Tackling interconnect debts in the Nigerian telecommunications industry
By Akapo Rotimi
Background
On 8 January 2024, the Nigeria Communications Commission (NCC), the regulator for the telecommunications industry in Nigeria, published a pre-disconnection notice granting approval to MTN Nigeria Plc (MTN), a mobile telecommunications company in Nigeria, to commence the partial disconnection of Globacom Limited (Glo), another mobile telecommunications licensee from the MTN network as a result of long-standing interconnect debts owed to MTN by Glo. Originally, the partial disconnection was due to begin on 18 January 2024. However, taking into consideration the impact on subscribers and to give the disputing parties the opportunity to resolve the dispute and facilitate the reconciliation process, the NCC announced a 21-day suspension of the partial disconnection approval from 17 January 2024. On 9 February 2024, the NCC announced a withdrawal of the approval based on the amicable resolution of the dispute by the parties. This highlights an issue that has plagued the Nigerian telecoms industry for decades and forms the basis of the reluctance by some network operators to connect new entrants until guarantees are provided as to their ability to settle all relevant interconnect costs and charges.
Interconnection
The Nigerian Communications Act 2003 (NCA) defines interconnection as ‘the physical and logical linking and connection of communications system used or operated by the same or different licensees in order to convey messages to and from the respective systems for the provision of services.’ It refers to the technical and commercial arrangements under which telecommunication operators connect their equipment and networks to each other in order for their subscribers to access their different networks and services. Without interconnection arrangements, subscribers of a telecoms network would not be able to communicate with subscribers on another network. Interconnection is unarguably the single most important element which makes it possible to have a national telecommunications network.
The NCA imposes a legal obligation on licensees who provide network services or operate a network facility to interconnect with another licensees of the NCC upon an interconnection request. While parties are at liberty to negotiate the terms and conditions of the interconnection agreement in good faith, such agreements are however governed and regulated by the NCA: the Telecommunications Network Interconnection Regulations of 2007 (the ‘Interconnection Regulations 2007’); the Guidelines on the Technical Standards for the Interconnectivity of Networks (the ‘Interconnection Technical Guidelines’); and the Guidelines on Procedure for Granting Approval to Disconnect Telecommunications Operators 2012 (the ‘Disconnection Guidelines’) among other regulations. In addition, the Dispute Resolution Guideline of 2004 governs the arbitration of open or unresolved interconnection issues which arise under ‘chapter VI part 2’ of the NCA.
Interconnection disputes and resolution
Despite the comprehensive regulatory framework on interconnection, interconnection disputes such as the instance detailed above persist. The dispute may range from billing, traffic reconciliation, failure to provide adequate interconnection links, allegations of traffic gapping, failure to make timely payment of due and undisputed interconnection invoices. It is important to note that Nigeria’s telecommunications market is overwhelmingly pre-paid, and the remittance of interconnect charges should ideally be a first-line charge on revenue.
The Interconnection framework allows parties to approach the NCC for dispute resolution in several cases; interconnect indebtedness and breach of the interconnection agreement are some such cases. The decision, reasoning and terms and conditions of any resolved dispute must be made in writing and copies provided to the parties by the NCC as soon as practicable. The decision of the NCC is binding on the parties and can be enforced by a court in the same way as a court judgment. A party may however appeal the decision to the Federal High Court of Nigeria.
The NCC, acting pursuant to the provisions of the NCA, has established several mandatory dispute resolution mechanisms to facilitate the speedy resolution of interconnection disputes and thereby guarantee the seamless operations of the national network.
Dispute resolution pursuant to the 2007 Interconnection Regulations
It provides for the resolution of interconnection disputes between operators and empowers the NCC to intervene to resolve disagreements at all stages of the interconnection relationship. This covers the negotiation of interconnect relationships, the conclusion and/or review of interconnect agreements, the implementation of physical interconnection and, finally, the termination of interconnection agreements. At any of these stages, either party may request the NCC’s intervention in writing, providing details of the dispute. Unless the NCC determines that the matter in issue is frivolous or trivial or if the complainant withdraws the application, it shall intervene and render a decision on the case having accorded the parties fair hearing and taking into due consideration their respective interests.
The parties to the dispute are to be notified of the decision, which must also be published with a statement of the reasons on which the decision was based. The NCC is empowered to make the decision retroactive and effective from the date it was referred. A party not satisfied with the decision may appeal to the Federal High Court of Nigeria. The NCC’s decision shall however remain binding until the final determination of the appeal. A copy of the Notice of Appeal shall be lodged with the NCC within 30 days from the date of the decision.
Arbitration of interconnection disputes under the 2004 Dispute Resolution Guidelines
The Dispute Resolution Guidelines govern the arbitration of open or unresolved interconnection issues which arise under Chapter VI Part 2 of the NCA. The arbitration process is commenced by the filing of a petition for arbitration by any party to the negotiation process (the ‘Petitioning Party’) where the negotiating process fails to reach an agreement within a period of 90 days. The arbitration process is deemed to have commenced on the date the petition is filed with the NCC. The Petitioning Party shall, at the same time as it files the petition with the NCC, serve copies on all parties to the negotiating process and obtain proof of service.
