How multiple taxes hinder quality service delivery – Ikpoki, MTN boss

BY OLABISI OLALEYE

From banking to real sector; from hospitality industry to telecommunications, no one is immune from the problem of multiple taxation in Nigeria. For instance, disclosing how his company was bogged down by this hydro-headed monster, the Chief Executive Officer of MTN Nigeria, Mr Michael Ikpoki, said the issue of call drops, delay in infrastructure roll-out and other allied problems can be traced to the multiplicity of taxes in the country. According to him, the telecom sector is unfairly targeted for reasons best known to the tax authorities. And this, he does not find funny at all.

His words: “The challenges we have had year-on-year as a sector is that we have been unfairly targeted in terms of the kind of tax regimes on ground. First, in terms of the quantum, we get to situations where we are having significant increases in the kind of levies and taxes we have to pay and which is not in line with the budget that we have made.” In this interview, he explains how the government can step in to address the issue.

Excerpts:

Digital industry

I think the point about the challenges and the issues that we face is that we need to spend a lot more time as an industry to begin to address issues. In our industry, what I see are three phases of development. The first phase is, you want to attract investment. In 2001 and thereafter, we strove, as a country, to attract the right kind of players into our market to be part of the growth of this industry.

The second phase in the development of an industry like ours is, you want to promote competition because when you get the investment, you want to be sure that you are creating the right environment for players to engage in fair and efficient competition because at the end of the day, liberalization is always about competition and you want to get the best benefits for the country. There is always a balancing act and you are looking at the consumer interest, the national interest and investor interest.

There is a third phase and that is, perhaps, where we are today. We have been able to attract the investment. As an industry, the level of investment coming into Nigeria is pretty significant. We have been able to create the right environment for competition to thrive. We must give credit to our regulator and the government that this has been achieved. But now where we need to start thinking is how we make sure that this industry is stable and support it to deliver the benefits in line with the growth of the economy.

The benefits I am talking about are very achievable in Nigeria. There is no reason we can’t achieve them. We have the skills, resources, the interest is there and everything that is required to succeed in terms of painting the picture of the new digital world. It is critical now that we pay more attention to the policy side of things and how the industry can be supported. The most important thing is how to get people to understand how central the industry is to the well being of the country. Here at MTN, we understand that the business we do is very central to people’s lives and we are doing everything possible to make our subscribers have a great experience on our network. We are very grateful and humbled that we have 55 million people relying on us to provide service to them, but it is something that is central to a larger picture in line with the dictates of the economy.

Investment

If you look at the figures critically, you find out that we’ve sunk about a trillion Naira into the MTN network in Nigeria. This year alone, for instance, we have so far invested excess of N290 billion in the network. We now have more than 10,000 base stations installed across Nigeria. If you look at the profile of our investment, we are not just investing in 2G, on our 3G sites, we are about doing almost 40 per cent investment on the network side of our 3G enabled sites. We are investing in fibre and by the end of the year, we should be getting close to 20,000 kilometres of fibre laid across the country. If you look at everything in totality, we believe it is a very healthy level of investment that MTN is making. If you look at the role we play, not just in the industry, but within the larger economy, we are quite satisfied and we believe that we are making a very valuable contribution to the development of this country by the virtue of how much we are investing on the network and the economic multiplier of that investment.

Network vandalism

Security is an issue and one point I must make is, we have a lot of staff of this company who are working extremely hard, working with our suppliers to make sure that we are able to keep the network running at every point in time. But we have had serious security challenges and these have been very well reported and they are not unique. In the North-Eastern part of the country, because of the security challenges we have had, we have not been able to service those areas as much as we would have liked to. Three states were literally shut down for most of the second quarter of this year and we also have to be careful so that we don’t put our staff and our suppliers in harm’s way if we don’t have a secure environment. We have had flooding in some other parts of the country, I am sure we are all aware of that. If we look at the operational challenges, they are mainly challenges in terms of factors that are militating against our roll-out. Security has been a big issue, I must say, and we are also putting in a lot of resources to see that, as much as possible, we manage that. But I think it is very difficult if you look at it within the larger context, the security situation just has to improve. We are a stakeholder in that and it is important for our customers to also understand that in certain situations, it is difficult for us to manage the network because we have to be there physically. It is a big concern for us.

