The first part of this article looked at the entrenched positions on SIM boxing, the law, the estimated financial damage to the country and the telcos and the reason for implementing the 19 cent minimum ITR with a 6 cents surtax, and the argument against the 19 cents. Part two looks at some accusations NCA levels against telcos and the responses of the telcos, plus some comparative examples in other jurisdiction and some information from GSMA on the damage surtax is doing to the industry and to the economy in general.

 

Accusations and responses

The NCA insists the telcos are not fighting SIM boxing hard enough. Firstly, they accuse telcos of bad customer acquisition practices, characterized by the often activation of unregistered and badly registered SIM cards. But the response from the telcos is that Ghana as a country has no proper ID verification system. So when people produce valid ID cards to register SIMs, it is almost impossible to verify the authenticity of the ID card and whether it actually belongs to the user. People cannot be traced to their homes, offices and other locations through their ID cards. Moreover, there is no law that determines how many SIM cards could be registered in the name of one person. So people register SIMs and give them to others to use for fraud and it becomes difficult to trace the real user of the SIM card.

There is no evidence yet, to show that telcos’ staff/agents DELIBERATELY register SIMs for fraudsters. But the NCA has not ceased making that claim. Whereas the telcos do not deny that some of their agents do bad SIM registration, they insist that wrong SIM registration and multiple SIM registration are not crimes. Each of the telcos say they usually block numbers found to have been badly registered or unregistered. And agents/staff found culpable are usually punished privately. But, sometimes when SIMs are detected as being used for SIM boxing, the respective telcos delay in deactivating them, and that fuels the NCA’s claim that the telcos are themselves condoning SIM boxing. The guidelines give telcos up to two hours to deactivate detected SIMs, but recently, it took Glo, for instance, more than one month to deactivate over 30,000 of such fraudulent SIMs on its network.

 

Telcos not committed?

The NCA also says most of the telcos are not investing into the right systems to fight SIM boxing. But the evidence does not seem to support that accusation either. Tigo has one of the most well defined systems of fighting SIM boxing. And recently, Vodafone also told this writer they have invested €400,000 (US$504,000) in a fraud management system, and another €77,000 (US$97,020) this year in call generation software all in an effort to detect and fight SIM boxing on its network. MTN, Airtel, and Glo also claim they have comprehensive in-house systems in place to fight SIM boxing. As to how effective those systems have been, is subject to debate because it would appear that apart from Tigo, the rest of the telcos are still recording very worrying levels of SIM boxing on their respective networks. A Vodafone official told journalists “when you detect and deactivate 1,000 SIMs the fraudsters will bring 1,000 SIMs to replace them because they have the incentive (19 cents) to do so”. But there is no lack of effort by telcos in fighting SIM boxing as the NCA often claim.

But it is important not to forget that whereas the NCA only points to a suspicion that telecom operators or their staff may be involved in SIM boxing, the evidence supports the telcos’ argument that the huge difference between the 19 cents ITR and the 4 cents maximum local call rate is a major fuel for the SIM boxing train. The NCA often argue that ITR is higher than 19 cents in other countries. And that is true. ITR is even over 35 cents in Burundi for instance. But the problem is never about high ITR. It is about the difference between the ITR and the local call rate. In those countries, the local call rates are also high enough, so the difference does not motivate SIM box fraudsters.

In Nigeria, for instance, ITR is 3 cents and local call rate is 7 cents, which is higher than ITR so no motivation for SIM box operators. In South Africa the arbitrage is zero because both ITR and local call rate are 4 cents. But in Zimbabwe ITR is 20 cents and local call rate is 7 cents; there is 13 cents arbitrage so there is SIM boxing. Similarly, in Ghana, SIM box fraud is big because there is about 16 cents arbitrage, which motivates fraudsters.

The table below shows how arbitrage is encouraging SIM box fraud.

 

Telcos hiding revenue?

The NCA also accuse telcos of under-declaring revenue from the incoming international gateway. The NCA says it has third party reports which show that the telcos are making more money from incoming international calls than they declare in their call detail records (CDRs). The NCA attempted to do real time monitoring of the international gateways but that did not happen due to a court action by some citizens (not the telcos).

NCA’s claim of under declaration of revenue by telcos has not been proven with evidence but the NCA keeps flying that argument and making it look like the telcos are only in to milk the state. Efforts to get the NCA to show evidence of those claims have proven futile because they would not share any documental evidence of those claims. That is very typical of the NCA.

