadeje, in that meeting verbally agreed to reduce taxes and levies in Lagos by over 40 per cent, with right of way fees brought down to N500 per linear metre from N5000, representing a reduction of over 90 per cent.

Although it was a verbal agreement reached between the state and the telecoms operators, both parties however, went ahead to concretise it by gazetting the outcome into a document, which was eventually signed by both parties last week in Lagos.

The Lagos Commissioner of Science and Technology signed for the state, while the Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, signed on behalf of the operators.

Now that the document has been signed, it becomes legal for telecoms operators to rollout telecoms services in the state without fear of intimidation from legal and illegal tax collectors that parade themselves as government agents. It will definitely lead to fast and uninterrupted telecoms infrastructure rollout in the state, which will evolve into better service quality for Lagos subscribers as well as the subscribers around Lagos suburbs.

Lagosians are also full of expectations that telecoms operators will no longer have excuses for poor service quality in the state, as the operators had in the past, blamed poor telecoms service offerings in the state on high telecoms levies.

Legal Implications Lagos telecoms lawyer, Barrister Jiti Ogunye who spoke with THISDAY on the legal implications of the agreement that was reached and signed, said: "The subject of the agreement is about tax administration in the state and the issues therein are within the taxation and regulation competence of the state government." The government, he added, entered into an agreement that it has competence to enter into and it therefore means that the terms of agreement is binding on the state and it must therefore honour the agreement to the letter.

Ogunye, who commended the state government for what he described as a bold step towards deepening telecommunications activities in the state, said the gesture would boost capacities of the operators to go the extra mile in offering better telecoms service to the people of Lagos and Nigeria, since the telecoms facilities that are domiciled in Lagos, also service people outside Lagos.

According to him: "Since the state government is reducing taxes and levies for telecoms operators in the state, it behoves the operators to come alive in delivering quality service to the people. Should they fail to do this, then it means that the efforts of the state government to deepen telecoms activities in the sate will be in vein.

Ogunye who called on other state governments to emulate the gesture Lagos in reducing taxes and levies on telecoms operators, also called on telecoms operators to consider further reduction in telecoms tariffs in the country. According to him, subscribers abroad talk for long hours and pay less. Nigerians should be able to talk for longer period of time on reduced tariffs, he added.

Minister's Worries Before the agreement was reached last November and the document eventually signed last week, the minister was highly worried about the slow pace of telecoms infrastructure rollout in most states, especially in Lagos State, occasioned by the long delay in the approval of right of way for infrastructure rollout, coupled with the high charges imposed by the states on telecoms operations.

The minister had lamented the high cost of right of way (RoW) imposed on telecommunications operators by most state governments, insisting that it is slowing the pace of fast broadband rollout across the country.

The minister who spoke on the issue during an interview session with journalists, said there was need for mutual understanding between state governments and telecommunications operators, to enable both parties strike a balance on affordable cost of RoW.

According to her, "Bringing down the cost of right of way will accelerate broadband rollout in the country." Several state governments, through their agencies, have come up with all manners of levies on RoW, insisting that telecoms operators must get approval of right of way to dig up road sides in their states for the purpose of laying fibre optic cables. The procedure of getting approval on RoW, involves formal application to the state governments, through the designated agencies, and the payment of certain amount of money which runs into several millions of naira, depending on the state's demands.

Apart from paying so much for right of way, most state governments have delayed approvals, which indirectly affected the speed of telecoms infrastructure rollout.

The Agreement The agreement on reduced charges is however hinged on the condition that operators must accept to use approved and qualified contractors who will ensure the integrity of the road after the fibre cables had been installed in the event that there is no fibre duct in the road.

Satisfied with the agreement, Fashola said: "All new roads in the state already have ducts in them. Telecoms operators should therefore submit annual infrastructure plans to the state to allow for proper planning on both sides." In spite of the attached strings, telecoms operators saw the reduction as a welcome development, and agreed to a 'dig once' policy whereby the first operator to dig the road for fibre installation would install a duct with spare capacity for other operators to use when they want to install fibre instead of digging up the roads multiple times.

Governor Fashola made it clear that it was not the wish of the state to prevent operators from rolling out. "We need you to roll out probably more than you need it, but we do not need it at the expense of our roads, or lives of the people. Infrastructure must be built to very high standards, for example, masts must be built with galvanised steel and not hollow pipes to prevent them from collapsing," Fashola said.

Speaking at the signing ceremony, Mabadeje said the signing of the memorandum of understanding marked a significant milestone in the quest of the state government to make the state a smart city and a digital enclave, adding that with the agreement, operators will now be free to rollout the requisite telecoms infrastructure that will redefine the experience of the subscribers.

