Monrovia – In recent weeks, the cellular giant, Orange Liberia has been raising alarm over surcharges resulting from new regulations imposed by the Liberia Telecommunications Authority and upheld by the Supreme Court of Liberia.
Analysis by Rodney D. Sieh, [email protected]
The surcharge is a government revenue generator from the telecommunications sector which was recently implemented to replace the 5 percent tax.
The surcharge represents US$22 million on a turnover of US$93.3 million turnovers, with a big sum of that going to Orange France as management and royalties’ fees to avoid further paying local taxes.
Orange’s Coulibaly: US$20M a Year in Taxes
Mr. Mamadou Coulibaly, General Manager of Orange Liberia, who has complained to the Supreme Court of Liberia, is quoted in the France-based JeuneAfrique magazine this month as saying: “We pay an average of 20 million US dollars in taxes each year. On its own, this surcharge represents $32 million on a turnover of $63.1 million.”
Orange’s argument appears to be generating some traction within the Liberian government with a senior government official questioning the cellular company’s contentions. “Orange does not mind paying surcharge in Guinea and Ivory Coast, both Francophone countries, where they invest a lot. But they are objecting in Liberia where they have made no investment since acquiring the company from Cellcom.”
In April 2016, Orange Group announced the completion of its acquisition of the mobile operator Cellcom. The buyout was carried out via Orange Cote d’Ivoire, which agreed to acquire Cellcom Telecommunications’ Liberian subsidiary at the start of 2016, inheriting around 1.4 million subscribers from Cellcom.
In May the Civil Law Court ‘B’ at the Temple of Justice denied contentions raised by Orange –Liberia, challenging the Liberia Telecommunication Authority (LTA) order 0016-02-25-19 that was intended to establish price floors for on-net voice and data services, a regulatory fee on telecommunications goods and services, and a regulatory surcharge for on-net voice and mobile data services.
Judge Scheaplor R. Dunbar declared at the time that: “The petition for judicial review is denied and dismissed, and the resistance is sustained. The stay order of April 15, 2019 is lifted. LTA may proceed to enforce and implement the order,” adding costs ruled against Orange-Liberia.”
Orange-Liberia’s argument has been that despite the regulatory authority vested in LTA over the telecommunications sector and its authority to issue regulations in exercise of said authority, “LTA cannot determine and impose surcharges as same is not within its regulatory authority, as that authority was removed by an Act passed by Legislature and published on August 29, 2017.”
The company contends, that LTA has no legal rights to impose floor price and levy surcharges on telecommunications goods and services and that the repealed provision was related to excise tax, which Orange claimed was within the authority of the Liberia Revenue Authority (LRA).
Judge Dunbar rejected Orange’s argument, ruling that the LTA’s order was promulgated in conformity with the Telecommunication Act of 2007, stressing “And that the said order does not violate any provision of the Revenue Code.”
The judge said LTA does not have to obtain the full agreement of all service providers and stakeholders before it can promulgate an order, rule or regulation.
Urey Challenged Freebies
In June 2016, Mr. Benoni Urey, then a candidate for the Liberian Presidency, under the banner of the All Liberia Party argued, in a letter to former President Ellen Johnson-Sirleaf, that free calls to the U.S. and other countries were gravely impacting revenue generation for Liberia.
In a letter addressed to President Sirleaf, Mr. Urey wrote: “The long-running and unending promotions, as well as the various freebies, i.e. free calls to the USA; $1.00 for 3 days or $1 for 5 days; the free data services; 3GB for $5 for a month; etc.” are negatively impacting revenue generation to the Government of Liberia, the Liberia Telecommunications Authority and Liberian GSM companies.”
In Mr. Urey’s letter of complaint, he indicated that the government had lost a total of $22M for the operating years of 2013, 2014 and 2015 due to long-running and unending promotions. He indicated further that of nothing was done by the government, there could be further economic repercussions on the country.
Said Mr. Urey: “Madame President, the loss of revenue to GOL has increased year on year and is expected to even grow higher if these promotions are not curtailed and the market stabilized…in view of the above, I pray your indulgence for consideration in addressing these issues.”
