Customers Inconvenienced As MTN Nigeria, Banks Bicker Over Commission

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On Friday, customers of MTN Nigeria awoke to the unpleasant reality that they could not purchase the telco’s airtime through the online platforms of the commercial banks. This caused a general sense of astonishment, which was followed by an explanation by MTN Nigeria via a text message to its customers. The Short Message Service (SMS) read, “Dear Customer, our bank recharge channels are currently unavailable. Kindly recharge using physical cards. We apologise for the inconvenience. Thank you.”

The development was as a result of a fresh price dispute between MTN Nigeria and the banks, following the telco’s unilateral decision to reduce the commission offered to financial institutions for airtime sales, from four per cent to 2.5 per cent. This did not go down well with banks, as they complained about the cost of managing the infrastructure and other operational costs they incurred.

In a letter to one of the MTN Nigeria’s distributors, dated March 31, 2021, the banks had protested that the proposed effective discount rate of 2.5 per cent did not cover their product marketing, application management, customer complaints management, and fraud management costs associated with the airtime vending service. In the letter, the financial institutions insisted that an effective discount rate of four per cent was the minimum acceptable to them for rendering the service on behalf of MTN Nigeria. They demanded maintenance of the status quo to enable them continue to render the service.

“Please note that if we do not receive a written confirmation of the acceptance of the above terms, we will be constrained to disconnect this service on our platforms and channels by close of business, April 1, 2021,” the bank stated.

An industry source, who is familiar with the matter, said MTN Nigeria’s position, which came 48 hours before its implementation date, was clearly in bad faith and without regard for the interest of the banks.

“But it is in line with MTN’s monopolistic tendencies and working against national interest,” the source stated.

He added, “In response, the banks have decided to suspend the service. Note that this relates to MTN alone.

“The banks are insisting that they won’t take anything less than four per cent because they bear the cost of maintaining the infrastructure, protecting it from cyber-attacks, among other costs.

“We have decided we would not offer MTN’s services on our platforms anymore.

“It was agreed that same date that MTN Nigeria gave us that it would start charging the 2.5 per cent, that we would stop offering its services on our platforms. Unless MTN reverses the discount and goes back to the four per cent, we would no longer sell its airtime on our platforms.

“This is not an industry issue, this is personal to MTN alone. We cannot allow a foreign company come in here and take advantage of Nigerians. No Nigerian company can do this in South Africa and get away with it.”

The source alleged that MTN’s plan was to outperform Nigerian banks and dominate the business environment.

He further alleged that the telco’s position was based on a directive from its parent company to implement a market-dominant plan, which includes: controlling the Nigerian telecoms and financial sectors; eliminating aggregators and squeezing margins from all third party contractors and business partners; and preventing Nigerian banks from winning the battle for customer engagement via the telecom’s platform.

According to the source, “The recent Unstructured Supplementary Service Data (USSD) pricing war sponsored by MTN with support from lobbyists and the new reduction in airtime discount rates is part of the company’s plan to curtail the financial inclusion initiatives of the financial sector and force the CBN to grant it a banking license to offer financial services based on its own terms and conditions.

“MTN’s use of lobbyists and practice of exerting aggressive margin pressure on business partners was the model used in Ghana, Benin, Uganda, and Ivory Coast to achieve dominance in Telecoms and Mobile Money.

“In Nigeria, MTN now intends to force aggregators and banks to a lower discount to make up for its inability to charge a higher fee for USSD banking services. The parent company is unhappy with CBN and NCC’s resolution of the USSD issue and has instructed MTN Nigeria to implement this new commission reduction to put further pressure on Nigerian banks and its business partners.”

Attempts to speak with staff of MTN Nigeria’s communications department were not successful. A senior staff of the department refused to pick his calls, and did not reply a text message by THISDAY.

Currently, over 60 per cent of airtime vending by telcos are done electronically through the banks.

However, reacting to the development, the Association of Licensed Telecoms Operators of Nigeria (ALTON) faulted the action of the banks. ALTON expressed concern that the action of the banks would affect MTN subscribers.

Chairman of ALTON, Mr. Gbenga Adebayo, said, “If this is the way the banks want to show to the public that they have impact on telecoms subscribers, then only time will tell. So if there is a commercial agreement dispute between banks and MTN, I think it is also the duty of CBN, which is their regulator, to stop them from disconnecting innocent subscribers. We are watching to see how both regulators will handle this issue.”

Adebayo urged the federal government to step in and deal with the issue once and for all.

The latest dispute came about two weeks after the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission (NCC) resolved a dispute on USSD fee between the banks and the telcos.

CBN and NCC had in a recent communiqué issued at the end of a meeting to resolve the disagreement on USSD fee agreed that with effect from March 16, 2021, USSD services for financial transactions conducted at the banks and all CBN-licensed institutions would be a flat rate of N6.98 per transaction. This replaced the previous per session billing structure, producing a much cheaper average cost for customers to ensure financial inclusion.

The communiqué had explained, “To promote transparency, the new USSD charges will be collected on behalf of MNOs directly from customers’ bank accounts. Banks shall not impose additional charges on customers for the use of USSD channel.

“A settlement plan for outstanding payments incurred for USSD services previously rendered by the MNOs is being worked out by all parties in a bid to ensure that the matter is fully resolved,”

The CBN had in 2018 accused MTN Nigeria of forex manipulation to the tune of about $8.1 billion.

Stakeholders fear that the recent moves by MTN may ruin Small and Medium-sized Enterprises (SMEs) in the country, given the extant policies making it difficult for business owners to break even.

It is widely thought that MTN had long sought to monopolise the telco space, and it almost paralysed Nigeria’s nascent renewable energy sector with its battery product.

An industry stakeholder, who preferred anonymity, said, “The biggest casualties of MTN’s aggressive exploitation of Nigeria are not just the SMEs, who are seeing their commissions constantly cut down till they die out of business; ordinary Nigerians bear the biggest brunt, without even knowing it.

“Nigeria has some of the most expensive mobile data prices in the world, more than 10 times what Indians pay. Telcos like MTN take advantage of their massive size to keep the price of data high so that they can keep extracting money from unsuspecting citizens and a hapless country, all the while repatriating all the money to South Africa and not paying their fair share in taxes.

“It is yet to be known if for once the Nigerian government and even big private institutions will stand up and stay strong to this drowning of Nigerian SMEs and daylight robbery of the country.”

Analysts believe there is need for the telco and the banks to quickly resolve their dispute to avoid the devastating loss of revenue on all sides and the ripple effect on the customers.