NCC slashes call termination rate by 20%

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Telecom consumers in Nigeria may soon enjoy lower call tariffs across the networks of MTN, Globacom, Airtel and Etisalat, New Telegraph has learnt. This came as the industry regulator, Nigerian Communications Commission (NCC) slashed call termination rates between the operators by 20 per cent.
The new Mobile Termination Rate (MTR) takes effect from July 1, 2018, according to a document posted on the regulator’s website.

Under the new rate regime, mobile operators are to charge N3.90 per minute for calls within the country terminating on their networks. This represents a 20 per cent drop compared with the 2013 rate currently in operation, which was fixed at N4.90 by the regulator.

The new MTR applies the asymmetric interconnect rate method whereby new mobile operators enjoy higher termination rates than the older operators as a result of the study that show that such operators expend higher cost of termination in their networks. Under the new rate, new entrant operators are to charge N4.90 for calls terminating on their network, compared with N6.40 in 2013.

Interconnect rate is the price that telecommunications operators pay each other for calls terminating on their networks. If a call originates from network A, for instance, and ends on network B, what A pays B for terminating the call is the interconnect rate.

The rate is considered crucial in the telecommunications industry as it is one of the factors that determine what an operator charges the subscriber and no operator can charge less than the interconnect rate, no matter how cost-efficient the operator is.

According to PricewaterhouseCoopers (PwC), the regulator’s consultant, which conducted a study on cost-based interconnect rates both in the country and across the world, since NCC moved towards cost-based interconnection rates in 2009 and its review in 2013, the market has seen strong growth, prices have fallen and the asymmetry between on-net and off-net calls has decreased. PwC added that the Nigeria telecoms market has been growing since 2013 with a cumulative average growth rate (CAGR) of around 10 per cent in subscriber terms.

Prior to the review of the 2013 rate, the Commission, in its usual consultative approach, held series of forums where it sought stakeholders’ inputs to determine the new rate. During one of the fora, the operators had expressed concerns that increasing the MTR would lead to an increase in the retail tariffs in the short to medium term and negatively impact on the growth of the industry.

Thus, the operators advised the regulator to either keep the MTR at the 2013 or decrease it so as to avoid exacerbating the cost differential already in place between large and small operators.

Speaking on the new rate, Executive Vice Chairman of NCC, Prof. Umar Danbatta, said the Commission carefully considered the information provided by stakeholders and has taken a view on parameters and regulatory measures in the light of that and other information – such as international experience, cost model results, the state of competition in the sector and the Nigeria macroeconomic environment.

“The process of arriving at a new MTR has been conducted in a climate of openness and with a view to providing maximum transparency to all parties without compromising the confidentiality of commercially sensitive information.

The Commission is confident that the results will make a significant contribution to the development of a thriving telecoms sector in Nigeria and hence benefit both consumers and the industry,” he said.

To arrive at the new rates, the EVC said the Commission also took cognizance of the concerns expressed by the operators on the impact that an increase in MTR may have on retail tariffs, especially in consideration of the current economic situation in the country and the pivotal role that access to telecommunications services plays in overall national socio-economic development.

“These concerns as well as the steps being taken by the Commission to reduce operating costs in the industry have been factored into the determination. Other factors pertaining to the possible impact of an increase in MTR have been addressed. Nonetheless, the Commission will continue to review the situation and will implement the necessary regulatory safeguards from time to time,” the EVC said.

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