Nigeria to cut telecom taxes to boost investment

The Nigerian government is planning to reduce taxes on telecommunication infrastructure to promote investment in the sector, according to the country's communications technology minister Omobola Johnson.

''For every naira that is spent on infrastructure, about 70 per cent of it is spent on taxes. We're going to bring that down to a much more reasonable level at 30 to 40 per cent,'' the minister said in an interview with Bloomberg in the capital Abuja over the weekend.

Despite witnessing rapid growth in the country's telecom sector, investments in mobile infrastructure have not picked up due to high federal government taxes and additional heavy fees charged by regional authorities for their infrastructure.

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.

Regional governments shouldn't charge a retail store 10 million naira ($62,000) and phone companies 100 million naira for the same-sized space, Johnson said.

Johannesburg-based MTN Group Ltd and India's Bharti Airtel Ltd are the biggest and second-biggest telecom operators in the country followed by Globacom, Etisalat and MTel.

It has been reported than MTN, Africa's largest mobile operator is exploring ways to offload stake worth over $1 billion in tower network to reduce exposure to costly African infrastructure.

Unreliable power supply and threats from Islamic militants in northeast areas of the country are deterring mobile operators from spending money for the development of communication networks.

Earlier rebel targets included an MTN office in Maiduguri and its base stations and towers.

A few months ago, the regulators imposed fines on major operators for poor quality of service offered to their subscribers due to network congestion and quality of service.

''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.''

Despite the odds, global telecom operators are lured by the demand from Africa's largest mobile market with over 125 million subscribers and a market penetration of around 75 per cent. According to some estimates, the number of cell sites in the country could triple from the current level of around 20,000 in the coming years.

In July, the Nigerian Communication's Commission notified available slots in 5.4 GHz band in the country's six geopolitical regions as well as in the country's commercial capital Lagos.

The government plans to attain 30 per cent broadband penetration by 2017.

 ''These companies will build the infrastructure which they will then lease to the network operators. So in this way, we are trying to attract more investment into the infrastructure, the minister said.

A fortnight ago, Bharti Airtel, the country's second-largest mobile operator said that it would spend $300 million in mobile network infrastructure. (See: Bharti Airtel plans $300-mn expansion in Nigeria).

Airtel, which has a 21-per cent market share, is targeting to increase its subscriber base from 26 million to 30 million by the end of this year.

MTN with a subscriber base of 57 million has 45-per cent market share followed by Globacom with 20 per cent and Etisalat 14 per cent, according to February data.