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NCC EVC, Prof. Umar Garba Danbatta championing new accounting framework for the telecom industry

No more anti-competitive behaviour: NCC enforces New Accounting Framework for telecoms industry

The new NCC accounting framework will prevent anti-competitive behaviour

IT News Nigeria:

The Nigerian Communications Commissions (NCC) is committed to the creation of an enabling environment for competition among operators in the industry to ensure the provision of qualitative and efficient telecoms services as stipulated in Nigerian Communications Act (NCA), 2003.

According to a statement signed by Director, Public Affairs, Dr. Ikechukwu Adinde, this move is to further ensure transparency and accountability in regard to effective regulation and prevention of anti-competitive behaviour, the NCC has commenced the implementation of the Accounting Separation Framework (ASF) in the Nigerian telecoms industry effective from July 15, 2020

NCC is championing implementation of Accounting Separation Framework for the nation’s telecoms industry to ensure that services are cost-based, transparent and non-discriminatory.

The policy document, “Determination on the Implementation of an Accounting Separation Framework for the Nigerian Telecoms Industry”, which was developed via a consultative process in 2015, has undergone a comprehensive review by the regulator in collaboration with telecoms licensees and other critical industry stakeholders.

With the commencement of the implementation of the framework, telecoms licensees are, henceforth, obligated to submit their Regulatory Financial Statement (RFS) to the Commission in line with the new ASF, within seven months after the end of the licensees’ financial year.

What did the EVC says about accounting framework?

Prof. Umar Danbatta, the Executive Vice Chairman of the NCC expressed optimism about the framework noting that “the new ASF will promote an industry environment that fosters open and transparent financial reporting, while ensuring that charges for telecom services are cost-based and non-discriminatory.”

accounting framework

The Commission, however, stated that submission of RFS in line with the new framework, is currently limited to and mandatory for only six telecom licensees, adding that this will subsist for an initial period of two years after which the regulator may review the list to include other operators.

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The six licensees include Airtel Nigeria, MTN Nigeria, Emerging Markets Telecommunications Services Limited (9Mobile), Globacom Nigeria, Main One Cable Company Limited and IHS Nigeria.

Adducing reasons for limiting compliance to six operators for now, the Executive Vice Chairman (EVC) of NCC, Prof. Umar Garba Danbatta, said the decision was taken to ensure necessary structure is in place for reviewing and analysing the accounts before applying the new framework to all licensees in the industry.

Danbatta, however, stated that any other licensee willing to prepare its financial statements in line with the new framework is allowed to voluntarily do so, just as he said the Commission may exercise its discretion to demand that a licensee prepare and submit separated account where it is determined that the activities of such a service provider are deemed critical to the overall well-being of the Nigerian telecoms industry.

Therefore, for full and effective implementation of the Framework, every operator under the ambit of accounting separation is required to prepare an Operator-specific Accounting Separation Manual (OASM) containing policies, principles, methodologies and procedures for accounting and cost allocation, which must be submitted to the Commission on or before October 30, 2020 for regulatory approval.

Licensees shall also be required to prepare their financial and non-financial reports in line with the Guidelines for the ASF while reports shall be furnished by the licensees for every account year beginning from the 2020 financial year end.

Also, as part of operators’ licensing conditions, the Commission requires licensees to prepare, in respect of each complete financial year or of such lesser periods as may be specified, separated accounting statements for all their activities.

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accounting framework

According to Danbatta, the Commission considers the Accounting Separation Framework “as an effective, least evasive and less costly solution to implement to meet its regulatory objectives”, adding that the implementation of the Framework is also a key deliverable for the Commission in the new National Broadband Plan (NBP), 2020-2025.”  

The EVC added that the Commission took into consideration the inputs from industry stakeholders and has provided capacity-building for operators and for relevant staff of the Commission to ensure seamless implementation of the Framework.

Danbatta further reiterated the commitment of the Commission towards continually developing policies, initiatives and programmes aimed at boosting healthy competition among telecoms operators in the country to ensure that consumers continue to enjoy efficient and affordable telecom services.

Accounting Separation (AS) has become an effective means in most of the developed telecoms markets in order to enhance cost transparency, to promote fair market prices, avoid SMP and non-discriminatory practices. The major goal for the regulator is to identify-competitive cross subsidies.

How news accounting framework strategy all began

The implementation of Accounting Separation Framework for the nation’s telecoms industry will  ensure that services are cost-based, transparent and non-discriminatory. It all began in December 2019 at a Workshop on ‘Operators Capacity Building on the Framework For Accounting Separation For The Nigerian Communications Industry,’ at the Colonades Hotel, Ikoyi Lagos.

NCC said this is in exercise of its regulatory functions as provided for under the Nigerian Communications Act (NCA), 2003, which the Commission considered the need for the implementing an Accounting Separation Framework that outlines the key principle and guidelines required for the preparation and submission of Regulatory Financial Statements (RFS).

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Speaking at the Workshop, the Commission’s Director, Policy, Competition and Economic Analysis, Ms. Josephine Amuwa, said  the framework will outline the key principle and guidelines required for the preparation and submission of Regulatory Financial Statements (RFS) for telecom operators.

 “We believe that Accounting Separation Framework will assist in ensuring that charges for telecommunication services are cost-based, transparent and non-discriminatory. It will also assist the commission in the monitoring of operators’ compliance with other regulatory obligations,” she said.

Amuwa added that the operators are expected to reap the strategic benefits of gaining a better understanding of unit costs, cost drivers and profitability of different services from the preparation of Regulatory Financial Statements.

The framework, she explained,  will identify and prevent any undue discrimination or practices that substantially lessen competition such as cross-subsidization, margin squeezes and ultimately, avert probable issues of regulatory overlap arising from the convergence in technology and service offerings that may extend.

She explained that the Accountıng Separation Framework issued by the NCC provides a comprehensive set of policies and guidelines for generating detailed regulatory financial statements, which will enable NCC to independently analyze revenues, costs and capital employed across different businesses, products and services of the operators.

The Nigerian Communications Commission recognizes the importance of mandating Accounting Separation within the Nigerian Communications industry and engaged KPMG Professional Services to assist in the development of an Accounting Separation Framework.

“While we understand that operators within the telecommunications industry are already preparing and filing financial statements as required by the law, reporting at the corporate level presents aggregate information, which may not provide sufficient detail for the Regulator for analyzing the performance and competitiveness of the markets within the Industry,” she said.

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