India's Telecommunications Corruption Scandal and the Lessons for Nigeria

Dear Sir/Madam,
The 2011 budget presented to the National Assembly in December 2010 by President Jonathan carried a deficit of more than one trillion Naira. Nigeria 's Excess Crude Account which stood at about 40 billion US Dollars a few years ago now has a paltry balance of only 3 billion Dollars. The country's domestic debt presently stands at more than 4 trillion Naira and the foreign debt, which was fully liquidated some years ago, has again risen to more than 4 billion US Dollars. If there had been no excess crude account Nigeria 's foreign reserves would have been completely depleted with the Naira depreciating to an unacceptable level.   In the face of mounting budget deficits, rising domestic and foreign debt profile, rapid depletion of the nation's foreign reserves, the Federal Government has been nonchalant to the severe revenue leakages in the various sectors of the economy. I have raised various alerts on the harm that the unbridled corruption in the telecommunications sector is inflicting on the Nigerian economy. Like the child who is only interested in his toys and not how much the toys cost the parents, so Nigerians and in particular the Federal Government is only interested in the political value of the so called GSM revolution and not the debilitating effect on the Nation's economy and security. Segun Oruame on 'Why Omo-Etu's ATCON missed it on Angaye's NITDA' in the December 15, 2010 edition of The Nation Newspapers wrote 'The reality of a nation on its knees, perpetually lapping at what others have created! In our so-called ICT industry, we have merely replicated our import-based culture in other sectors so that 100 per cent of what constitutes our ICT industry is a reflection of dependency on the thriving economies of India, China, Malaysia, USA, UK, and the rest of Europe. So while the world creates, we consume' The prolific consumption in the telecommunications sector which have adverse effects on the economy is the fall out of gross mismanagement, corruption, and flagrant violation of extant laws in the disposal of the Major National Asset in the telecommunications sector, especially the National frequency spectrum as the Indian telecommunications corruption scandal has shown.   India has been reeling under one corruption scandal or another which is not surprising as India is 78 on the Transparency International Corruption Index (TIC) while Nigeria ranks much worse at 150. India 's corruption scandal involving the licensing of the telecommunications frequency spectrum for 2G services in 2008 has beaten the other scandals in shock value, arbitrariness, brazenness and size. On November 16, 2010 the Controller and Auditor General (CAG) of India released a damning report on the sale of 2G frequency spectrum. The report indicted the Indian Ministry of Telecommunications for causing a whopping US$40 billion loss to India 's treasury by selling the 2G spectrum on a so called first come first served basis as opposed to auction to benefit a few favored operators. The public revulsion to this scandal has led to the resignation of India 's Minister of Telecommunications and persistent calls for his prosecution. The Indian Prime Minister was criticized by the Supreme Court for failure to respond for more than one year to calls to investigate the scandal. The scandal caused heavy losses on India 's Stock Exchange and the near collapse of India 's coalition Government from the massive public demonstrations of outrage.   India 's Telecommunications Regulator, the Telecommunications Regulatory Authority of India, has also called for the cancellation of 69 of the 130 spectrum licenses issued since 2006 because it considers frequency spectrum scarce national resource. In most countries of the world, Frequency Spectrum management is placed under direct government control through an appropriate government ministry because it is sourced through International Agreements coordinated for the United Nations by the International Telecommunications Union (ITU) and it is a depleting and very scare national resource with major security implications. Nigeria , in ignorance or more likely, corrupt manipulations enacted very bad laws on telecommunications which have given rise to shared responsibilities on Frequency Spectrum management. While the irresponsible management and arbitrary sale of the frequency spectrum has almost brought down the coalition Government of India and the resignation and possible prosecution of India's Minister of telecommunications, the Nigerian Communications Commission (NCC) has brazenly sold Nigeria's frequency spectrum patrimony to a favored few by under the table deals in flagrant and criminal violation of existing laws resulting in an estimated total loss of more than US$50 billion and nobody cares - not even the cash strapped Nigerian Federal Government. All spectrum sales so far by NCC are by the despicable method that generated so much anger and protests in India . Even the Federal Government that cannot balance its budget and has to resort excessive borrowings refuses to appreciate this massive hemorrhage in the economy.       