He said the government demonstrated that it is not interested in turning telecoms infrastructure rollout as an avenue to grow internally generated revenue (IGR) but a means to achieving development for the good people of the state by substantially reducing the charges to be paid by the operators.

According to him, it is a win-win situation for both the operators and the government, as it will give the government better access to regulation and monitoring. He said the agreement was in line with the statutory responsibility of government to provide infrastructure that would accelerate development and well-being of the people of the state.

In his response, Adebayo expressed the gratitude of the operators to Governor Fashola for making the MoU a reality, adding that with the development, the state was on the glorious path to attaining the status of a smart and digital city.i He said by the agreement, the state government becomes part-owner of all the telecoms infrastructure in the state, stressing that the state government will now intervene in the area of providing security to telecoms equipment in the state.

Before the Agreement Before agreement was signed last week, the Nigerian Communications Commission (NCC), the telecoms industry regulatory body, had inaugurated a committee of Industry Working Group (IWG) to address the issue of multiple taxation in the telecoms sector across the states. Part of the committee's mandate was to visit all state governors and local government chairmen across the country, and liaise with them on how to expunge most of the levies and charges, which the NCC, said, was impeding the fast rollout of telecoms infrastructure in the country.

The committee, which comprised nominees from operators of Global System for Mobile Communications (GSM), the Code Division Multiple Access (CDMA), the Federal Inland Revenue Service (FIRS), the Media and the NCC, immediately swung into action, but could not make any meaningful headway. This is because the state governments were bent on collecting such levies, which they argued, would further help the states in creating an enabling business environment for the operators to thrive in.

When the committee efforts collapsed, the NCC team, led by its Executive Vice Chairman, Dr. Eugene Juwah, decided to personally visit some state governments to further discuss the issue, and the first state to visit was Lagos State.

The Juwah led NCC team, had in August last year, met with the Lagos Governor in the State House to discuss the issue of telecoms levies in the state. During the visit, Governor Babatunde Fashola insisted that telecoms operators operating in the state must pay all levies, since it costs government a lot to provide infrastructure for the state. Although Juwah tried all he could to persuade and convince the governor to have a change of heart, the governor remained unconvinced.

Having been unable to penetrate Lagos, the federal government, through the Ministry of Communications Technology, saw the situation as dicey for telecoms growth in the country, and decided to intervene, using the federal might. The Minister, Mrs. Omobola Johnson had to move from Abuja to Lagos to hold a meeting with the state governor.

Subscribers' Expectations Most subscribers that spoke with THISDAY expressed joy that the agreement had been signed. They called on telecoms operators to make better use of the opportunity to offer better service quality to Lagos subscribers.

Mr. Jude Okafor, a subscriber to MTN and Etisalat said: "I am happy that Lagos has finally signed the agreement. I therefore expect telecoms operators to improve on their service delivery, which has become so bad in recent times.

"We cannot make calls without experiencing incessant drops in calls, yet we are charged by the operators for incomplete calls. In most cases, we are charged even when the receiver and the caller cannot hear themselves during attempted conversation, he said. If the state could do this, then the operators must sit up and give us quality service," Okafor added.

Another subscriber, Mrs. Foluke Ayo, thanked the state government for shifting grounds from its earlier decision to continue to impose high telecoms levies on the operators. She wondered why in the first place, telecoms operators should be subjected to harsh operating environment, when their services are of national interest. She also called on operators to reciprocate the kind gesture of the state government to offer Lagos subscribers the best of telecoms services, which she said they deserved.

ALTON's Assurance Pleased with the agreement signing, Adebayo, told THISDAY that the decision was a right step in the right direction. He assured Nigerians that such reduction would definitely lead to improved service quality in the state and its environs, as operators would now be able to carry out fast network upgrades and expansion without any hindrance.

He assured subscribers in the state that between the next six to 12 months, service quality would improve significantly as the operators would rollout infrastructure in an expedited manner as the grant of right of way approval will now come quickly while the issues of multiple taxation, charges and levies have also been resolved in the agreement.

Adebayo said with the agreement, the state government has opened a floodgate of economic prosperity for its people, adding that other states in the country should borrow a leaf from the initiative of the state government.

Now that the agreement has been signed it will be appropriate if subscribers allow the operators to do their homework and come up with improved telecoms service within the next 12 months as assured by Adebayo.

Copyright This Day. Distributed by AllAfrica Global Media (allAfrica.com).

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