It is estimated that African telecom operators are cheated for revenues totalling more than US$ 1 billion from their northern counterparts, who are not properly billed when international calls are made to Africa. These losses are a major reason behind the stiff pricing of international calls for Africans. The lack of up-to-date billing systems between telecoms is held responsible.

Charges to carriers for using the networks of others – also known as interconnect – is a challenge for many African operators. Complete interconnection between networks is crucial in a competitive environment, but this is easier said than done. The problem is twofold: firstly a regulatory issue – usually about the level of interconnect costs – and secondly a practical issue of installing equipment for allowing interconnect and billing for this traffic.

Billing is the heart of every successful telecoms company, the glue that holds the business model together and finances future investment. In an age of steady deregulation and increasing foreign investment, one form of settlement payment – known within the industry as interconnect billing – plays a critical role in generating revenue streams. This is the process whereby one operator charges another for using its network to support a call.

The concept of interconnection has been around since the 1920s but it is only recently that telecommunications companies have become able to accurately invoice each other as a result of advanced billing software and comprehensive interconnect agreements.

In the Western World, interconnect billing has become the first or second source of income for most telecommunications players. For major incumbent operators, this adds up to hundreds of millions of dollars worth of revenue each year.

In Africa, the concept of interconnect billing is still relatively new for most operators, but the opportunity to make money through this method of payment are too great to ignore. So are the losses. For example, it is estimated that first world telecommunications operators are consistently underpaying their African counterparts by up to a third of the annual US$ 4 billion in fees for international calls as many African operators have no means of checking the invoicing.

Since most international calls are too expensive for Africans to make, there is a net number of incoming calls from various parts of the world to the continent and this brings in a fair amount of money. Unfortunately, African telecoms operators have little proof to ensure their invoicing of foreign telecommunications operators are accurate or even the means to prove that the calls crossed their lines. If these invoicing issues could be sorted out, African operators could easily receive another US$ 1 billion annually in revenue.

Effective interconnect settlement is not only about dealing with international partners but with local operators as well. As the markets become more liberalised, incumbent operators are faced with new competition within their own borders – especially with the increase of GSM players.

Without the right billing equipment, calls can not be accurately billed for across the network. Nor can interconnect partnerships be established without effective interconnect agreements in place. The result is poor services and increasingly frustrated customers.

Consequently, not a week goes by without some African interconnect issue being in the news.

Operators in countries such as Nigeria, for example, are consistently facing major interconnection issues since the launch of rival GSM services. Part of the problem is the cost of the actual interconnection charges, which has a profound effect on the development of wholesale or retail markets in Nigeria, as well as on decisions to invest in infrastructure.

In the past companies such as Nigeria’s national telecom operator NITEL have argued that their GSM tariff of naira 21 per minute can barely support the prevailing interconnect tariff of naira 18. Furthermore, most companies do not have the network technology to ensure that their future inter-carrier partners are not going to overcharge for their services.

Nigeria’s Communications Commission (NCC) – the country’s telecoms watchdog – has met regularly with operators to smooth out this issue as well as other interconnection disputes between NITEL, the National carrier and GSM operators. The NCC warned operators that 60 days after physical interconnection, an agreement would have be executed by the parties to the interconnect partner. Otherwise, the NCC would step in to enforce the new policy.

NCC’s pressure has yielded some results, with companies such as MTN Nigeria signing an interconnect agreement with the second national operator and fourth GSM operator, Globacom last year. But there is clearly still more work to be done. Services are still poor, particularly between mobile operators who have not ratified partnership agreements.

As a result the NCC is considering the possibility of imposing sanctions on any major operator whose quality of service falls below its published minimum grade of service thresholds. For their part, operators have pledged to take urgent steps to improve service delivery and consider the option of per-second billing.

But improvements have not taken place soon enough for the disgruntled Nigerian population, who in the past have even resorted to nationwide boycotts of mobile services. In one recent incident, millions of customers switched off their phone en masse in the hope of forcing operators to lower tariffs and raise standards.

The issue of lower customer tariffs and successful call transfers between networks brings us back to the issue of interconnect billing systems. Flexible interconnect software is designed to help operators evaluate a call and its network details from beginning to end to prevent any form of settlement errors from occurring, such as overpaying operators for network usage and not accurately charging partners for its own services.

Money earned from effective billing practices agreements can be redirected to new product launches and competitive pricing for new services- essential business strategies for keeping ahead of competition.

As a marketing tool, interconnect billing systems are also extremely useful to operators as they can provide online reporting capabilities to give companies the possibility to analyse and forecast usage for products and services, such as directory enquiries and toll free numbers. This helps to understand trends in the marketplace and to determine what types of new services could potentially increase the company’s revenues even further.

Investment for interconnect systems are gaining momentum, with countries as diverse as Senegal, Egypt and South Africa installing new equipment. Best of all, there is fast return on these investments (ROI). It is estimated that installing a flexible interconnect platform can allow companies to increase their revenue stream by 30 percent- money that African operators can reinvest into their infrastructure.

The good news is that now is the time for telecoms players to buy their software. Billing vendors have had to slash their prices in a bid to win customers as a result of a slowdown in the telecoms sector.

According to the industry association Telemanagement Forum, today’s prices have fallen so much that OSS vendors are even losing money just to win business. Margins have been cut slim, and some vendors are selling at below cost. Ten years ago, carriers were spending anything up to US$ 20 million on massive systems, but now prices around US$ 1 million, and even below that, are common.

Africa’s booming telecom market

Interconnect systems are becoming crucial for Africa’s telecoms markets, which are growing at a remarkable pace, especially in the area of wireless communications. A recent survey by the International Telecommunications Union (ITU) has found that Africa has become the first continent to have more mobile users than fixed line customers.

At the end of 2003, there were more than 52 million mobile subscribers in the continent, 13 million of which were added during that year, compared to around 24 million landline customers. The report also revealed that the continent’s mobile phone usage has increased at an annual rate of 65 percent; double the global average.

Managing this level of growth – and the intercarrier partnerships that go with it – will be a challenge, but with the right billing systems in place there is no reason why Africa’s telecoms operators cannot enjoy a future of incredible financial growth and prosperity. All it takes is a little bit of an investment up front and, of course, the right legislation.

Christian Ciupek is the regional Director in Africa for Intec Telecom Systems, a leading South Africa-based billing software provider.

By Christian Ciupek