Benin: Regulator plays poker with Moov and MTN by cutting networks over increased licence fees

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The new Beninois Government decided to review all telecoms licensing arrangements when it came into office and tasked its newly independent regulator to carry out the task. It argued that the previous Government had out previous licences in an irregular fashion and that it was simply regularising the position. The same issue is also affecting both Liberia and Sierra Leone although in a less dramatic fashion. For events took a turn for the worse this week as the Beninois Government decided to cut off two networks – Moov and MTN – to impose the new level of licence fee it has chosen. Russell Southwood looks at a country where the regulator has cut off the two operators to convince them to pay up.

Benin’s regulator told the two mobile companies that they would have to pay a substantially increased licence fee from that which had originally secured them their operation. In both cases the companies were under different management when they set up operation in Benin. When MTN bought Lebanese-owned Investcom, among its portfolio of operations was Areeba Benin. Likewise Atlantique Telecom bought a clutch of Telecel operations that included Benin. So in neither case were the current operators responsible for the original licensing arrangements that were made directly with the then Government. It was under this Government that someone close to the President took money from Titan Wireless to secure a contract and set up operations in the country.

Nevertheless, for example, MTN is being asked to increase its licence fee payment from US$10 million to US$62 million, a 620% increase. On Monday the regulator suspended both operators’ licences, saying that they had changed their names without permission. It also threatened to cut off both networks if they did not submit documentation detailed the name changes, a threat it made good on by Thursday. Going to war over name changes smacks of being a heavy-handed negotiating gambit. But clearly one to be taken seriously as it now impossible to reach subscribers of each network.

Whilst the Government has a point when it says it wants to correct the “irregular practices” of the previous Government, it is behaving in a way that can only drive international investors away from the country. The one thing that almost every survey of telecoms investors identifies is that they require “the rules of the game” to be clear and transparent and for them not to be applied in an arbitrary manner.

MTN’s figures for the year to December show its Benin operation generated US$41.2m revenue and US$21.4m earnings before interest, tax, depreciation and amortisation. Its Benin subscribers have ARPUs of $21 a month, one of the highest user spending figures for its operations in 21 countries. With just over half a million subscribers, it claims a 40% market share.

The suspension of Moov and MTN’s network operations can only be an unexpected bonus for the two other operators in the market, Bell Benin and Libercom, the mobile subsidiary of the financial disaster that is the incumbent telecom, Benin Telecom. And although the regulator has said that it will impose these increased fees on all operators, it is unclear how the financially embarrassed Benin Telecom will find this kind of money.

Benin’s independent regulator has clearly forgotten that it has a dual set of responsibilities: to ensure that the industry grows and thrives and that Beninois consumers have their interests looked after. It is not clear how increasing the licence fee by over 600% serves either of these objectives.