• Trapped funds, DND, other challenges shrink sub-sector by 35%
• Operators write NCC, seek intervention
• NCC plans review of VAS industry for more efficiency
• Big banks delay settlement of N200b USSD debts
Amid calls by the mobile network operators on deposit money banks (DMBs) to pay up the legacy N200 billion unstructured supplementary service data (USSD) debts owed them, the telcos, in turn, are sitting on hundreds of millions of naira of unfulfilled commitment to value-added service (VAS) providers.
The Guardian gathered that some of the debts, largely owed by telecoms operators, have lingered for about 24 months.
The Guardian gathered that apart from the battle the industry had with the introduction of the Do-Not-Disturb (DND) in 2017, which was created by the regulator, the Nigerian Communications Commission (NCC), other challenges, including trapped funds, have cut the VAS ecosystem growth by about 35 per cent with thousands of jobs lost.
As of two years ago, the NCC disclosed that over 30 million Nigerians have activated the DND, using the code 2442, which allowed subscribers to stop all unwanted messages that usually come from VAS providers.
VAS refers to services that are not within the scope of core telecommunications services such as voice calls and text messages. The services are either rendered by telecommunications companies or by other companies working with or through telecommunications companies.
Examples of such services include multimedia messaging and caller tunes. The market value of the industry was estimated at $200 million as at 2016 and grew to $500 million by 2021.
Wireless Application Service Providers of Nigeria (WASPAN), the umbrella body for VAS operators, claimed that the sub-sector generated about N330 billion yearly shortly before the introduction of DND. But the traction has faded as the figure fell to less than N100 billion thereafter.
Checks showed that the sharing formula between MNOs and VAS operators is 60 per cent to 40 per cent respectively, which before now, had been a major issue with the telcos seeking to increase their share to about 75 per cent. The 60:40 ratio is for caller tunes (CRBT), which does not use VAS aggregators.
For other VAS services, MNO gets 50 per cent while VAS aggregator receives 10 per cent while VAS service provider takes 40 per cent. For the lottery, telcos get 24.57 per cent as against aggregator’s 10 per cent and service provider’s 65.25 per cent.
According to data obtained from the NCC site, in the category of licensees’ section, some 386 firms were listed as VAS. But in a statement about six weeks ago, the NCC, which planned to reform the sub-sector and others, said there were 49 VAS aggregators, which it said were rather on the high side.
For emphasis, the VAS sub-sector consists of four broad segments with the following corresponding market players including the MNOs, aggregators, content and application service providers as well as developers of content, applications and platforms.
The aggregators, which are highly essential to telecommunication operations, provide simplified, direct and secure connections to content and application providers for access to all network operators that can transmit VAS to end users.
VAS providers are widely regarded as a subsector of the telecommunications industry and they are regulated by the NCC, according to the Nigerian Communications Act (NCA) and the Wireless Telegraphy Act of 1990 (WTA). The NCA and WTA empower the NCC to regulate VAS providers and operators in Nigeria.
Further to the NCA and WTA, the NCC, issued the VAS and Aggregators Framework (VASAF) and the License Framework for Value-Added Services (LFVAS).
As disclosed, Nigeria’s $76 billion telecoms sector is not in its optimal form with part of its illiquidity crisis coming from its trapped N200 billion USSD debt held by the DMBs. Other forms of indebtedness are stifling the industry.
Speaking with The Guardian, a major VAS aggregator, who preferred anonymity for fear of victimisation, said the sub-sector is currently challenged as VAS operators’ funds are trapped with some of the mobile network operators and other service providers.
“The funds we are talking about run into hundreds of millions of naira. I may not be able to put a specific figure to it because virtually all the aggregators are suffering from this issue. You can ask other players within the sub-sector; you will be alarmed by more revelations.”
According to this VAS operator, two of the leading MNOs have not honoured their contractual agreement for 20 months. He said they have written letters to the debtor but “all they have been saying is that payments will come”.
Some affected aggregators have equally lettered the NCC seeking its intervention.
Speaking on this development, the National Coordinator, Wireless Application Service Providers of Nigeria (WASPAN), the umbrella body for VAS operators, Chijioke Eze, claimed the health of the sub-sector remains stable.
On trapped funds, Eze said there could be instances where an MNO may experience a cash flow crisis and notify their partners of new payment terms.
“But in some cases, this idea of payment discrepancy could stem from unrealistic expectations of some VAS players. Still, some MNOs have owed some VAS companies for extended periods.”
On the challenges VAS players face, an industry analyst, Leo Abulu, urged the NCC to have a complete open-door policy with the VAS players to improve the speed of approvals and the updated terms and conditions of such operations.
To ensure an effective ecosystem in the telecoms industry, to enhance the competitiveness of the industry for growth and to enable the NCC to conduct a thorough review of several key areas within the sector, VAS aggregators were listed alongside Interconnect Exchange Service and Mobile Virtual Network Operators for thorough policy reviews.
The NCC explained that VAS aggregators serve as the links between VAS Operators (VAS Content Providers) and MNOs, saying they play a crucial role in the ecosystem by facilitating seamless connection of VAS operators (VAS content providers) to MNOs.
The Commission noted that the aggregators have the scale to ensure that all VAS operators (VAS content providers), regardless of size, can easily integrate into MNOs.
In the meantime, the Commission has issued a significant number of licences in this category of service, which raised the need to review the market dynamics of the sub-segment to ensure effective competition.
The NCC said it has also carried out a benchmarking exercise with some jurisdictions across the world and observed that there may be currently more VAS aggregator licensees than may be required.
The telecoms regulator said there are currently 49 VAS Aggregator licensees in the country.
“There is, thus, the concern of saturation, with not enough market for the aggregators due to “over-supply”. This has also led to an increase in several aggregators with difficulties interconnecting with the four MNOs,” the NCC stated.
On the NCC move, Eze, the WASPAN National Coordinator, said a robust size of the aggregator sector would check monopolist tendencies whereby the VAS companies have access to many options if service dissatisfaction arises.
Amidst the crisis over trapped VAS funds, the Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, confirmed some progress on the payment of the legacy N200 billion USSD debts.
But Adebayo said the payments have largely been made by small banks, while the tier-one operators have refused to pay.
“If you look at the number, it is not going down. The ₦200 billion, which consists of the principal sum and the interest is likely to rise if the payment continues to drag.”
“We believe that our friends in the banks can do better than what they are doing currently. It is worthy of note that the money received thus far are from some of the smaller banks. The big banks are in denial, they have not been committed. No payment from them,” he said.
Last year, the CEO of GTCO, Segun Agbaje, submitted that Internet-based mobile banking, and not USSD technology, is crucial for financial inclusion in Nigeria.
He also called on telcos to lower the data subscription rates to accommodate everyone to drive the adoption of mobile banking.
Although USSD is used for other purposes like airtime recharge or data bundle purchases, many commercial banks have liberated the technology to optimise delivery and bridge the gap between customers and basic financial services. Instead of visiting the nearest branch for a basic reason like an account balance check, individuals just have to input their bank short code and voila.
While Nigerians everywhere have used USSD at some point, it is mostly popular in remote areas where access to fast Internet is limited. USSD has played a significant role in helping M-Pesa – a mobile money service – succeed in Kenya.
