Association of licensed Telecom Companies of Nigeria (ALTON), umbrella body of telecom operators in the country, has raised the alarm over the review of annual payment structure under the Financial Reporting Council Amendment Act 2023 (FRC Act), warning that its implementation will hurt telecom operators.

The group warned that “the new structure would pose significant challenges for our members, especially in light of the prevailing harsh economic conditions in the country”.

A letter addressed to Dr Rabiu Olowo, executive secretary/CEO, Financial Reporting Council of Nigeria, dated September 13, 2024 and jointly endorsed by Gbenga Adebayo, chairman, and Gbolahan Awonuga, executive secretary of ALTON respectively, highlighted the concern of the reviewed annual payment structure.

“ALTON writes to express its deep concerns regarding the recent review of the annual payment structure under the Financial Reporting Council Amendment Act 2023 (FRC Act) particularly as it relates to non-quoted public interest companies.

As you are aware, the new payment structure is based on a percentage of the annual turnover of our member companies, rather than the previous maximum cap of N1 million that was payable under the Act. Section 33(1)(d) of the Act now requires private companies to pay their annual dues based on the computation below: 0.02% of annual turnover of N25 million and below; 0.025% of annual turnover of more than N25 million but not more than N50 million; 0.03% of annual turnover of more than N50million but not more than N500 million; 0.04% of annual turnover of more than N500 million but not more than N1 billion; 0.045% of annual turnover of more than N1 billion but not more than N10 billion; and 0.05% of annual turnover of more than N10 billion.

“On the other hand, Section 33(1) (c) of the Act determines the annual dues payable by quoted companies with reference to a percentage of their market capitalization up to a pre-determined lower amount, which is more favourable to publicly quoted entities compared to the non-publicly quoted entities.  For example, a publicly quoted company with market capitalization of N1 trillion will be required to pay N25 million as annual dues, whilst a non-publicly quoted company will be required to pay 0.05 percent of N1 trillion amounting to N500million. We are concerned about the huge disparity in the amounts payable as annual fees by entities having the same turnover figure deserves to be addressed in the face of the harsh operating environment in the country.

“While we understand the rationale behind this review, we believe that implementing the new structure would pose significant challenges for our members, especially in light of the prevailing harsh economic conditions in the country. The telecommunications industry in Nigeria has been facing numerous headwinds, including rising operating costs and foreign exchange fluctuations. The current payment structure will place an undue burden on our members, potentially impacting their ability to maintain operations and continue providing critical services to the Nigerian public,” ALTON wrote.

The group noted that when considering the balance between enforcing the law and the need for Foreign Direct Investment (FDI), as well as the demand for bridging the telecom infrastructure deficit to enhance digital penetration, it urged the FRC to consider adopting alternative computation for companies within the telecommunications industry.

“We respectfully urge the FRC to consider the following suggestions as alternatives: Computation of annual dues based on profit and not revenue.

“By virtue of the nature of the telecommunications industry, our members deploy significant capital towards carrying out their operations and bridging the telecommunications gap within the country. As such, there is a great disparity between the revenue of these companies and the profit which they declare. For example, a company might have a turnover of N200 billion and declare a profit of only N15 billion and it would be unfair for such a company to pay FRC dues based on its revenue. We consequently request that the FRC uses its good office to consider computation of the annual dues for companies within the telecommunications industry, based on their profit as opposed to revenue,” ALTON suggested.

Another suggestion was the reintroduction of a pre-determined cap on the FRC dues.

“We note that the new Act in Section 33 (1)(c) computes the annual dues payable by public companies based on their market capitalization but subject to a pre-determined cap. For example, a public company with a market capitalization of N500 billion will either pay 0.0025% of this amount or N20 million, whichever is lower. On the other hand, a private company with the same revenue will pay N250 million. This disparity is significant and unfair to private companies. In the interest of fairness, we urge your good office to consider reintroducing a pre-determined cap on the dues payable by non- quoted public interest entities, similar to that which is applicable to public companies.

“In the light of the foregoing, ALTON respectfully request you to use your good office to change the basis of computing the annual dues payable based on either of the option mentioned above.   We are committed to working constructively with the FRC to find a mutually acceptable resolution to this matter. We would be more than willing to arrange a meeting with your office to discuss this issue in detail and explore alternative solutions or payment arrangements that would be more manageable for our member companies.

“We firmly believe that a collaborative approach would be in the best interest of the industry, the regulatory environment, and the overall economic well-being of the country,” ALTON stated.