Financial statements of telecom operators soon to be made public

The financial statements of telecom operators are some of their guarded securities. These statements are written reports of their financial performance which could be in the form of profits after tax, equity values, debts and assets owned.

In Nigeria, these financials are kept secluded from the press and public by almost all the telecommunication operators in operation in the country. However, recently the NCC disclosed its intention to mandate the uncovering of the financial performance of six telecom companies to public scrutiny. According to the national regulator, this move is part of its Accounting Separation Framework (ASF) which is yet still a subset of its 2020-2025 broadband plan.

Before giving more insight on this, it is much necessary to deliberate on reservations which might playout on your curiousity.

Why do some telecoms withhold their financial details from the public?

It is worthy to foremostly note that although few operators do rescind from bringing into public their financial statements, they do present such to the government. These reports would be required of them when their quarterly and yearly tax returns are made with the Internal Revenue Service (IRS) and this contains all of its financial information for the year.

Nevertheless, these documents are not made public by these authorities but restricted to government use only. Primarily, they are used to assess tax liabilities for incorporated entities, ushering the government the ability to track shifts in the economy.

The Accounting Seperation Framework in details

According to the NCC, the Accounting Separation Framework (ASF) is a comprehensive set of policies and guidelines for generating detailed regulatory financial statements employed across different businesses, products and licenses of operators.

This framework was developed through a consultative process in 2015 and has successfully been practiced by countries in the like of the UK, UAE and Ireland.

In a toned-down explanation, with the ASF, it would now be mandatory for telecommunication companies to submit financial statements for each of the licenses provided to them by the government. What this means is that each of the operators, e.g. Airtel, would have to present separate financial statements for its base receivers, cable laying, internet deployment and all other licensed services rather than consolidating them into one.

The ASF is to be provided by the licensees every accounting year beginning from the accounting year on 31 December 2019. Similarly, the 2020 financial year report is to be submitted before 31 March 2021 and the one for 2021 will be submitted by March 2022.

To what purpose is the Nigerian government promoting the framework?

The NCC says the implementation of this policy is in pursuance of its 2020-2025 broadband plan of offering a competitive, efficient and less-cost telecommunication in the African telecom hub. The regulator is of the opinion that if the financial statements of operators are made public, then there would be more competition and fairness within the sector.

This is coming on the heels of dissatisfaction leveled against the seeming dominance of MTN Nigeria, a South African owned operator. As in most countries where a single operator has successfully wield enough majority influence, the government has in recent years taken steps in bearing down a possible monopoly, albeit unsuccessful.

Also, since the coming of Etisalat (now 9mobile), there hasn’t been any new national operator in the country and the regulator believes that with the policy, the market would be open for newcomers.

The financial statements of telecom operators — Aimed at quality service delivery and consumer satisfaction

Implementation of the ASF would greatly be of benefit to subscribers as the costs and revenues obtained from services of these operators would be presented to public scrutiny. Third-party organisations would be able to analyze from the data provided, the profitability of each telco, thereby encouraging fair competition among these telecom brands.

Additionally, buoyed by this exposure, newer entrants would be possible, thereby bringing down the costs of these services. This would likewise eventually benefit the consumers.

Financial statements of telecom operators — The affected telecom operators

Telecommunication companies with an annual turnover of at least ₦5 billion were mandated to be captured in the framework. The companies which met the benchmark were: MTN; Globacom; Airtel; 9mobile; MainOne; and IHS.

IHS is one of Nigeria’s biggest telecom solutions company. The firm is committed to building and operating telecom infrastructure throughout emerging markets, with Nigeria being its largest market. Most of the country’s ground receiver stations (mast) employed by telecom network providers are constructed by IHS.

Main One is another of the country’s renown telecommunication solutions company. Through its cable system, Main One provides international internet connectivity to countries between Portugal and South Africa on the west coast of Africa.

The four main telecommunication operators in MTN, Airtel, 9mobile and Globacom are the industry’s leading players, dominating the scene for some years now. Industry leader, MTN is managed by Ferdi Foolman, with second-placed Globacom, an indigenous franchise owned by Mike Adenuga.

The financial statements of telecom operators — MainOne bemoans inclusion

Although the benchmarked N5 billion roof saw MainOne listed as one of the operators to be subjected under the ASF, the company argues that its revenue is not up to a fifth percentile of what the four major operators accrue.

Further arguing its dominant presentation by the regulator, the company says its subscriber base isn’t also up to 3,000.

While MainOne is subject and complies with a certain level of accounting separation and reporting now as part of or licensing guidelines, implementing this AS framework would be disproportionately time consuming and very expensive given our size relative to the other operators included on the list. This additional level of compliance for a small operator further inhibits our ability to compete in a market where we have not been protected and where we see further price erosion given the supply glut on the submarine cable segment with potential entry by OTTs who are building cables to Nigeria without corresponding foreign direct investment in our economy

, Main One added in a statement.

The Nigerian regulator isn’t a lone player in trying to break dominance and encourage competition in the telecommunication industry with this framework. Ghana has recently implemented policies to minimize the influence of MTN Ghana, the telecom operator which commands more than halve of the country’s subscriber base. Similarly Kenya has been in skirmishes with Safaricom.

In Europe, German telecom leader, Deutsche Telekom resisted a move to implement the ASF saying it was ill-suited to a dynamic and diversified market environment.

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