MainOne said its inclusion as one of the six telecommunication companies expected to comply with the new Accounting Separation Framework (ASF) by the Nigerian Communications Commission (NCC) needs more clarification.
The company was in 2019 listed alongside MTN, Globacom, Airtel, EMTS (9Mobile), and IHS as the “top” six telecommunication companies that will be submitting their annual financial statements as part of the ASF. The companies which were selected because they have an annual turnover of N5 billion and above are supposed to publish the statements before the end of 2020. NCC said it has already begun implementation of the ASF in the Nigerian telecoms industry effective from July 2020.
A primary objective of the ASF is to address the problem of dominance in the telecom industry which is usually measured by the criticality of the operator on competition and market pricing determination and revenue base. By singling out the six telcos, the NCC is invariably suggesting that the six players are the biggest in the market. However, MainOne told BusinessDay this is unlikely to be the case.
First, compared with the other players, MainOne is disproportionately insignificant in the market segments where it operates and its revenue base is small in comparison. The company has less than 3,000 subscribers and a revenue of no more than 5 percent compared to the smallest of the other operators identified, which play across all market segments with subscriber bases oscillating between 10 – 75 million and aggregate revenues of about N250 billion and N1.2 trillion.
“It is therefore worrisome that our regulator would single us out amongst all the fringe players within the industry,” the company said. “Indeed, we own a submarine cable, but we currently have six cables landing in Nigeria and more on the way. We have been hurt by the glut of submarine cables and the competitive landscape that makes it prohibitive for us to distribute our capacity around the country and our CEO has been a vocal advocate of broadband, but we cannot be viewed as dominant by any measure.”
The Accounting Separation Framework (ASF) is a comprehensive set of policies and guidelines for generating detailed Regulatory Financial Statements employed across different businesses, products, and licenses of Operators.
Generally, and as with other jurisdictions where AS framework has been applied, the twin policy drivers behind ASF is the promotion of fair competition and prevention of arbitrary and discriminatory practices of dominant operators that substantially lessen competition such as cross-subsidization and predatory pricing. In essence, ASF is preferred to regulatory imposed tariff controls and applied as a remedy in markets where certain operators are considered as dominant or having a significant market presence in order to ensure there is fair competition and ultimately that consumers get the benefit of competitive price regimes.
The company also noted the contraction in the implementation guidelines because rather than adopt the guidelines in Section 5 lists addressing licence categories, the regulator surprisingly adopted a phased approach and compulsorily mandated 6 operators without providing a rational basis for including MainOne and excluding others.
“While MainOne is subject and complies with a certain level of accounting separation and reporting now as part of or licensing guidelines, implementing this AS framework would be disproportionately time consuming and very expensive given our size relative to the other operators included on the list. This additional level of compliance for a small operator further inhibits our ability to compete in a market where we have not been protected and where we see further price erosion given the supply glut on the submarine cable segment with potential entry by OTTs who are building cables to Nigeria without corresponding foreign direct investment in our economy,” the company said.
