Govt to cut taxes for phone companies to boost investment

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In Nigeria
Aug 2nd, 2014
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The Federal Government plans to reduce taxes on telecommunications infrastructure to encourage companies to spend more on networks in the country, Communications Technology Minister Omobola Johnson has said.

“For every naira that is spent on infrastructure, about 70 percent of it is spent on taxes,” she said in an interview in Abuja. “We’re going to bring that down to a much more reasonable level at 30 to 40 percent.”

Mobile-phone companies including MTN) and Bharti Airtel Ltd have examined ways to offload networks to reduce exposure to costly African infrastructure. Apart from taxes, Nigeria operators also face the challenges of unreliable power supply and the threat of bomb attacks from terrorists. MTN and Airtel were both fined earlier this year for poor service standards in the country.

While Nigerian laws allow only the federal government to tax mobile-phone companies, states and local authorities have found other ways to raise cash by heavily levying operators’ infrastructure, including towers and base stations, Johnson said. The states shouldn’t charge a retail store 10 million naira and phone companies 100 million naira for the same-sized space, she said.

MTN  is planning to sell a stake in its Nigerian mobile tower network, which it values at more than $1 billion. Sunil Mittal, the billionaire chairman of India’s largest mobile-phone operator Airtel, said in a May interview that operators are unfairly taxed in Nigeria because the industry supports other areas of the economy.

A five-year insurgency by Boko Haram in the Northeast has “badly affected” phone companies’ operations in the region as militants target telecommunications network sites, Johnson said. An MTN office in Maiduguri was torched by terrorists in 2012. Its base stations and towers have been attacked in the past.

“There are parts of the Northeast that no operator can go into even if they want to,” Johnson said. “Whenever they have to desperately go and maintain, they do get the support of the security forces to escort to their base stations to do their work.”

Nigeria remains  a target for international phone companies eager to tap into demand from the country’s 170 million people. The total number of connected mobile-phones increased to 177 million as of the end of April, compared with 170 million at the start of the year, according to the Nigerian Communication Commission.

MTN said in April it secured a $3 billion loan to invest in the country, while Globacom is spending $1.25 billion to upgrade and expand its network.

Nigeria plans to award seven licences within a year to companies that will build fibre-optic networks in each of the six geopolitical zones and Lagos  Johnson said. The nation wants to reach 30 percent broadband penetration by 2017.

 


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