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FG Set to Reintroduce 5% Excise Duty Tax on Telco Services

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Telecommunications - Investors King

The Federal Government of Nigeria is set to reintroduce a 5% excise duty tax on Telco services after it was exempted last month.

The imposition of a 5% excise duty tax on telco services is part of the government’s 2023 Fiscal Policy measures and tariff amendments which have been approved by President Muhammdu Buhari.

In a circular shared on LinkedIn by the Fiscal Policy Partner and Africa Tax Leader, PWC, Taiwo Oyedele, part of the 2023 Fiscal Policy Measures and Tariff Amendments reads,

“This is to confirm that His Excellency, Mr. TelPresident has approved the implementation of the 2023 Fiscal Policy Measures made up of Supplementary Protection Measures (SPM) for the implementation of the ECOWAS Common External Tariff (CET) 2022-2026 and a revised excise duty rates on alcoholic beverages, cigarettes & Tobacco products, as well as introduction on excise duty on Single-Use Plastic (SUPs).

“Telecommunication Tax- the 2023 FPM confirms the excise duty on telecommunication services earlier introduced via the Finance Act 2020 and prescribed in the Official Gazette No. 88, Vol. 109 of 11 May 2022 approved by the President. The tax is applicable on mobile telephone services (GSM), fixed telephone and internet services, both postpaid and prepaid at the rate of 5%.”

Investors King understands that concerning the proposed implementation of excise duty tax on Telecom services, telecommunication consumers under the aegis of the National Association of Telecoms Subscribers are currently in court to counter the government’s move.

Speaking on the issue, the President of the Association of Telecommunications Companies of Nigeria, Mr. Tony Emoekpere, said,

“If the excise duty tax on telecom services is reintroduced, the advantages of its removal will be eroded. This sets us back, we have always been complaining about multiple taxations, and the removal of excise duty was a relief from the Federal Government on the challenges we were facing.

“Do not forget that some of these multiple taxations we are facing are in areas where the Federal government does not have a direct impact like in the states, the FG didn’t have control over that. The removal helped the industry, but putting it back just sets us back to the challenges we have been facing all this while.”

Federal Government implementation of a 5% excise duty tax on Telco services is coming after it was dropped in March 2023, after six months of intense deliberations with the telecommunications industry stakeholders.

Recall that Nigeria’s Minister of Communications and Digital Economy, Isa Pantami during the suspension of the 5% tax had expressed concerns that the industry is already overburdened by excessive and multiple taxations, which will likely adversely affect the sector if the government fails to take any precautions.

With the reintroduction of a 5% excise duty on telco services, it could discourage Nigerians from using telecommunication services which have become a necessity for many. It could also negatively impact the telco sector and further contribute to more hardship for Nigerians.

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Telecommunications

Ethio Telecom Sale to Foreign Bidders Halted; Local Investors to Get Priority

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Ethiopia has decided to halt the sale of its state-owned telecommunications operator, Ethio Telecom, to foreign investors.

Instead, the government will prioritize domestic retail investors before listing the company on the nation’s upcoming securities exchange.

Originally, the Ethiopian government planned to sell 45% of Ethio Telecom to foreign investors. This approach was abandoned in November after Orange SA, a major contender, withdrew from the bidding process.

Emirates Telecommunications Group Co. was also rumored to have considered a bid but did not proceed.

“There were bidders, but each one of them has left the process at one point,” said Abdurehman Eid, CEO of Ethiopian Investment Holdings, which is overseeing the sale along with the finance ministry. “At the end, we felt it’s probably better to halt the process.”

Eid explained that foreign interest did not meet Ethiopia’s expectations. “The priority now is to expedite the sale of 10% to retail investors, who are showing a huge appetite,” he noted during an interview at a sovereign wealth fund conference in Mauritius.

The focus on foreign investors will resume after Ethio Telecom is listed on the Ethiopian Securities Exchange (ESX), set to commence operations in October.

Ethio Telecom, the largest telecommunications operator in Africa’s second most-populous country, had a monopoly for decades. By January, the company boasted 74.6 million subscribers and recorded a profit of 11 billion birr ($191.6 million) for the first half of the fiscal year.

The shift in strategy underscores Ethiopia’s intention to leverage domestic investment capacity. The decision to prioritize local investors aligns with broader economic goals, aiming to stimulate local participation in major economic sectors.

This move is part of a larger plan to list five other state-owned companies on the ESX. According to Eid, proceeds from these divestitures will be utilized to reduce public debt.

Over the years, enterprises controlled by the government have accumulated substantial debt, leading to financial struggles.

The Liability Asset Management Corp., established three years ago, currently manages close to 780 billion birr in debt.

By redirecting the sale of Ethio Telecom shares to local investors, Ethiopia is fostering a more inclusive investment environment and setting a precedent for future listings.

The new strategy is expected to enhance domestic capital markets and provide more opportunities for Ethiopian citizens to invest in the country’s economic future.