What makes the reckless attitude of the NCC more brazen in the circumstance is that Nigerians and the Federal Government in particular are taken for fools by the posturing of NCC that the frequency spectrum allocated to it for telecommunications are auctioned when in fact they are not and NCC Management thereby engaged in criminal violation of the Public Procurement Act 2007. Section 54 (3) of the Public Procurement Act states 'The open competitive bidding shall be the primary source of receiving   offers for the purchase of any public property offered for sale'. A good example is the controversial 2.3GHz frequency spectrum sale to Mobitel. NCC Management obtained the permission of NCC Board of Governors to AUCTION the 2.3GHz frequency spectrum. Instead of auctioning the spectrum by inviting open competitive bids from interested telecommunications companies as demanded by the Public Procurement Act which was already in force, NCC resorted to the so called first come first served method which nearly brought down the Indian Government on the payment of grossly underestimated reserved price. A method already prearranged to favor predetermined operators. The federal Government challenged this fraud and the President of the Federal Republic of Nigeria ordered the reversal of the sale to no avail. It is interesting that the same NCC Board that ordered the sale by auction ratified the arbitrary sale to predetermined operator on the illegal and so called first come first served basis and the Federal Government that was seriously embarrassed caved in under a court judgment obtained by deception.   NCC caused Nigeria 's treasury further loss of revenue in the sale of the frequency spectrum by brazen waste of the scarce resource. Frequency spectrum auction or sale is different from and independent of Operational Licenses. The spectrum needs of operators are not necessarily congruent with areas of operational coverage. NCC sold frequencies cheaply in line with Operational coverage. National Digital Mobile Licenses (DML) was auctioned to GSM Operators but much more revenues would have been made if the frequency spectrum has been auctioned on regional basis. The auction of frequencies in the Lagos area will definitely attract much higher bid prices than in other areas of the country. For the 3G frequencies some operators may not even bid for the 3G spectrum in areas where such services may not be commercially viable. The scandal of the frequency spectrum sale in Nigeria is magnified with the arbitrary sale of the 3G spectrum license. One of the winners of the predetermined 'arranged' sale of the 3G license has failed to roll out any service on this frequency and is already arranging to resell the spectrum. The company will definitely sell the frequency at a much higher price than she bought it from NCC. The fact that NCC acquiesced to this spectrum resale without any penalty for failure to roll out services with the frequency by the company confirms NCC predetermined criminal intention to short change Nigerians on the Nation's spectrum assets.   Corruption is openly flaunted in Nigeria 's telecommunications sector and the Police or the Anti-corruption Agencies appear powerless to check the raging fire of corruption in that sector. Most of the licenses issued by NCC are patently illegal and therefore null and void but the companies holding the illegal licenses are operating without any encumbrances on Nigerian soil. Section 15 ( i ) of the 1992 act under which NCC was operating prior to July 2003 when the Nigerian Communications Act 2003 became effective clearly mandated NCC to 'determine by notice and subject to the approval of the Minister, services and undertakings eligible for licensing from time to time;'. Section 15 (h) further restricted the scope of licenses that can be issued when the law mandated NCC to 'grant a license to a person to carry on telecommunications undertakings in one or more of the activities listed in the second schedule to this Act;' But the unbridled corruption ruling the telecom sector made NCC issue many licenses during the period in flagrant violation of the law and nobody cared. The recklessness and arbitrariness of NCC in issuing licenses worsened when NCC assumed it has been given unfettered independence by the 2003 Communications act and NCC refused to take cognizance of the Wireless Telegraphy act 2004 which virtually restored the powers of the Minister that were transferred to NCC by the 2003 act and the Public Procurement Act which stipulated how public assets, of which licenses are components, can be disposed.   Nigerians and in particular the Federal Government appear to have forgotten that in 2005 former President Obasanjo reported one of the GSM operators, MTN to the former President of South Africa Tabo Mbeki about the corruption of Nigeria's polity by MTN's policy of giving free recharge cards to members of Nigeria's National Assembly. Tabo Mbeki, with tongue in cheek, replied Obasanjo that the practice was to help Nigeria Legislators 'in their communication system and services needs' as published by The Champion and This Day Newspapers edition of 29th April 2009 . Mbeki implied in the reply that Nigeria has failed to provide communication services to her law makers. But Tabo Mbeki clearly knew that such a practice is not acceptable in South Africa . Tabo Mbeki assured Obasanjo that the despicable corruption of the polity by MTN would end in March 2005 but did it? If the obnoxious practice had stopped Professor Akunyili will not ,years later, have reason to stop public officers in the Ministry of Information and Communications and its Agencies under her supervision from collecting free recharge cards or toll free numbers from telephony operators.   