This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 LAGOS 001562 
 
SIPDIS 
 
STATE PASS FCC 
 
E.O. 12958: N/A 
TAGS: ECPS ECON EINV NI
SUBJECT: SCRATCH CARD FEVER 
 
¶1. (SBU) Summary: For the past month, between 5 and 10 
million MTN mobile phone scratch cards have been held 
up in Lagos ports over a payment dispute between MTN 
and the Nigerian Customs Service.  In the country's 
cash economy and largely wireless telephony 
environment, scratch cards are an important component 
of the local telecoms market.  MTN has agreed to pay 
indemnity charges incurred since the dispute started, 
but will not pay arbitrary/illegal penalties.   As the 
situation gradually clears up, scratch cards are slowly 
making their way back into the market.  In the meantime 
the Nigerian consumer has been the main loser.  End 
summary. 
 
¶2. (U) Pre-paid recharge cards - also known as "scratch 
cards" - are the most reliable means of payment for 
Nigeria's estimated 3-4 million wireless subscribers. 
In a mostly cash based economy, the scratch card system 
works.  Along the streets of Lagos, hundreds of card 
hawkers sell the pre-paid cards (with a numbered code 
on the back).  MTN's wireless clients buy the cards, 
scratch off a security strip to expose the numbered 
code, and call a special phone number and dial in the 
code to place a call.  The prepayment system ensures 
that telecom companies and consumers alike need not 
worry about outstanding bills.  It is a pay as you go 
system. 
 
¶3. (U) Since early June, MTN scratch cards have been a 
hot but scarce commodity.  Normally, MTN sells 5-10 
million scratch cards monthly in Nigeria.  Media 
reports and the current selling price confirm the 
scarcity of cards on the streets and in MTN stores and 
distribution ("Friendship") centers.  Scratch cards 
valued at naira (N) 750 are being sold between N800 and 
N900, and N1500 cards are between N1600 and N1900. 
Some angry MTN clients believe the shortage is a 
moneymaking contrivance of MTN.  In late June, the 
National Association of Nigerian Students (NANS), even 
held a press conference stating that its members are 
avid phone users and are prepared to "lock up" MTN 
stores across the country to protest the shortage and 
higher prices. 
 
¶4. (U) Since MTN's customer-base includes top 
government officials and MTN has the largest mobile 
network in the country, the GON (including President 
Olesegun Obasanjo) has noted the card shortage.  A 
recent investigation by the Nigerian Communications 
Commission (NCC) held MTN responsible for the scarcity. 
The company was ordered to increase the supply of 
cards.  However, the NCC also noted that millions of 
MTN cards were being held up in Lagos ports by the 
Nigeria Customs Service (NCS). 
 
¶5. (SBU) During a recent meeting with Econoff and 
EconSpec, MTN Chief Corporate Affairs Executive, Joke 
Giwa, said one month's supply of scratch cards is on 
hold in the Lagos ports.  According to Giwa, the 
shortage began more than a month ago when port 
officials demanded "other charges" that MTN considered 
improper.  When MTN refused to pay, port officials 
began delaying paperwork and holding up shipments.  The 
port charges on the consignments have been accumulating 
with MTN incurring fees totaling N1 billion ($7.52 
million) as of July 23, though the company owes NCS a 
total of N3 billion ($22.56 million).  Giwa said MTN is 
willing to pay legitimate government fees like import 
duties.  The company has already paid more than N7 
billion ($52.63 million) in legal taxes and duties 
since the beginning of 2004. 
 
¶6. (SBU) During the NCC investigation, MTN did not 
blame the NCS but rather told GON officials that 
production had been on track, that sufficient supplies 
had been sent to Nigeria, and that the company has 
documentation to prove it.  A review of MTN's 
documentation and a visit to its warehouses and 
friendship centers confirmed the hold up was the ports. 
With the spotlight on the ports, the NCS backed down 
and has begun to release the scratch cards.  Progress 
has been slow, but the cards are being distributed in 
Lagos' streets and elsewhere. 
 
¶7. (U) Holding press conferences, MTN advised its 
customers not to pay a premium for the cards.  MTN also 
suggested that its clients take advantage of MTN's new 
Virtual Top-Up (VTU) system, an electronic recharge 
service. 
 
¶8. (SBU) Comment: South African MTN is an easy target 
of criticism and unwanted attention in Nigeria.  It is 
the number one mobile service provider in the lucrative 
Nigerian telecoms market.  Its profits from the country 
are known and reported.  As a foreign-owned firm, it is 
often attacked as an outsider that takes money away 
from Nigeria.  Giwa suggested MTN would welcome another 
successful international player in the Nigerian GSM 
market.  An additional international presence would 
deflect attention from MTN and result in more 
competition and better service to subscribers.  End 
comment. 
 
BROWNE