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Nigeria’s Monthly Internet Usage Skyrockets by 501.99% in Just 5 Years

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Nigeria’s digital landscape has transformed in the past five years with monthly internet usage soaring by an astonishing 501.99%.

The surge in online activity, driven primarily by the proliferation of streaming services and other digital platforms, has bolstered the country’s internet usage.

According to data from the Nigerian Communication Commission (NCC), monthly internet usage has surged from 125,149.86 terabytes (TB) in December 2019 to 753,388.77 TB as of March 2024.

This exponential growth reflects a fundamental shift in how Nigerians access and consume information, entertainment, and services.

The COVID-19 pandemic acted as a catalyst for this surge in internet usage, as lockdowns and social distancing measures compelled individuals and businesses to rely heavily on online platforms for work, education, and social interactions.

Video conferencing, online learning, and virtual events became the norm, driving up demand for internet access across the country.

“The year 2020 witnessed a significant surge in data usage… The increase in data usage is directly linked to the outbreak of the COVID-19 pandemic, which disrupted normal activities, and most functions had to be held virtually including schools, corporate meetings, etc.,” stated the NCC in its 2020 industry report.

Streaming services emerged as a major driver of internet consumption, with platforms like YouTube, Netflix, and Spotify experiencing a surge in users.

Adetutu Laditan, Senior Product Marketing Manager for Sub-Saharan Africa at YouTube, noted, “We have a lot more users coming online and consuming more content… Trends are changing; digital is here to stay… For instance, more Nigerians are watching Nollywood movies on YouTube.”

The shift towards digital consumption was further fueled by the availability of a vast library of free content on the internet.

Nigerians, both young and old, have embraced online platforms for entertainment, education, and communication, contributing to the exponential growth in internet usage.

Karl Toriola, the CEO of MTN Nigeria, highlighted the changing consumption patterns, stating, “A lot of people are shifting their consumption from traditional voice and circuit switch services to data services…”

According to GSMA, 85% of Nigerians on mobile internet use it for video calls, 75% for watching online videos, and 54% for listening to music online.

The surge in internet consumption has not only transformed the way Nigerians interact with the digital world but also presented significant opportunities for economic growth.

The information and communications technology sector, buoyed by increased data service consumption, has remained resilient even during periods of economic uncertainty.

Despite the growth in internet usage, challenges persist, including broadband penetration below 50%, urban-rural disparities in internet access, and fluctuating internet speeds.

Also, the high cost of smartphones remains a barrier to many Nigerians, hindering widespread adoption of digital technologies.

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Airtel Africa’s Subsidiary Repays $550m Bond, Achieves Zero-Debt Position

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Airtel Financial Results - Investors King

Telecommunications giant Airtel Africa announced that its subsidiary, Bharti Airtel International (Netherlands) B.V., has successfully repaid its $550 million bond in full.

This achievement marks a pivotal moment for the company, as it now stands in a zero-debt position at the holding company level.

The news came through a corporate filing with the Nigerian Exchange Limited, signed by Airtel Africa’s Group Company Secretary, Simon O’Hara, on Monday.

The $550 million bond, known as the 5.35% Guaranteed Senior Notes, matured on Monday, and the repayment was made entirely from cash reserves at the holding company.

Airtel Africa highlighted that this repayment is part of its strategic initiative to reduce external foreign currency debt. Back in June 2019, during its IPO, the group had a substantial $2.719 billion of external debt at the holding company level.

This indebtedness exposed the company to currency fluctuations and necessitated the upstreaming of funds to cover interest costs and principal repayments.

Through consistent execution of its strategy focused on strong free cash flow generation and successful upstreaming efforts, Airtel Africa has been steadily reducing its holding company debt over the past few years.

The culmination of these efforts is the achievement of a zero-debt position at the holding company level.

The company’s current leverage and capital structure underscore the success of its capital allocation strategy since its IPO.

Airtel Africa intends to continue reducing foreign currency debt obligations across its operating companies (OpCos) in line with this strategy.

Despite this significant financial feat, Airtel Africa faced challenges in its financial performance, primarily due to foreign exchange headwinds.

The company reported a $89 million loss after tax, translating to a $549 million loss net of tax.

This loss was mainly attributed to the devaluation of the naira in June 2023 and the devaluation of the Malawian kwacha in November 2023.

The devaluation of the naira had a profound impact on Airtel Africa’s financial results, resulting in derivative and foreign exchange losses amounting to $1.07 million during the year.

However, despite these challenges, the company’s board proposed a final dividend of $3.27 per share for the year ending March 2024.

Airtel Africa’s successful repayment of its $550 million bond and attainment of a zero-debt position underscore its commitment to financial prudence and strategic debt management.

The company’s resilience in navigating foreign exchange fluctuations reflects its robust operational framework and sets a positive trajectory for its future financial performance.

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