New tariff regime may force PTOs to merge


September 11, 2006 / Punch


A new tariff regime expected to follow the new interconnect rates announced by the Nigerian Communications Commission for the telecoms sector billed to commence from September 22, 2006 may force small telecoms firms to explore merger options, industry operators have said.

The operators informed our correspondent on Sunday that since the announcement of the change in interconnect rates by the NCC operators had been toying with idea of mergers and acquisition.

According to the Chairman of the Association of Licensed Telecoms Operators of Nigeria, Chief Adebayo Akande, merger among private telecoms operators may become a very attractive option for small operators as a result of the expected increase in tariff by fixed wireless firms for inter-network calls and an expected response by GSM firms.

From September 22, the new interconnect rates for fixed call termination using near-end-handover shall be N10.80, from N5.52. Interconnect rates for fixed call termination using far-end-handover shall be N9.10. Mobile call termination shall be N11.40 against N11.52.

Operators are predicting that once these rates become operational, PTOs might charge subscribers as high as N12 per minute for inter-network call as against the current N6.50 per minute.

But the fear among the PTOs is that once they raise their rates, GSM operators may then reduce the cost of intra-network calls to about the same figures as theirs, thereby removing the current attraction for subscribers to use the lines offered by the PTOs.

According to a source, with the GSM operators offering rates as low as N4.30 per minute on the intra-network calls during off peak periods, this could be a prelude to a plan to eventually introduce a tariff structure that might put the PTOs out of the market in the near future.

Once GSM operators reduce the cost of calls within their networks, what advantage is there in having two lines or carrying a fixed wireless phone? asked an operator, who spoke anonymously.

This possible effect is one the reasons why PTOs are considering seeking for a court declaration of operators which fall into the Dominant Operator category.

A dominant operator is one which controls a substantial market share in the sector.

In telecoms business, this position confers some responsibilities on such an operator especially the provision of facilities to protect smaller operators including paying the small operators, higher interconnect rates.

With this situation not yet operational in Nigeria, PTOs are working to see that the declaration is made to ensure survival.

In Nigeria, NCC says in its Guidelines for Competition Practice 2006 that any licensee whose gross revenues in a specific communications market exceed 40 per cent of total gross revenues of all licensees in that market is in a dominant position in that market.

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