What former President Obasanjo did not know when he was writing the letter on unethical practice by MTN to Tabo Mbeki and his attention was not brought to it, despite series of my protests, was that MTN participated in corruptly influencing NCC to Change an existing Interconnection Agreement approved by the Federal Government with a view to enable MTN and others use NITEL network and services free of charge. This led to a loss of more than N500 billion in NITEL revenues and predictable bankruptcy. Because Nigerian Law was not explicit on how to determine Interconnection, the 1997 Interconnection Agreement approved by the Federal Government relied on the South African communication law which was very explicit on how to determine Interconnection tariff between networks. It was also found that the Published British Telecommunications Tariffs for Interconnection of other operators to its networks was in perfect consonance with the South African law. MTN Nigeria was fully aware of the Interconnection Agreement that MTN signed with Telkom SA which was in full agreement with the Interconnection Agreement on ground when MTN arrived in Nigeria . MTN extended the unethical practices to influencing NCC to change that agreement which ensured the bankruptcy of NITEL as no organization can survive when its services are given out free of charge!   Nigeria Today Online edition of Tuesday December 14, 2010 reported that as a result of the Multi-Link debacle in Nigeria, Telkom SA is laying charges against some of its senior executives for gross negligence, corruption, irregular activities and gross misconduct. Telkom SA is fully aware that the fortunes of Multi-link changed when NITEL collapsed. Multi-link had to start paying some illegally licensed carriers for services NCC compelled NITEL to provide free of charge to the private operators under the fraudulent Interconnection Agreement. Also the excessively wide disparity in call charges that NCC approved for CDMA lines and GSM lines was a factor. The GSM operators ran into quality of service problems but did not run into much financial difficulties for two main reasons. 99% of NITEL networks that were used free of charge were taken up by GSM providers. Combined with excessive tariffs that they corruptly got NCC to approve for them, GSM operators were able to rake in enough funds to also set up carrier or backbone networks which are also illegally approved for them by NCC.. Nigerians should ask NCC why it has not been interfering in the Interconnection Agreements Private telecom operators are entering into among themselves but had to Compel NITEL with the connivance of NITEL traitors to give away use of NITEL networks free to private operators.   Any investor in NITEL will first have to get the fraudulent Interconnection Agreements that NITEL was compelled to sign with private operators revoked otherwise the GSM or private operators will still come back to use reactivated NITEL networks free of charge to improve their quality of service!   I challenge NCC to contradict my assertions above by quoting the relevant laws and regulations. I also maintain that all the frequency spectrum sales so far conducted by NCC, and operational licenses such as the Universal Access Licenses, Internet Exchange Switch and other licenses by whatever fanciful names they are called are illegal. The only two licenses that can stand legal scrutiny are the GSM operational licenses auctioned in 2000 and the second National Carrier License auctioned in 2002.   NCC claims that foreign investments in the telecom sector are worth US$15 billion. The loss to Nigeria in the reckless, illegal, arbitrary and brazen sales of the frequency spectrum and monies drained or laundered from NITEL by fraudulent Interconnection Agreements are more than US$60 billion. Most of the funds have been shipped out in questionable invoices which caused Prof. Soludo, the former Governor of the Central Bank, to raise an alarm early in 2004 on the rate at which MTN was depleting Nigeria's foreign exchange reserves when in December 2003 alone MTN requested US$ 123 million which represented 61% of the total foreign exchange disbursement for that month as reported by the Punch Newspaper edition of March 18, 2004.   About March 2009, EFCC invited me to make a statement on some of the issues raised above. I embarked on a risky journey to Abuja from my meager resources since NITEL can no longer honor its pension commitments. Till date MUM is the word from EFCC. I am therefore not surprised at the reaction of Tabo Mbeki, the former President of South Africa, to former President Obasanjo's complaint.   In India however, the Prime Minister is struggling to keep his job, the Minister of telecommunications is facing prosecution, the stock exchange is in shock, and the whole country is in turmoil for a telecommunications scandal which is insignificant compared to what is going on in the same sector in Nigeria .   Anyhow Nigeria is not India   Yours sincerely       By Solomon Ogundele (Former General Manager (Operations) and Head of NITEL ad hoc Team on Regulatory issues with NCC)