Questions are being asked about the legitimacy of huge monies the National Communications Authority (NCA) is paying Afriwave Telecom Ghana Limited for services that industry analysts say the regulator has no authority to contract a service provider to do.
Afriwave has been awarded a 10-year contract to build and operate an Interconnect Clearing House contract (ICH).
Afriwave paid $1million for the 10-year license which translates into GH¢4m under the current exchange rate.
In return, NCA is to pay a flat rate of GH¢4.52m (GH¢4,521,864.70) a month to Afriwave for three services.
The break-down of the monthly flat rates are as follow: Monthly report on traffic volumes and revenue - GH¢3.52million (GH¢3,521,864.70); monthly anti-fraud testing based on performed activity – GH¢600,000 and monthly Geo-Location services based on performed activity - GH¢400,000.
The Managing Director of Afriwave Telecom Ghana Limited, Mr Philip Sowah, confirmed to The Finder that NCA paid them GH¢4.1million (GH¢4,121,864.7) per month for September and October 2016.
This covers monthly report on traffic volumes and revenue and anti-fraud testing based on performed activity.
He explained that payments for November and December 2016 have not been made to Afriwave, adding that they are not being paid for Geo-Location services because they are yet to start it.
Controversy of Act 910
Section 20A of Act 910 explicitly excludes revenue monitoring services from the functions of the ICH, as this is the responsibility of Ghana Revenue Authority (GRA) under the purview of the Finance Ministry.
But Afriwave is monitoring and providing revenue assurance on six cents tax on international traffic and the one per cent annual fee NCA receives from telecommunication companies.
This is because, in the contract, NCA stated that the Licensee shall operate and maintain Anti-Fraud Management Systems to ensure Revenue Assurance for service providers and government.
Industry players say NCA, on its own, cannot impose taxes on companies under its authority even if it is authorised by law to keep a percentage of the revenue because parliament, which imposes taxes, is the same authority that empowers GRA to undertake revenue monitoring and assurance.
It will be recalled that the Ministry of Finance wrote a stern letter signed by former Deputy Minister of Finance, Casel Ato Forson, which directed the NCA to refrain from awarding any contract for revenue monitoring.
The letter, dated July 31, 2015, cited the Financial Administration Act which reserves the responsibility for collection revenue monitoring to the Finance Ministry.
But, Nana Defie Badu, Director of Consumer and Corporate Affairs of NCA, explained that at the time of the Amendments to the Electronic Communications Act to have a new interconnect regime, there existed a payment system for interconnection between the MNOs.
“Any new change would have distorted the process since the payment would have been passed on to the consumers and increasing prices. Government decided to absorb these prices for the period in order to initiate a new interconnection price regime, beginning January 2018.
“This absorption is to also cushion the telecom Industry because of the sunk cost that each operator had incurred in setting up its peer-to-peer interconnect infrastructure”, she added.
According to her, from January 2018, that is when a new interconnection tariff regime has been set taking into consideration ICH service charges, NCA would not make any further payment to the Afriwave.
“This payment is only for the transitional period pending a new interconnect tariff regime in January 2018.
“Section 19 of the ICH Regulations provides that until January 2018, the Authority shall remunerate an ICH engaged in interconnection with monies that the Authority collects on behalf of Government for the use of the Authority”, she added.
Responding to this, Mr Sowah told The Finder that the revenue assurance that Afriwave conducts is different and separate from the work of GRA.
"The big part of NCA's request to the Interconnect Clearing House right now is that the only source of information is the one brought it by telcos so it has no independent way of knowing how much traffic is going between telcos and coming from international routes.
"NCA issues invoices to telcos to pay for certain things. That is separate from government tax revenue assurance. There are two separate activities.
Basically, every month, based on the international traffic that comes, NCA issues invoices to telcos to pay.
"In the past, they used to rely on telcos report to issue the invoices. For best practice, it is better to have an independent source of that information to issue the invoices to the telcos.
"So, that is the work Afriwave is doing. NCA gets surcharge on international income and is also entitled to one percent of telcos revenue as NCA's income, which is not government tax revenue assurance.
"For example, telcos do mobile money. At the moment, they generate other revenue from mobile money. Per NCA rules currently, that is not revenue Afriwave is monitoring", he added.
Explaining further, Donald Gwira, Communication Director of Afriwave, said the law talks about tax revenue but what NCA included in Afriwave's contract is revenue assurance without the tax element.
"You can only do revenue assurance for NCA if you know the amount of revenue coming into the country and that is why the monitoring of the volume of traffic and revenue assurance goes hand in hand.
"The report Afriwave produces gives the NCA one stop shop to know the total picture", he said.
According to him, the provisional license included tax revenue but after discussions, parliament took out the ICH monopoly and differentiated between tax revenue since the NCA would not engage in tax revenue.
He explained that the way Airwave is set up, it is able to do the determination of the tax revenue and is willing to provide that information to government for free as part of its corporate social responsibility.
GH¢542.6m in 10 years
For the 10 years that licence will be valid, Afriwave would receive GH¢542.6million (GH¢542,623,764) from the three flat rates - something industry analysts and critics have described as waste of public resources.