Key focus

I actually plan to devote a lot of attention to three major areas. Customer experience is the first of these. We want to provide the right kind of experience to our customers that transcends not just customer service and includes giving the right quality of service, giving the right breadth of services and identifying innovative services that are more reflective of customer lifestyles. We are no longer just a telecom company, we are now an ICT solutions provider. Customer experience will provide us a platform to impact positively on the lives of our customers, socially and economically. Beyond quality, scope and range of solutions we offer, we want to utilize every touch-point to make the experience on our network special to every customer.

The second major area is our vision to lead the delivery of a bold new digital world. What this means is that we want to translate the power of technology into enabling people to connect with their passions and lifestyles. Going forward, we will strive to lead innovation and continuously explore ways of empowering our customers with innovation in a way that is relevant to them and suits their lifestyles.

The third major area is that we will continue to aggressively seek better and more creative ways by which we can align with the current economic growth agenda in Nigeria today. The telecoms sector today contributes about 8.5 percent to the GDP of this country. So you may imagine how much MTN, with about 55 million customers, about 50 per cent market share, contributes to the country’s overall GDP. If we were to look at it from that context, as a company, we are making a very significant contribution to the economic development of this country and it is something that we will continue to push and entrench in different ways. Apart from the direct economic impact of our operations, another way is through the MTN Foundation and all of the work we do through it in such areas as education, healthcare and economic empowerment.

Roll-out delay

MTN is a very responsible corporate citizen, we make bold to say. We are a law-abiding corporate citizen. We pay our taxes and it is very well published and transparent. The challenge that we have is in planning. Our business is based on time. If you carry traffic and your customer is not able to make a call that minute, he is not ever going to make that call again. That is the reality of our business. In getting facilities and infrastructure rolled out, timing is critical. The second key issue is the inconsistency. What you find is that you go to a particular state, there may be a certain tax regime, you go to another state, and it is different. What we are saying as operators is that, we want a harmonized framework whereby we are clear on what the tax regime should be. There has to be a uniform way of establishing what it should be and if there are any increases, there has to be some mechanism where we are informed and on time so that way, we are able to plan and put it in our budget. When we go out, we pay and then roll out our infrastructure on time. If we don’t have that in place, it slows down our roll-out. And when it slows down our roll-out, it impairs our ability to deliver good quality service. If, for example, we have a particular location where we are seeing significant congestion because of rising traffic volumes and we need to build a new base station there, by not resolving this issue, we are prolonging that problem.

Multiple taxation

Y

es, that is the challenge of the consistency. The other one again is, let us know what we are paying for. Sometimes, new taxes pop up and sometimes we find out that those taxes are a kind of duplication of what already exists. There is also the situation where every tier of government and some agencies of government insist on taxing certain infrastructure components. So you may find out that operators are served demand notices on the same network component by multiple federal government agencies, government agencies, local governments, and similar bodies.

As an industry, our business is extremely capital intensive. In terms of penetration in the market, we celebrate that we have achieved a lot in penetration, about 80 percent penetration, but we still have a lot of work to do. Again, the point is that, the industry needs to be supported to continue investing. These are some of the challenges we have that actually not just slow down our roll-out but increase the cost of operation. And at the same time, as we are doing that, we have to deliver services to the customer at reasonably affordable rates. If you look at this market and if you look at what we are delivering in terms of prices and tariffs for customers, it is very competitive.

Tariffs

Tariffs have progressively dropped in the last two to three years. The challenge is, while that is happening, a situation where our costs continue to increase is an imbalance. We are saying let’s get the support of government, local governments to be able to manage our costs; to be certain about our costs so that we can plan better and that way we can provide better services to our customers.

MTN funded

Yes. We also got third parties involved to help us physically protect those links because some of our links carry significant amount of traffic; some of our hub sites and the sites that actually enable us to carry huge amount of traffic across the country. Once you have problem there, it will affect a whole lot of people.

So, it is both for MTN and other industries?

Yes, because we carry voice and data traffic not just for ourselves, we also have corporate clients for whom we manage infrastructure. It is so critical because we have companies that wholly rely on us for managing their operations. Imagine how negatively that would impact the other company’s operations. It is a big concern for us and we are trying to do all that we can to make sure that we focus especially on the areas where we are seeing a higher level of the kind of problems we are having. It is a key concern. Another point to make on the security is that as much as possible, we are working with government. Recently, we donated 25 vehicles to the Lagos State Security Trust Fund as our own way of supporting Lagos State in terms of managing security in the state. As much as possible, we try to work in ways that we can support government so that we can achieve the mutual objective of creating a safe and secure environment.