Temporary suspension of communications licenses for three categories, a sustainability issue

On May 17, 2024, the telecommunications sector was alerted to the announcement that the Nigerian Communications Commission (NCC) had temporarily suspended the issuance of communications licenses in three different categories.

This is in line with the Nigerian Communications Act, 2003, which gives the Commission the power to grant and revoke licences. With the Commission’s power to grant and revoke licences comes the power to suspend the issuance of those licences.

The categories included Value Added Services (VAS) aggregator licenses, Interconnect Exchange Service (IES) licenses and Mobile Virtual Network Operator (MVNO) licenses.

Your roles in the ICT sector

One of the main reasons for the establishment of the Commission in the Nigerian Communications Act, 2003 is to facilitate the provision of communications facilities and access to communications services in Nigeria.

The law sets out the Commission’s tasks in more detail. These include, among other things, issuing licenses to private companies to provide telecommunications services.

In carrying out these tasks, LEADERSHIP found that the VAS, IES and MVNO licenses were issued to address specific gaps in the ICT sector.

For example, aggregator licenses were issued to bridge the gap between content providers, subscribers and their operators.

Remember that operators are not allowed to distribute value-added services directly to their subscribers. For this reason, a VAS aggregator provides the link between operators and content service providers.

VAS aggregators are expected to provide simplified, direct and secure connections to content and application providers to enable access to all network operators capable of delivering VAS to end users.

They serve as a link between VAS operators (VAS content providers) and Mobile Network Operators (MNOs). VAS aggregators play a crucial role in the VAS ecosystem by enabling seamless connectivity of VAS operators (VAS content providers) with MNOs, thereby streamlining the integration process of these VAS operators into MNOs. These aggregators are so large that all VAS operators (VAS content providers) regardless of their size can be easily integrated into MNOs.

As for the IES license (also known as Interconnect Clearing Houses), the original objective of introducing this category of license was to encourage interconnection among smaller players and reduce interconnect debt in the telecommunications sector.

The license was also granted to improve and streamline voice call routing within the industry, simplify billing for interconnect services for smaller operators, and increase the resilience of the interconnect segment of the industry.

IES licensees have so far helped route voice calls between MNOs, between MNOs and smaller licensees (providing voice services), such as local exchange operators, and between a local exchange operator and a licensee for private network connections to others. Their responsibilities also include facilitating the exchange of voice calls between networks.

On the other hand, MVNO licenses were issued to deepen competition in the market, extend coverage to rural areas and increase market efficiency for various market niche segments.

Reasons for the blocking:

As crucial as their role is in promoting the telecommunications industry, several key areas within these categories need to be reviewed regularly to ensure an effective ecosystem in the telecommunications industry and improve the industry’s competitiveness for further growth.

In this context, LEADERSHIP concluded that the reason for suspending the VAS licence was that the Commission had awarded a significant number of licences in this category of services and therefore there was a need to review the market dynamics of this sub-segment in order to ensure effective competition.

In addition, the Commission has carried out a benchmarking exercise in some countries around the world and found that there may currently be more VAS aggregator licensees than necessary.

The findings also revealed that there are currently 49 VAS aggregator licensees in the country, so there is a concern of saturation and there is not enough market for the aggregators due to “oversupply”. This has also resulted in several aggregators struggling to connect with the four MNOs.

The IES licensees have contributed positively to the interconnectivity of smaller operators. However, the problem of interconnectivity debt remained in the industry, which was the reason for the license suspension, LEADERSHIP learned.

As a reminder, there are currently 37 IES licensees that route data traffic mainly to and from four major mobile network operators in the country. Unfortunately, however, it is observed that cases of SIM boxing and call refiling have become a major problem affecting the licensees in this sub-segment as well as the mobile network operators that serve as the main endpoints for voice traffic in Nigeria.

Reports suggest that some of the licensees in this category also have other licensees terminating international traffic. Some are suspected of abusing this for SIM boxing and call masking to terminate international traffic as local calls, thereby depriving operators of revenue that should normally go to the operators.

The suspension of the award of MVNO licences was due to the fact that the Commission is assessing the market to see how it is evolving and functioning, given that there is a significant number of licensees (43) in this area.

Impact on industry growth

While stakeholders expressed concern over the suspension of these licenses, LEADERSHIP’s findings showed the opposite, as the suspension will have little to no impact. The purpose of the temporary suspension was to ensure the sustainability of the various players in the different segments and to increase the dynamism of the industry.

The reason for the suspension was mainly that there are enough licensees in each of these categories to meet the needs of the industry. Also, keep in mind that this is a liberalized industry and when a segment becomes saturated, it needs to be reviewed and competition-related issues addressed to reposition licensees for better service delivery.

There is no cause for alarm as the suspension of these licences is intended to improve the sustainability of the various sub-segments in which these licensees operate.

The Commission has proven that it has the industry under control and, with this intervention, has created a more competitive climate and ensured the survival of all players in the industry.