$60m set up cost
Mr Sowah noted that to fulfill the requirements of the ICH license, Afriwave would be investing about $60million, excluding taxes and duties.
According to him, this investment includes equipment, software and other accessories to provide the gamut of services detailed in the regulation and license.
Currently, he said, equipment and software worth several million dollars has already been deployed.
3 Data centres
Mr Sowah stated that when fully operational, Afriwave would have three data centers each capable of carrying 100% of the country's interconnect traffic, employ about 40 staff directly (and 45 indirectly) and deploy fibre optic cable to over 23 telcos and identity (ID) company datacenters.
He disclosed that annual operational costs are expected to exceed GH¢40million.
However, some industry players and watchers described the $60m set up cost as unjustifiable. An official of NCA had said on radio in 2015 that it would cost $20million.
In addition, they stated that telcos already interconnect infrastructure which was a requirement by law and, therefore, did not see the wisdom in licensing an ICH to make a capital expenditure of $60m for a service customers already enjoy. In the end, the cost would be passed on to customers, they pointed out.
Why ICH delayed
NCA is optimistic that the ICH would be in full operational mode within the stipulated time as the MNOs comply timeously with all necessary requirements.
According to Nana Defie Badu, the ICH Regulations came into force in July, 2016, with the contract executed in August, 2016.
Based on this, she said, the NCA is optimistic that the domestic interconnect traffic should commence in full by end of January 2017.
But, Mr Sowah said “we have delivered some of the equipment. We have linked to all telcos and currently waiting to start international interconnects. We are waiting for commercial agreements to be signed to start”.
He added that all tests have been done, all connections are there and 11 wholesale international carriers are connected to Afriwave.
He said Afriwave wrote to telcos around Christmas but as a result of a network freeze, the process was delayed, noting that now the network freeze is over.
He disclosed that Glo Mobile and Kasapa have signed the commercial agreements and would probably start with Glo next week.
The Afriwave MD said domestic interconnect is the next phase and equipment was on the way.
He noted that the equipment they have now can do domestic interconnect but the main concern was single point of failure which has necessitated three data centres.
Already, he said, Afriwave has one and the equipment for the remaining two is on its way.
Domestic interconnect to start end of first quarter
The transitional provision provided for six months from the passage of the Act in April for the ICH to be operational.
He announced that the plan is for domestic interconnect to start at the end of the first quarter.
When asked if their work so far with international traffic monitoring has produced evidence of telcos misreporting, Mr Sowah said results of six months work is not enough and that between 9 to 12 months was needed to compare data with previous years before they can start making concrete decisions and recommendations. Mr. Sowah was himself a former MD of Airtel.
Aside the flat rates, NCA is required to pay Afriwave 20 pesewas for SIM re-registration of existing subscription while telecommunication companies are to pay 50 pesewas to Afriwaves for SIM registration of new subscription.
NCA is to pay Afriwave 0.005 pesewas per minute for Routing of International Interconnect Voice Traffic and 0.0001 pesewas per SMS for Routing of a Single International Interconnect SMS traffic.
On the other hand, international carriers are to pay Afriwave 0.04 pesewas per minute for Routing of international Voice traffic and 0.01 pesewas per SMS for Routing of international SMS traffic
Mr Sowah noted that telcos have no independent way of verifying the validity of IDs used in registering a SIM card.
"So, Afriwave checks the validity of the registration as it will link fibre to all the five ID agencies.
"Afriwave sends the information to the agency which is validated from the electronic data based before registration is approved," determining the genuineness and validity of ID used for registration.
Nana Defie Badu added that a centralised system that allows the MNO to validate IDs before registration will discourage the use of cloned and fake IDs and bring some sanity to the industry by completely eliminating pre-registered numbers by numerous free-lancers and dealers that are selling these SIM cards for a living.
“All the ID agencies will be paid a fee for granting the ICH access to copies of their data.
“This will all be done in compliance with the Data Protection Act and all security around the databases will be controlled by the ID agencies themselves”, she added.
He added that when an international call shows a local number, Afriwave takes the number to the telcos for it to be blocked. Telcos also say they have dedicated resources to routinely block sim box numbers.
Mr Sowah explained that under Geo-location, Afriwave would go round town to look for actual SIM boxes with policemen and arrest the culprits and destroy the boxes.
He added that Afriwave would also search for people who registered the numbers used for the sim box fraud.
The Director of Consumer and Corporate Affairs of NCA stated that NCA's desire to pursue efficiency and reduce cost of delivering common services led to the inclusion of the different services in the scope of the ICH licence knowing that licensing multiple entities for each of the scope defined in the licence will lead to so many inherent efficiencies created by multiple interfaces to the MNOs compared to the gains of licensing a one stop shop that provides services to all.
Chamber of Telecommunications
The Chamber of Telecommunications has argued persistently in the past that the search and destroy method was not effective in fighting SIM fraud.
They cited Nigeria where they had used pricing to totally eliminate the practice.
Source: The Finder
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