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Telcos in N30bn interconnect debt

The estimated N30 billion interconnectivity indebtedness among players in the nation’s telecoms sector can be solved if a centralised approach of settlement is created, adopted and implemented where the Nigeria Interbank Settlements Systems Plc (NIBSS) is used as clearing point just as it is the case in the e-payment/ banking sector, a telecoms expert, Mr. Ike Nnamani, has said. Although, the Nigerian Communications Commission (NCC) disclosed that the indebtedness has reduced to less than N20 billion through series of interventions.

Nnamani who spoke with New Telegraph on the sideline of a Telecoms Executive and Regulator Forum (TERF) organised by the Association of Telecoms Companies of Nigeria (ATCON) in Lagos at the weekend, said despite the creation of interconnect clearinghouses by the Nigerian Communications Commission (NCC), the interconnectivity problem continues to be on the rise in the country. According to him, while the idea of creating the interconnect houses was a good concept, its implementation has been shoddy.

“Initially, there were three clearing houses, but they are now six, while only five of them are active.

There is also no settlement scheme for the industry; no service fee for clearinghouse services, as Operators decide; also, dominant operators undermined successful implementation and also this has resulted in five per cent traffic among operators passing through the clearing houses, while 95 per cent of interconnect traffic is still peer-to- peer,” he said.

He explained that all these have resulted in increased debt/dispute; network congestion and poor quality of service. Suggesting a new approach of settling the telecoms interconnectivity indebtedness that makes the Nigeria Interbank Settlements Systems Plc (NIBSS) a central clearing house, Nnamani said the problem of rising interconnectivity debt would be solved through such a scheme.

Explaining the benefits of such NIBSS-based approach to address the huge indebtedness in the country, Nnamani said: “A one-month improvement in the payment cycle will result in improved cash flow to operators amounting to over N1.8 billion with the processing of only 10 per cent of interconnect traffic using Niss.

“The immediate impact on the availability of this fund to operators cannot be over-emphasised given the difficult financial operating environment in Nigeria.

Upon full implementation and maturity of the NISS platform, it is expected that no less than 30 per cent of interconnect traffic will be settled through NISS. It will result in cash flow improvement of over N5.4 billion per month.”

He explained that in the suggested settlement scheme, the NISS will offer a high degree of accuracy on interconnect bills. “The call records from interconnect exchange operators will be used to process the invoices and confirm payments due to each operator. For operators that decide to present traffic that has been exchanged directly, the processing at NISS will be used as the invoice amount and payment will be done based on this.

“An improvement of over 10 per cent in billing accuracy is possible using the NISS. A five per cent improvement in billing accuracy will result in saving of over N11 billion in the first year of operations to the operators

“The NISS will also offer realtime visibility of the net cash positions and obligations of operators on a daily basis. This will enable the operators and their partner banks to plan ahead and ensure  there is cash availability to meet their obligation when it becomes due, unlike the current situation where invoices are sent several months down the road and the obligation becomes too large to handle from the operators angle, resulting in disputes and inability to pay,” he said.

Also, the reduction of payment cycle from several months or years to a few days after the billing cycle will result in immediate funds availability for network operation and expansion services to the operators.

“The cost of fund in Nigeria is currently about 22 per cent per annum. With one month improvement in the payment cycle, the operators will be saving over N462 million from funds that would otherwise have been borrowed. With two months improvement, these figures double for the benefit of the industry at large,” Nnamani said.

On the implementation of the suggested approach, Nnamani, a board member of the Nigeria Internet Registration Association (NIRA), said the NCC, the banks, telecoms operators as well as interconnect exchange operators would be involved.

According to him, NCC needs to issue directive to operators on the patronisation of the NISS. “Upon full implementation any operators that have interconnect dispute or who has failed to meet its interconnect obligations to the industry will not be attended to by NCC unless they are using the services of NISS.

“Also operators that borrow money from NISS and refuse to pay back after the maximum allowed timeframe will be blacklisted from NISS and other operators will be instructed by the NCC not to accept traffic from them until the outstanding amount is settled.”

For the banks, Nnamani explained that each operator will submit a bank or group of banks where their interconnect payment will be paid into and from which their interconnect obligation to other operators will be serviced.

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Telcos in N30bn interconnect debt


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