Disconnection
Where, despite best efforts, an operator is unable to resolve interconnect issues and wishes to discontinue interconnection, it may do so in accordance with the procedure detailed in the Disconnection Guidelines. The Disconnection Guidelines provide a ‘predetermined framework to engender transparency, certainty and fairness’ in the exercise of the NCC’s discretion.
Since disconnection would result in cutting off customers of the defaulting network from customers of the other network (s), the NCC has in the past been understandably reluctant to grant disconnection approval requests and the Disconnection Guidelines reflect this reluctance. The process is therefore not as swift as operators would prefer.
A party to an interconnection agreement is prohibited from disconnecting the other party without the prior written approval of the NCC. This is notwithstanding that the other party is in breach of the agreement. The Disconnection Guidelines, however, set out instances when a disconnection application may be submitted. They include:
1. where a party has persistently failed and or refused to settle interconnection indebtedness;
2. where an interconnection agreement has been terminated in accordance with its terms;
3. where there is a fundamental breach of agreement;
4. where the respondent is engaged in acts contrary to the terms of its license as may be determined by the NCC; or
5. for any other reasons under the NCA or any subsidiary legislation made by the NCC.
While considering the request to disconnect on the grounds of indebtedness, the NCC is required to take into account the exchange of Call Detail Records (CDRs) by the disputing parties for the purposes of reconciliation; the duration of indebtedness should not be less than 60 days before an application for approval to disconnect is made, although this may be reduced to 45 days where the respondent has a proven track record of not meeting its interconnect obligations. In addition, the NCC is to be further guided by the previous payment record of the indebted party to the applicant and the antecedents of the respondent vis-à-vis payment of interconnection indebtedness to its interconnecting parties.
The Guidelines further require the operator to prove that it has exhausted all other applicable remedial options before the grant of the approval for disconnection.
In addition, the Interconnection Regulations provide that the termination of interconnection agreements shall be strictly in line with the terms and conditions of the interconnection agreement between the parties. The defaulting operator must be given six months written notice of the intention to terminate specifying the grounds of termination; in the case of breach, three months written notice is given to remedy the breach. The operator requesting for disconnection must be notified by the NCC of its decision no more than 35 days after receipt of the request.
Upon exhaustion of the detailed procedures in the Disconnection Guidelines, the NCC may issue an order permitting the aggrieved party to carry out a partial or full disconnection. It may also stipulate other measures such as the execution of an undertaking by the defaulting party pursuant to paragraph seven of the Disconnection Guidelines.
Conclusion
Indeed, a troubling feature of interconnection relationships in Nigeria is the huge debt profile of many operators. It appears that some operators have taken undue advantage of the fact that their creditors cannot unilaterally invoke the ultimate commercial remedy of discontinuing the relationship (or withholding supply) as would be the case in other commercial relationships. This is because interconnection agreements are strictly regulated agreements under the NCA which prohibits disconnection without the written permission of the NCC.
It should be noted that permission to disconnect is very rarely granted since it could ultimately cause harm to (mostly prepaid) consumers who would then be unable to terminate calls to customers of the disconnected network. Nonetheless, the NCC has granted relief in a small number of cases: in 2005 it permitted some mobile operators to disconnect the then Mobitel Ltd and Reltel Wireless. The NCC also permitted the disconnection of a few interconnect exchanges/clearinghouses and a mobile network service operator due to indebtedness in October 2019.
The disconnection process has unwittingly turned the NCC into a ‘debt collection’ agency for operators – and this is not something to be encouraged. As noted earlier, interconnection charges are ideally meant to be first-line charges on revenues; for a market that is overwhelmingly pre-paid, there should be no difficulty making interconnect payments, and an operator’s inability to pay may well be a sign that it is in distress.
The telecoms industry is a hugely capital-intensive industry, and operators continue to approach financial institutions to finance their procurement of equipment and software to keep up with their ever-evolving technology requirements. If interconnect debts are permitted to persist it might start to impact the ability of operators to meet their financing obligations and affect lenders’ attitude to the industry.
In managing interconnect indebtedness in the Nigerian telecoms industry, the NCC has the difficult task of maintaining a balance between the sustainability of the industry and ensuring that the indebtedness does not adversely affect operators, protection of the national network and continuing access to network services by subscribers, who, as stated earlier are mostly prepaid subscribers. In a capital-intensive industry, like telecoms, cash flow is key to investments in infrastructure and ensuring high quality of service and this is consistently threatened by interconnect debts. It has therefore become necessary for the law and regulations around tackling interconnect debt to be reviewed and tightened.
Akapo Rotimi, Advocaat Law Practice, writes from Lagos. The article was first published on Ibanet.org on April 12, 2024.
