Sharp practices threaten $68b investments in telecoms sector


Operators trade blame, NCC moves to stop menace
A series of ‘communication frauds’ including masking, call refilling and SIM box is threatening $68 billion investments in the nation’s telecoms sector.

Already, the menace has pitted the Mobile Network Operators (MNOs) against the interconnect clearing houses.

A communications fraud involves illegal use of telecommunications products or services to make money without paying the firms.

A masked call happens when an international calling number (Caller Line Identity) is masked as local number traffic. It is a deliberate attempt by the fraudster to avoid paying the correct International Termination Rate (ITR) for international calls, but to benefit by paying Local Termination Rate (LTR).

For example, when the number is masked as a local call, the operator pays N3.90 LTR and not N24.40 ITR.

A SIM Box fraud is a setup in which fraudsters install SIM boxes with multiple prepaid SIM cards. The fraudster can bring calls through VOIP (through internet) and terminate international calls through local phone numbers in the respective country to make it appear as a local call, by initiating the call through local SIM installed in the SIM box.

Call Refilling is a form of interconnect fraud in which one carrier tampers with CID (caller-ID) data to falsify the number from which a call originated before handing the call off to a competitor.

The Nigerian Communications Commission (NCC) said it had been inundated with complaints from subscribers, including highly placed government officials and corporate organisations, about the menace.

While the MNOs are blaming the interconnect clearing houses, which pick up international call traffics and terminate them on the local networks for the frauds, the NCC has given the telecoms operators July 28 deadline to stop the sharp practices or face fresh sanctions. The clearing houses have denied involvement, and passed the blame to the operators.

A telecoms expert, Kehinde Aluko, told The Guardian that the menace was being fuelled by the huge difference between termination rates for local and international voice calls. The development is therefore largely a ploy by perpetrators to illegally reduce their expenses while increasing their revenues.

“Decisive punitive action taken against one or two perpetrators would go a long way in serving as a deterrent. Action in this regard could range from financial sanction to suspension, revocation of licence and prosecution for economic and financial sabotage, and perhaps even for threat to national security.”

A letter by NCC to the MNOs, a copy of which The Guardian got, said following the complaints by different stakeholders in the industry in respect of receiving international calls, which display numbers in the National Numbering Plan (NNP) as the calling numbers, it has been investigating these unwholesome practices “and our initial findings show that the menace is currently widespread.”

The commission said due to the serious security and economic implications, “you are, by this letter, given a deadline of Friday July 28, 2017 to ensure no call masking and call refilling activity takes place in your network. The commission explicitly prohibits the practice and as such shall carry out robust compliance monitoring and enforcement actions after the expiration of this deadline. The commission shall fully apply relevant regulatory sanctions on your organisations if found to be in breach post the one week deadline.”

Some of the operators, who spoke to The Guardian on the condition of anonymity, said they had taken the matter to the NCC.

According to them, the NCC has held consultations with all stakeholders and read the riot act. “Engagement is ongoing with a view to arriving at a conclusive solution to the issue. However, as stated above, what we recommend is that decisive punitive action should be taken against one or two perpetrators.”

The operators, which failed to disclose how much they might have lost to these frauds in Nigeria, however, said the menace is not peculiar to the country.

According to them, SIM box fraud is among the top five emerging threats to operators and MNOs worldwide and cost the industry over $3 billion per year, according to the Communications Fraud Control Association (CFCA report 2013).

The operators recommended a detailed cost study that would serve as a basis for setting cost-based termination rates, which align with prevailing economic realities and allow for the flexibility required to deal with the dynamic nature of relevant fiscal parameters.

The Chief Executive Officer, Medallion Communications Limited, an interconnect clearing house, Ikechukwu Nnamani, said the MNOs’ accusations were baseless, alleging that the operators were culpable.

He explained what the clearing houses do as passing calls from one network operator to another, even international calls.

“For instance, if Globacom is calling MTN, the interconnect clearing passes the call from Globacom to MTN, so if Globacom has already masked the call before passing it to us, we don’t have a way to know, we just pass the call. It is only when MTN picks that they can say such a call has been masked for whatever reasons.

“The reaction to that allegation is that it is not accurate. A clearing house cannot be involved in such menace based on the ways calls are routed. Clearing houses are not supposed to have subscribers, they are not supposed to generate traffic. It is calls that come to them that they pass to terminating networks.”