The Nigerian Communications Commission has commenced the review of interconnection rates for call and SMS services among telecom operators in the country, eight years after the current regime was last reviewed.
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Interconnection rate, also known as Mobile Termination Rate, is the wholesale charge one telecom network pays another when its subscriber makes a call that terminates on a different network.
The rate serves as the underlying pricing mechanism that allows subscribers on one network to connect with subscribers on another network.
The current interconnection rate is between ₦3.90 and ₦4.70 per minute.
The review could lead to changes in the cost structure for telecom operators and may affect what subscribers pay for call and SMS services if the rates are eventually adjusted upward.
Speaking at a stakeholders’ consultative forum on the determination of Mobile Termination Rate in Lagos on Tuesday, a partner at KPMG, Wole Adenekan, said rates that are set too low may fail to reflect the true cost of providing termination services and could discourage investment in telecom infrastructure.
Adenekan said cost-based rates reward efficient investment and can positively contribute to the country’s Gross Domestic Product.
According to him, a wrongly fixed MTR could also enable dominant operators to frustrate smaller competitors through high termination barriers.
“A mis-set MTR can enable dominant operators to foreclose smaller competitors through high termination barriers. A cost-reflective rate supports a level competitive playing field,” he said.
He also warned that inflated termination charges are ultimately passed on to end-users through higher retail prices.
Adenekan noted that major economic changes since 2018, including naira devaluation, inflation, rising energy costs and increased equipment expenses, had significantly altered the cost structures of telecom operators.
He added that the rollout of 5G, growing adoption of artificial intelligence, Internet of Things services and changing network usage patterns had made older interconnection frameworks less reflective of current realities.
The KPMG official further said competition from Over-the-Top service providers, which now capture significant voice and messaging traffic, had reduced reliance on traditional interconnection and weakened legacy wholesale revenue streams.
He noted that the 2018 MTR determination had not been updated for local rates, adding that the 2022 amendment only addressed international termination rates.
In her welcome address, the Head of Competition and Tariff Unit, Policy Department at the NCC, Omotayo Mohammed, said the review was a significant economic intervention aimed at aligning the commission’s regulatory framework with developments in the telecom sector.
Mohammed said the exercise would examine existing retail price controls and asymmetry arrangements to protect consumer welfare and ensure fair competition.
According to her, the existing national interconnection rate regime was established by the NCC’s Interconnection Rate Determination of June 1, 2018, and later adjusted only in respect of Mobile International Termination Rate in September 2022.
She said the commission had historically maintained periodic reviews to ensure that its frameworks remained relevant.
However, she noted that the years since the 2018 determination had been marked by major changes in Nigeria’s telecommunications market, including rapid expansion, shifting market dynamics, commercial deployment of advanced technologies such as 5G and the emergence of new players such as Mobile Virtual Network Operators.
Mohammed said global and domestic macroeconomic conditions had also changed significantly, with exchange rate movements and inflation altering the cost of providing communications services in Nigeria.
“For regulation to remain effective in a fast-moving market, our frameworks must evolve in step with it,” she said.
She added that the commission was acting pursuant to Section 108 of the Nigerian Communications Act, 2003, which mandates the NCC to ensure that telecommunications tariffs and charges remain reasonable, cost-reflective and non-discriminatory.
The review is expected to determine whether the current interconnection rate regime still reflects the realities of Nigeria’s telecom market and how any adjustment may affect operators, competition and consumers.
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