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Opinions of Wednesday, 11 November 2015

Columnist: Samuel Dowuona

Letter to the President: Gargantuan scramble for telecoms cash

Opinion Opinion

Following the re-emergence of issues about telecom revenue monitoring in Ghana and its attendant back and forth between two state organizations, President John Mahama has invited the Ministers of Finance and of Communications, the Attorney-General and the institutions involved in the struggle to bring some finality to this rather protracted and somewhat obscene scramble for telecoms revenue. Beyond the main issues that prompted the long awaited presidential intervention, the scramble for telecoms revenue has been going on at various levels and in numerous forms.

This writer would like to bring the attention of Mr. President to a bigger picture on this matter, so that while dealing with the specific issues of the battle between the toe ministries and their agencies, a look could also be taken at some of the other ways Ghana is being denied telecoms revenue unfairly. Mr. President, this has gone on long enough and now it is becoming obscene and fraudulent because you and your predecessors have sat by for too long and pretended all is well. But it is not.

It might turn even dirtier if some presidential intervention is not brought to bear on this shameful manner in which everyone, from telcos, their content providers, SIMBOX fraudsters, self-styled revenue assurance contractors and even government institutions and some individuals who work in them are scrambling for revenue in the telecom sector.

It starts with the telcos themselves. Not long ago, this writer pointed out many ways in which telecom operators in the country are using fair and not too fair means to shore up their revenue at the expense of consumers, and value added service providers (VASPs).

Meanwhile, government officials and industry regulators have for years been alleging that the telcos also deny the state revenue through subtle and unethical tax management practices that leads to gargantuan transfer of telecoms revenue from this county before tax. So in effect the telcos' practices deny the country revenue that was generated here and could have been invested here.

The telcos have been a bit dodgy about whether they make transfers of hard currency out this country for years (whether lawfully or unlawfully) until recently news broke that MTN Ghana, for instance, legally transferred at least GHC758 million (US$204.9 million) to MTN Dubai and onward to MTN Mauritius between 2008 and 2013. And that constituted 9.6 per cent of its revenue over the period. It was transferred with approval from the Ghana Investment Promotion Council (GIPC), allegedly to pay for technology transfers and management services.

Mr. President, the news also had it that GIPC usually approves up to 6 per cent of revenues for multinationals to transfer out of Ghana. So 9.6 per cent is 3.6 percentage points (GHC284.25million) higher than the supposed threshold. Sir, the GIPC is your agency and so you can look into it and determine if this country was shortchanged or not. Apparently, approval for MTN to do further transfers have been suspended to enable the appropriate bodies look into the components of the transfers, the news said.

Years ago, this writer had asked the CEOs of MTN Ghana Vodafone Ghana about allegations of money transfers and they had both denied it, as captured in the two stories on these links -- Link 1 and Link 2. Whereas it is still not clear if Vodafone has also started transferring money from Ghana yet, it is common knowledge that in July 2012, the global telecoms giant was cited for huge transfers it was making from the UK through a spaghetti of cover up companies into tax havens.

So Mr. President, as we say in our local parlance, "shine your eye." It is just a matter of time and it will be clear if Vodafone, Tigo, Airtel, Glo and Expresso are also transferring money out of Ghana into tax havens or, as they say, to pay for technology transfer and for management services. But there is one more way in which telcos transfer moneys that could have stayed in the country. There is a segment of the telecom industry players called the Value Added Service Providers (VASPs).

They create content like motivational messages, ring tones, caller ring back tones, news in brief, short audios and videos among others and sell them through short codes to the interested subscribers of the telcos. These services usually come with higher charges than normal SMS rates. Because the service is on the telcos platforms, they do the billing for the VASPs and they (the telcos) keep between 60 to 70% of the money and give the young VASPs only 30% to go share with their content providers.

The VASPs have complained about this matter so many times, but the more they complain, the more the telcos keep imposing even worse revenue share arrangement.

And the telcos allegedly attribute their behavior to orders from their respective group offices abroad. So even the group executives sitting abroad, are interested in the money generated through the creativity of other Ghanaian players in the local telecom ecosystem.

The leading VASPs in Ghana have constituted themselves into the Wireless Application Services Providers Association of Ghana (WASPAG), and the Head of Regulatory and Corporate Affairs for WASPAG, Conrad Nyuur told this writer "the telcos started with a 50-50 revenue share but over time they have imposed new arrangements without discussing with any of us and when you ask they tell you the order is from their group level - this is totally unfair because how can someone sit at the group level outside of this country and determine what relationship telcos have with their local partners". So in effect, Mr. President, the telcos have squeezed the VASPs so hard, the latter are unable to reduce charges for the services they provide.