But the telcos have always argued that there is no motivation for them to under declare revenue because each of their top executives in Ghana and elsewhere get paid commissions in the form of a percentage of the revenue they generate and declare for their mother companies. Under declaring revenue therefore means the executives are shortchanging themselves. So there is no point in under declaring revenue for any telecom CEO in Ghana. But the NCA insists, without any published evidence, that the telcos under declare revenue.

On the local front, the Ghana Revenue Authority also has same suspicion and has therefore employed Subah Infosolutions Limited to do real time monitoring of telcos. Subah has started work now, but information reaching this writer indicates that they have not found any extraordinary incremental tax revenue apart from the normal periodic increases resulting from the natural growth of the telecom industry.

 

GSMA Report

In conclusion, it is appropriate to share some highlights from a recent GSMA Report on Surtaxes/fixed ITRs and its direct and indirect impact on the Ghanaian economy, telecom operators, private businesses, phones users and Ghanaians living abroad. It research was conducted by globally recognized research, management and audit company, Deloitte between June 2010 and September 2013. GSMA (GSM Association) represents 100s of telecom operators and device manufacturers across the globe. So it speaks for the telcos.

 

Highlights

As a result of fixed ITR, calls from UK to Ghana is now 200% higher than calls from UK to Nigeria. So Ghanaians in the UK are paying more for calls to their country. As a result, it is estimated Ghana lost US$4.1million in remittances from abroad. Indeed, a World Bank publication in 2009 showed that remittances to Africa started growing at a lesser rate from that year. A four percent drop was reported in the growth rate between 2008 and 2009 for instance.

Again, more Ghanaians abroad are said to be using VoIP (voice over internet protocol) platforms like Viber, Tango, Facebook, imo, Skype and others to make calls to Ghana. These platforms only bring very minimal data charges, which is way more affordable than what telcos abroad charge.

It is estimated that within the first five months Ghana introduced the 19 cents fixed minimum ITR, calls to Ghana through legit routes fell by 27%. This is consistent with Meucci Solutions Report, which shows the drop has been increasing since.

Over the 40-month period under review therefore, it is estimated that Ghana lost a whopping 679million minutes of incoming international traffic. That is consistent with other reports quoted above. It is also consistent with a recent analysis by OECD (Organization of Economic Cooperation and Development), which found that legit traffic to countries implementing fixed ITRs have reduced significantly.

It also resulted in losses in corporate taxes from telcos, estimated at US$2.9million over the period.

The fixed ITR is also estimated to have short up operational cost to Ghanaian businesses who do business with other countries where ITR exist. The cost is estimated at US$21.4million for Ghanaian businesses over the period under review. That was the highest loss among the 15 countries studied. The second to Ghana was Benin, where a loss of US$10million was recorded.

As a result of the losses to those local businesses, corporate taxes from them also reduced by an estimated US$300,000.

Moreover, the 19 cents, according to GSMA, has encouraged a boost in SIM box activity, which is also affecting call quality for Ghanaians who live in areas where SIM box fraudsters have hidden their SIM boxes and are terminating thousands of calls daily. They create congestion on the networks of the telcos and genuine customers suffer.

 

Going forward

There are a number of hints that promise to kill SIM Boxing. The NCA has said it will go away. It would appear they are considering a removal of the 19 cents, but will insist on telcos still bringing the surtax of 6 cents from every minute of incoming international call to the state. The Minister of Communication has also hinted of a possible legislation to limit the number of SIM cards registered in the name of one person to 10. There is also an interconnect clearinghouse coming soon. This has the backing of the president himself and therefore comes as a national policy, and not just a project by the regulator. The clearinghouse would serve, among other things, as a national firewall, and would do real time monitoring of all domestic and incoming international traffic. So the NCA would get to see the revenue flow from the international gateways real time.

Moreover, there is street naming and house numbering ongoing, and the national ID system is going to be done all over again to ensure there is a proper ID system and proper ID verification system. There has been suggestions that SIM registration should also be given to private VAS providers who have systems to link to the database of the various ID institutions in the country for speedy electronic verification, to prevent registration of SIM for people without unverifiable ID.

If all that is done well, Ghana would not need the 19 cents minimum ITR and one can confidently say SIM box fraud would either be reduced drastically, or be killed completely.