Telcos threaten to sue banks over N80bn USSD debt

Telecommunications companies under the aegis of the Association for Telecommunication Companies in Nigeria (ATCON) have said they will consider a lawsuit as part of efforts to recover an accumulated debt of over N80 billion owed to them by banks.

ATCON says it is aligning with its sister association, the Association of Licensed Telecommunication Operators in Nigeria (ALTON), which last week had threatened to withdraw the Unstructured Supplementary Service Data (USSD) that they offer to banks because of the debt, which has grown from N42 billion to N80 billion.

“When the matter first came to the fore about a year and a half ago, the debt was below N40 billion,” Gbenga Adebayo, president of ALTON, said. “But because they refused to comply and pay as and when due, the debt continued to rise. Today, it is about N80 billion.”

According to the operators, taking the legal path has become necessary because the Central Bank of Nigeria (CBN), the financial services regulator, has failed to ensure that banks complied with the payment.

It started on 20 October 2019, when MTN Nigeria sent a text message to its subscribers informing them of plans to charge N4 for every 20 seconds of USSD transactions. A few partner banks picked up the message and pushed it to customers.

Almost immediately, bank customers expressed their disappointment at the charge, which many classified as ‘insensitive’ and an extra burden in addition to the many bank charges they were subjected to.

Godwin Emefiele, governor of CBN, who was attending a conference in far-away Washington at the time was forced to issue a statement condemning MTN’s plan, which would not be allowed to happen.

Emefiele went on to disclose that it had in a meeting – sometime in May 2019 – with some telecommunication companies and big banks “agreed” that the use of USSD was a “sunk cost”. A sunk cost is an additional cost on the infrastructure of the telecom company.

“But the telecom companies disagreed with us,” Emefiele had said. “They said it was an additional investment in infrastructure and for that reason, they needed to impose it.”

The CBN governor said the big banks and telcos were later asked to come up with an option since imposing charges on users was not an option for the bank regulator. The CBN has the objective of making USSD services as seamless and affordable as possible because of financial inclusion.

Ali Isa Pantami who was then barely four months into his tenure as minister of communication and digital economy quickly issued a statement ordering the suspension of the planned fee hike, pending an agreement with banks on the way forward.

The Nigerian Communications Commission (NCC) later issued a revised guideline, which put the new USSD fee to N6.98 effective from August 2020. Following that review, the NCC said the telcos were being owed N17 billion by banks.

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In 2021, the telcos threatened to switch off support for USSD transactions if they were not paid the debt, which had grown to N42 billion. As a result of the threat, the banks agreed to thenceforth remit N6.98 per USSD transaction to telcos, a development that averted the switching off of USSD.

Ajibola Olude, chief operating officer of ATCON, said while some banks have complied with the agreement and remitted the money to the telcos, there were banks that have refused to remit the money.

“It seems that the money that was collected is being declared as profits by the banks. That’s what caused the money not to be remitted and customers are paying this money,” Olude said.

Experts say cutting USSD services would not only affect customers but also constitute a setback for the digital inclusion drive. In 2021, the number of digitally excluded Nigerians dropped from 40 million to 15 million people as communities in the country without digital access also dropped from 217 to 112. The NCC has set a target of 80 percent digital inclusion by 2025.

As a payment channel, USSD is considered critical because users can conduct transactions without an internet connection, hence, ideal for persons in regions where broadband is either non-existent or very poor. It is also driven by adaptability. USSD can be used for wireless application protocol browsing, prepaid callback service, mobile money services, location-based content services, menu-based information services, or even as part of configuring the phone on the network.

Olude said telcos had invested about N250 billion in building the infrastructure, hence the USSD fee they are charging is a way to recoup some of the expenses and not a push to make a profit.