Based on Mr. Urey’s letter, former President Sirleaf reportedly met with the Commissioners of the LTA and the government submitted a bill to the National Legislature to amend the Revenue Law dated May 16, 2016. The bill imposes an excise tax of 1 cent US on each minute of call made over the GSM networks. This was in addition to the 15% GST already being collected from the GSM companies. If the GSM service providers have to pay one cent for each call minute, there would be no way to offer free calls to their customers. This would end all the free promotions that many Liberians depend upon every day to communicate with family, friends, and business associates.
“Orange does not mind paying surcharge in Guinea and Ivory Coast, both Francophone countries, where they invest a lot. But they are objecting in Liberia where they have made no investment since acquiring the company from Cellcom.”– Mr. Mamadou Coulibaly, General Manager of Orange Liberia
FrontPageAfrica reported at the time that Dr. Edward B. McClain, Jr., then Minister of State for Presidential Affairs directed Chairman Urey’s letter to the LTA, indicating that the letter would be discussed during a meeting with the President and the Commissioners of LTA.
At the time, industry observers argued that curbing free calls hurt the consumer market because government intervention in the free market would undermine competition and lead to higher tariffs and hurt Lonestar competitors and consumers.
The International Monetary Fund (IMF) has in recent years made many interventions in Liberia to avoid policies that tend to undermine the free market. Industry experts at the time argued that it would be naïve of the government to expect to increase taxes by imposing an excise tax simply because people would adopt, make less calls, and use apps such as WhatsApp, Viper, Facebook Messenger, and FaceTime to make free calls and send messages. In fact, the government may end up losing revenue if users decide that traditional mobile calls and SMS are too costly.
Fast-forward to February 2019, the Liberia Telecommunications Authority (LTA) on February 25th issued an Order (LTA Order: 0016-02-25-19) establishing Price Floors for both on-net voice and data services. This followed series of stakeholders’ consultations with the key GSM Operators in Liberia, Orange Liberia and MTN Liberia. The Order came as a result of declining revenues from the sector as a result of long-running and unending promotions as well as predatory pricing by operators which led to a decline in revenues generated by the sector.
In addition to the revenue loss to the economy, the unending promotions and predatory pricings have had a great impact on the quality of service offered by the operators. Networks were continuously congested, call qualities eroded and value for money declined significantly.
While the operators opted for an adjustment in pricing and ending the free calls in the networks, neither one of the two operators wanted to be the first to end the promotions; for fear of losing its subscribers to the competition. This brought the LTA in the conformity of its regulatory functions. During the consultations with the stakeholders, both operators agreed to the cutting off of long-lasting promotions and for the adjustment in the prices. Each operator proffered suggestions and made recommendations that benefited their market. LTA, as a regulator, then had to come in to create the level playing field for the benefit of the operators, the government and the consumers. Thus, the promulgation of the Floor Price Regulations and the subsequent issuance of the LTA Order, setting floor prices for both on-net voice and data; two areas where the freebies were prevalent.
Gauging Price Floor Effects
As per the LTA Order, operators shall not price mobile voice services, whether as standalone or as a bundled service, below US$0.0156 per minute. Additionally, Operators shall not price mobile data and Internet access services below US$0.00218 per megabyte. As an incentive to government, operators shall pay a regulatory fee of five percent (5%) of the total sale of domestic telecommunications goods and services sold in the reporting period. This regulatory fee runs for a six-month period leading up to March, 2020. From March 2020, operators will be required to pay a regulatory surcharge of $0.008 per minute for voice calls and US$0.0065 for each megabyte of data. These surcharges are in lieu of the current five percent (5%) regulatory Fee.
Industry observers say Price Floors is only unique to Liberia. In Guinea where both MTN and Orange operate, and where Orange Guinea is eighty percent (80%) market leader, the regulator, ARPT, levied several taxes and other regulatory fees on the telecom sector. According to the Guinea “Reforming Mobile Sector Taxation in Guinea”, the total tax contribution from the telecom sector in Guinea represents 54% of the mobile sector’s total market revenue. In 2017, the total tax contribution from the sector was estimated at $278M, representing 20% of the country’s revenue. According to statistics, the total tax contribution from the telecom sector in Guinea (54%), is the highest among several African countries including Liberia, Nigeria, Senegal, South Africa, etc.
Some are now arguing that the Price Floor is positively impacting the sector’s revenue as the loadings of scratch cards and activation of data packages are increasing. This translates to direct revenue increase in the sector to the benefit of the operators, and if properly regulated, to the government of Liberia.