Under normal circumstances, telcos will not lose anything if they charged their normal SMS rates from VAS and let the VASPs keep the rest so that they could reduce the rates for consumers and even develop even more content and ideas, like what happens in other jurisdictions in the developed world.

While, the telcos are making it difficult for the VASPs in Ghana to charge less, they (the telcos) have resorted to the use of VASPs sitting outside of this country, who have the incentive in their respective countries to offer very affordable services, such that even the local VASPs cannot compete with them in Ghana. Some of these VASPs are in France, Holland, India, China etc and the telcos in Ghana use them to run big promotions on the SMS platform into Ghana and transfer huge moneys in dollars to pay for their services.

So that is another way in which telcos are transferring money out of this country. But the local VASPs themselves are part of the scramblers for telecoms revenue, except that they target the consumer directly. Because telcos take what the VASPs describe as "more than a lion's share", the VASPs are forced to depend on volumes to shore up their share of the revenue.

So they often place consumers on premium services without the consumer's consent, and they charge for those services without the consumer knowing he or she is being charged for unsolicited service. A greater chunk of the revenue from the illegal practice still goes to telcos, but the volumes mean the VASPs can also make ends meet. The other group of scramblers for telecoms revenue in this country are the SIMBOX fraudsters.

These are not genuine business people using unethical and sometimes illegal means to make money. These are hardcore fraudsters taking advantage of technology to reroute international communication traffic through unapproved channels and thereby siphoning millions of dollars that should go to the state and to telcos.

A lot has been said about SIMBOX fraud in previous articles like the one on this link. NCA and GRA Mr. President, it would appear that the state agencies assigned to ensure that Ghana got her due from the telecom industry, in terms of direct revenue, service quality, impact on growth of businesses and general national development at all levels, are themselves in some sort of a scramble for telecoms revenue.

It may be partly for very good reasons, but there seem to be an obscene turf war between Ghana's telecoms industry regulator, National Communications Authority (NCA) and the state revenue agency, Ghana Revenue Authority (GRA) as to who has the legal mandate for telecom revenue assurance for the state.

GVG The battle started way back 2007/2008 when the Ministry of Communications imposed a company from Haiti called GVG (Global Voices Group) on the NCA as the agency selected to help NCA monitor telecoms revenue from incoming international traffic in real time. Mr. President, the NCA would have preferred a licensed operator for that job but government at the time impose a contractor/vendor GVG for reasons only known to the government then.

And when the subsequent government took over they decided to continue working with GVG. But before GVG could connect a wire to any telco and monitor, they were sued and they never got to do real time monitoring. But the NCA kept paying GVG a percentage of revenue from that international gateway for years without explaining to the public what exactly GVG was paid for, since they did not do the real time monitoring.

Mr. President, it was estimated that GVG was paid up to US$1.5million every month out of the estimated US$6million NCA made from the international gateway. But as contained in the story on this link, a former NCA Boss, Paarock VanPercy said GVG was paid up to about US$400,000 a month for a number of services the DG listed. The bottom line however is that, GVG did not have a license.

It had a contract to do real time monitoring of telcos billing systems for revenue assurance on the international front. GVG NEVER did any real time monitoring but were paid at least US$400,000 every month for years before they finally thought they had made enough free money and they sold to a local company and left with their booty.

Subah GVG was acquired by the Jospong Group of Companies, through another one of its companies which first came into the news for the bad reasons still related to the gargantuan scramble for telecoms revenue. The company in question is Subah Infosolutions Ghana Limited. Subah was contracted in 2009 by GRA to do real time monitoring of domestics telecoms traffic for revenue assurance for the state.

To do that, Subah was also required (like GVG was) to connect directly to the telcos and take raw revenue flow data and verify. They were to be paid 13.5 per cent of any incremental revenue they discovered, and that was only if they discover any incremental revenue (a purely performance-based contract). Incremental revenue here meant revenue that telcos hid from the state and therefore evaded taxes. That would have been a crime on the part of the telcos. So Subah was supposed to be like a police man on the telcos.

Mr. President, Subah NEVER connected to the billing systems of any telco, NEVER discovered any incremental revenue; no telcos was held liable for evading tax, and yet in 2013, news broke that between 2010 and 2012, Subah was paid a whopping GHC74million plus of the painstakingly mobilized taxpayers' money, which could have been used for loads of developmental projects.

