Let us review this current charge that MTN wants to start charging its customers as of Oct 21, 2019. This is the banking transaction access charge for customers using the Telco’s USSD (Unstructured Supplementary Service Data) access of 4 Naira per 20 seconds.
I am also aware that MTN is claiming that it is charging the fees on the directives of the banks or financial institutions that have asked it to charge the fee. Therefore, referring customers to their financial institutions. There may be some elements of truth in this but it all still rests with MTN.
A little explanation on the USSD and some of the ways we use it as I am aware of. You will observe that we don’t get charged for something like checking our prepaid phone balances. This is because we use the USSD access and the telco companies do not charge for it because it is a supplementary service. The other services include data and voice which the telcos would charge for.
As a former telco regulator, this looks like a sunk cost or one of those channels for communication that is inbuilt with the system and the costs already accounted for in determining the Telco’s tariffs or rates. This in all probability seems that it does not require any additional cost for this access channel to be available to the telcos companies customers. So it would appear that there may be no additional cost for the telco companies to recover because if any at all, most of it would have been recovered on the other rates/tariffs customers are charged for their primary services.
The regulator of the telco, Nigerian Communications Commission (NCC) should be in a better position to know the status of these costs. But my hunch is that it must either be a sunk cost or cost that has been duly recovered in their tariffs for primary services provided to their customers. This system is and has been part of the telco companies operations and they do not need to build additional capacity in order to accommodate the use they now find for USSD. It is going to be a test of regulatory compliance over allowable tariffs.
USSD is Unstructured Supplementary Service Data and it is a protocol used by GSM cellphones to communicate with their service provider’s computers via text messages according to an online source. We commonly use it to check mobile airtime and data balance enquiries, or to receive one-time passwords or PIN codes, among many applications. I am sure that most of us are familiar with this.
The new charges are for new applications. For instance if you want to check your bank account balance which you have registered with the service provider it will now use the USSD access protocol to obtain it and provide it to you without you going through signing in to your bank account online. This means that you do not use your data for this service. Now with the collaboration between the banks and service providers or telecom companies you can perform other banking transactions using this USSD protocol with ease. It is this type of use for banking applications that the 4 Naira per 20 seconds charge is what MTN planned to be charging for. However, I fail to see the additional costs that this impose on the Telco companies network. Moreover, it does not require any additional capacity to be built because of this service.
Currently, it appears that the CBN, the other regulator of telcos that licensed them to be engaged in Mobile Money has kicked against the additional charges that MTN planned to charge for this service.
Currently, it appears that the CBN, the other regulator of telcos that licensed them to be engaged in Mobile Money has kicked against the additional charges that MTN planned to charge for this service. Likewise, the Ministry of Communications seems to have requested to be fully briefed by NCC the telco regulator before such charges are imposed. It looks like the NCC and not CBN will have the final say on these charges.
If we look at the claim by MTN that the USSD access charges are imposed by the banks in light of CBN Governor’s statement it does not make sense in my opinion. Naturally the banks and the Telcos collaborated to offer this service and the charges were part of the agreement. However, any charges by Banks must be approved by the CBN, although the Telcos are the ones to collect it in this instance. I believe that the CBN and the banks have a hand in it. Though they may not have been responsible for fixing the exact amount but we need to know how much goes to the banks out of the planned 4 Naira per 20 seconds. Despite this, MTN seems to be the main culprit here, and on this issue it may try to coerce the other telco companies to go along because it is extra gravy in terms of additional revenue.
The telco companies need to demonstrate to the NCC that there are additional unrecovered costs involved in the use of this USSD channel that require them to charge consumers in order to recover the additional costs. These additional costs in most cases if any, will be the incremental costs and this should be very small indeed to make the current charge of 4 Naira per 20 seconds untenable in my opinion.
Finally, I believe that MTN may be trying whatever it can get away with in Nigeria in order to recoup the infamous penalty it was slapped with for billions of Naira. This is not far fetched if you consider the fact that the same MTN has also tried to deduct the same penalty as expenses in Nigeria in order to arrive at MTN’s taxable income. It is known worldwide that you cannot deduct a regulatory penalty for non-compliance on your tax returns. Despite this, MTN as part of its strategy to recoup the penalty has made such filings and I am sure that the Federal Inland Revenue Service (FIRS) will not allow such blatantly illegal deductions from its taxable revenue in order to reduce taxes paid in Nigeria. So, this charge for USSD access looks like another attempt to recoup the penalty in my opinion that should be rejected by the regulators. Be it CBN or NCC or will they be caught napping? I sure hope not.
In fact, this latest attempt by MTN has the potential to undermine the policies of the CBN on its cashless policy and the financial inclusion policy that we desperately need in order to bring more people into the banking system in Nigeria. No company should be allowed to thwart our government policies just because they feel the pain of paying a deserved penalty and therefore want to stick it to us wherever they can, such as what MTN appears to be doing. Our regulators must be alert to their possibilities and not allow the recovery of such penalties to be passed on to the consumers directly or indirectly. Such actions must be challenged and checked by the regulators to ensure fairness.
We must still bear in mind that the company needs to earn enough revenue to cover its cost of service and to also earn a fair return on its investments. This is still MTN’s right in our market but it should not be able to do anything or feel empowered because of size to do anything outside of the regulatory system that involves both the CBN and NCC. The regulatory agencies must be alert to their responsibilities to the Nigerian Ratepayers or Customers that may be saddled with such unexpected and unnecessary expenses if the regulators fail to perform their expected regulatory duties.