• Monday, May 20, 2024
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BusinessDay

Tax burden may slow N979bn investment in network expansion

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Huge financial burden imposed on telecommunications operators in Nigeria as a result of the raft of multiple taxes is a major disincentive to investment in network expansion, operators have warned. With operators in Nigeria’s highly competitive market expected to spend an estimated $6.2 billion (N979bn) on network expansion initiatives this year, the industry seems determined to meet the quality of service (QoS) mandates of the Nigerian Communications Commission (NCC). But if taxes levied on operators are not harmonised, and arbitrary right-of-way charges abolished, operators might hold back in terms of making necessary investment on network expansion in 2013.

“Multiple taxation is a huge threat to investment in network expansion”, Osondu Nwokoro, director, regulatory services, Airtel Nigeria, told BusinessDay. “No matter how much operators invest, if the enabling environment is not in place, the output will not be seen. Subscribers will feel operators are not making any effort to address the issue of poor quality of service”.

Operators are lining up big budgets and signing new contracts for network expansion with high optimism that the issue of multiple taxation will soon be resolved, he explained. United Arab Emirates’ (UAE) Etisalat announced plans to spend $500 million in network expansion this year.

MTN Nigeria obtained a medium-term loan facility of $3 billion from a consortium of 17 local and seven foreign banks. Second National Carrier, Globacom signed contracts with two Chinese companies, Hauwei ($750mn) and ZTE ($500mn) totaling $1.2 billion for network optimisation and upgrades. In the last 30 months, India’s Airtel Nigeria said it has invested $1.5 billion in network upgrades. Estimation are that there are little over 22, 000 Base Transceiver Stations (BTS) in Nigeria to meet the communications needs of Nigeria’s 114 million active mobile lines. To meet the QoS mandates of the telecoms regulator, industry analyst say mobile operators will need to deploy additional 50, 000 BTS sites

“The delays in Right-of-Way (RoW) and the inconsistency of approach and fees levied across the different states of the federation are currently delaying the roll out of infrastructure, which have direct consequences for quality of service”, Funmi Omagbenigun, general manager, corporate affairs, MTN Nigeria, told BusinessDay. “The same applies to approvals for site building. These are all issues that continue to pose challenges for the telecoms industry”, she added. For Aremu Olajide, senior executive at Globacom, said telecom is indeed critical to national development. “You need telecoms for security, health, and banking. A lot of other sectors depend on telecoms for survival. It facilitates cross-industry linkages, efficiency and productivity.

“Governments at all levels need to understand that telecommunications can do more to their economy than just been a source of internally generated revenue.” The telecoms regulator has also expressed concerns over the spate of multiple taxation and its adverse effects on the growth of the industry. “Tax is a disincentive for investment”, Tony Ojobo, director, public affairs, of the commission, told BusinessDay. “Once, the tax regime in any country is not friendly; capital will indeed take a flight. “Telecoms operators in the country want to expand their network. “They want to build out more base station to address the issue of quality of service. But mobile networks constrained by the huge taxes and levies from federal, local and state governments.

“So, what is the incentive for mobile operators to make such investments? How long will it take to recoup their investment? “That explains why operators are holding back in terms of making necessary investment in network deployment”, he explained. In the area of broadband infrastructure development, the enormous taxes imposed on networks by state governments have slowed down the deployment of fibre infrastructure. Some state government charge operators as much as N50, 000 per metre of fibre buried in the ground.

BusinessDay also found out that some state governments are shutting down base stations due to failure on the part of telecoms operators to pay annual levy of N1 million per base station.

Stories by BEN UZOR JR