Till date, that huge amount of telecom revenue has not been properly accounted for, and yet no one lost a job, and Subah kept their contract and even got more state contracts and received more state funds to participate in street naming among other things. But Sir, in a rather strange twist of events, Subah has not only been around and received more state funds, but also things have actually gotten better for them as they have entrenched themselves, with the willing and ready help of your state revenue agency, GRA to get their contract extended, with a termination clauses that puts more than a handsome retirement package in the hands of Subah if the contract was terminated, and places a huge liability on your consolidated fund Mr. President.

Subah's original contract, which was exposed as a fraud, was due to end May 2015, by which time the telecoms industry regulator, NCA had managed to get your good self and your Cabinet to approve a policy that enforces the portion of the Communication Service Tax (Amendment) Law, 2013, Act 864, which enjoins your Ministries of Finance and of Communications to establish a common monitoring platform for both incoming international calls and domestic Interconnect traffic, while doing revenue assurance for the state on both the local and international fronts for less. That policy, Mr. President, led to the interconnect clearinghouse (ICH) license, which Subah and others bid for and local company Afriwave Telecoms Ghana Limited won it fair and square.

Obviously, Subah was aware its contract was running out and the new policy required them to have a license before they could continue, and that was why they participated in the bid for the license but were not success. But before Afrilwave even installed equipment to start work, a law suit was filed against it, challenging its legality and constitutionality.

Because of the suit, a joint committee constituted by the Ministries of Finance, Communications and of Justice agreed that Subah holds that fort in an interim capacity till the court case was determine, particularly regarding the interconnect aspect of the work of the ICH. Mr. President, while the agreement was to give Subah an interim contract with a termination clause that gives government the opportunity to get out easily and allow the ICH to take over, your revenue agency, the GRA rather extended Subah's contract for a full one year, renewable for five years and with a termination clause that says, in the event the contract was terminated before of the end of the stated period, the state will pay for all of Subah's equipment in full and also pay for the rest of the contract period. This clause, according to the Attorney-General, was different from what the termination clause was when she approved of the interim contract for Subah.

This writer is not a lawyer, but if a contract is given to the Attorney-General for legal clearance, and after the clearance has been obtained, whatever adjustments are included thereafter should also go back to the AG for legal clearance. But from what the AG is saying, new stuff were inserted into the approved contract and so the implemented one is different from what she approved.

Now those wicked and allegedly fraudulent insertions have placed unnecessary liabilities on the state. Mr. President, this is something you should take a very serious view of because it would appear your appointees at the GRA are out to shortchange the state at all cost.

Firstly, they paid Subah more than GHC74million in two years for no work done, and after they have been caught pants down, they renewed a full contract for Subah with benefits that places a huge burden on the meager resources you are struggling to disburse fairly and widely to reach all. Now the NCA, has found need to let Subah go so that the aspect of your ICH policy which is not in legal dispute could start operations. But knowing what they have done, and the deliberately liabilities they have placed on the state, the GRA is busily quashing every effort to get the ICH to take off.

They have ignored the cautions of the AG about the fraudulently inserted termination clause and are out in a turf war with NCA against the take off of the ICH. Mr. President what are we doing to our country? For how long would you sit by and watch the people you have appointed do the wrong thing and keep expecting them to do the right thing? Do we want the ICH or not? Didn't Subah believe in the ICH when they placed a bid for the license - didn't Subah believe they needed a license when they paid the non-refundable fee and lost it to Afriwave? Mr. President, it would appear the people you appoint or people appointed in your name to various high public offices only go in there to set the tone for their personal and corrupt advantage.

At least two former top officials of the NCA are the main pillars behind Subah and using all their connections in state institutions to manipulate the system to their advantage. Sir, it is time to let some of those people know that their time is up. It is time to let Ghanaians know that when you say you are fighting corruption you mean nothing less than just that.

There are too many scavengers in and around the telecoms industry and they are all seeking to grab some of the big cash they suspect to be flowing in that industry. No one seem to pay much attention to the contribution of the industry to job creation, business development and advancement of other sectors, effective communication among ourselves, career development, new businesses and many more.

The state institutions seem to be more interested in the direct revenue from the sector. Whereas the sector has the lowest level of inflation in the country (which means telecom tariffs are relatively low), it would appear it is the most taxed and the sector with the largest number of permit bodies, all of which take money from industry players. So what do we want, as a people, from the telecom sector.

Mr. President I suggest you act on these matters fast before the scavengers chew this flesh also to the bones. Otherwise, the way we have allowed this sector to be abused by cash-hungry and self-serving state agencies, it will make the industry players continue to find subtle and legal but unethical ways to engage in more capital flight practices because they cannot watch their investments go down the drain while some individuals in state agencies and their cohorts in the private sector continue to enrich themselves with telecoms revenue.