Africa’s telecom operators advocate lower taxes

Telecom operators in Africa are advocating lower taxes as a way to expand services and bring about faster economic growth on the continent.

Mr. Chris Gabriel, Chief Executive Officer of Zain Africa, said research had shown that for every 10 per cent in telecom penetration there was 1.2 per cent growth in Gross Domestic Product in the medium to long term.

“African governments and industry regulators must shift their focus from the short-term gains from heavy taxation on telecom operators and focus on the medium and long term development impact of telecom on their countries,” he said during his presentation at the opening of the Telecom World Africa Conference 2009 in Cape Town, South Africa.

In Ghana, telecom operators pay over 28 per cent taxes on their annual profits, beside duties and tariffs on importation of telecom equipment. Taxes on the importation of handsets have also been replaced with communications service tax, otherwise known as talk tax.

Some service providers have absorbed that talk tax, whiles others have passed it on to their customers, making call tariffs higher than usual.

Operators are questioning the rationale for the talk tax, describing it as counterproductive and calling for a possible abrogation.

In terms of licensing, operators pay money to the regulator for every new technology, like third generation technology and additional network codes. Recently, MTN Ghana paid one million dollars for a second network prefix, 054.

Operators also pay money for permits to mount their masts at identified locations, plus rent money to owners of such locations.

There is also the Ghana Investment Fund for Electronic Communication (GIFEC), into which operators contribute a mandatory one per cent of their profits to provide telecom masts for co-location, internet connectivity, community phones, and power sources to un-served and under-served communities.

Operators in Ghana and across Africa are being urged to spread their services to rural communities to cover the un-served and under-served populations.

Mr. Gabriel said African governments would have to choose between lowering taxes and charges on operators in order to free some money and time for the operators to invest more to cover a greater part of their countries and bring about the needed development, or keep collecting taxes that impeded the spread of telecom to a wider population.

“Why can’t African regulators give operators access to all licences at a go to free money and time for expansion?” he asked.

He called for collaboration between operators and regulators to bring about some understanding of how to maximize the benefits of telecom on the development of African states.

Mr. Gabriel noted that both regulators and operators were working for the same objective but there was the need for decision making in the sector to be a two-way affair instead of regulators seemingly using every means to cash in on telecom operators at the expense of the wider populations.

Recently, the Chairman of Millicom Ghana, Tismark Inja, also appealed to the government and the regulator to involve operators in decision making at the policy level, particularly on taxes and charges.

Mr. Abraham Kofi Asante, former Administrator of GIFEC, also speaking at the conference, said the money operators contributed to GIFEC was not a tax but a solidarity fund that went a long way to assist operators reach and serve rural communities.

Mr. Oluwale Ige, a member of the Nigerian Communications Commission (NCC), agreed that taxes and charges on telecom operators were numerous and high, but licensing charges could not get any lower at this stage.

He explained to the GHANA NEWS AGENCY (GNA) that in the past when certain operators held monopolies, the mandate of regulators was to assist the operator to reach a wider population with affordable services, but now there were numerous operators, and “this is the time to allow competition to determine the level of tariffs”.

“Because telephony technology keeps changing rapidly, some of the operators want a situation where they can make quick money from every new technology they buy so that before any other operator brings a better and cost effective technology, they would have recouped their money,” he said.

Mr. Ige said the operators and regulators could not be on the same page on that matter, adding that regulators would continue to create a situation to ensure competitive tariffs for customers instead of conditions for operators to make money at the expense of the customer.

On the question of 10 per cent increase in telecom coverage leading to 1.2 per cent increase in GDP, he said research was done under ideal conditions where mobile telephony came to meet universal fixed line coverage, adding “in most African markets there is no universal fixed line access so that does not apply”.

Operators, investors and regulators are attending the conference, organised by Terrapinn Limited under the theme “Opportunity, Innovation and Strategy for Fixed and Mobile Operators and Investors.”

Source: GNA