TMCnet News

Investments As Competitive Edge for Nigeria's Telecoms Sector
[September 17, 2014]

Investments As Competitive Edge for Nigeria's Telecoms Sector


(AllAfrica Via Acquire Media NewsEdge) ADEYEMI ADEPETUN, in this report, examines the growing concern for fresh investments in Nigeria's telecoms sector and challenges ahead. Excerpts...

THE liberalization of the Nigerian telecommunications sector about 13 years ago has indeed opened it for various developments as showcased in the level of investment the sector has so far attracted.

Going by latest statistics, the sub-sector, which contributed about 0.04 per cent to the country's Gross Domestic Product (GDP) pre-telecoms revolution in the country, today has over $32 billion investments.

Closely related to this was the recent declaration by the National Bureau of Statistics (NBS) report, which disclosed that the industry in real terms, contributed N 1.48 Trillion or 9.25 per cent to total Gross Domestic Product (GDP) in the second quarter 2014.



Indeed, in the 1990s, this was a sector, which was well below what was required for sustainable growth and development, especially in terms of telephone lines per 100 inhabitants, Nigeria had an average of 0.33 between 1992 and 1994 and a paltry $500 million investments..

Today, with four of the world's biggest Mobile Network Operators (MNOs) with the GSM technology operating in Nigeria--MTN; Airtel; Globacom and Etisalat, there over 177 million subscribers connected, of which more than 129 million of them are active users of the various mobile network operators.


Over a year ago, the MNOs claimed to have provided coverage to about 64 per cent of Nigerians. They equally claimed that to have contributed about N160 billion to government coffers as tax; created 20,000 jobs directly and 1.1 million indirectly.

The efforts of the GSM players have been complemented tremendously by the Code Division Multiple Access (CDMA) players. Though, due to the 'harshness of the 'country's business climate' and mis-management, some players including Starcomms; O'Net, Intercellular fell on the way, they have even been declared among operators that have become inactive by in Nigeria.

However, kudos must be given to Visafone, which has remained steady, though offering voice services, but has built a strong wall around its core areas of strength... data provisioning.

Indeed, the telecoms sector, an arm of Nigeria's ICT sector has done creditably well currently contributing about 19 per cent to the GDP, which was recently rebased by the NBS, putting the figure at $510 billion. In all, the telecoms sector was adjudged a star performer in the rebasement.

However, industry analysts believed that Nigeria still lags behind fast growing economies of Brazil and South Africa in terms of telecommunications investment per capita.

According to World Bank, Nigeria invested an estimated $6.6 billion in telecoms infrastructure from 2010 through 2012, which worked out to a total of about $40 per person. Brazil, on the other hand, has a telecoms investment per capita of $167. Between 2010 and 2012, Brazil and South Africa spent about $127 and $62 more per person, respectively, on telecoms infrastructure.

As at March 2014, Brazil has a mobile subscription base of 273 million.The country has a population of 201 million people. South Africa, on the other hand, has a mobile subscription base of 59.4 million. The country has a population of about 50 million people, according to the 2013 GSM African Mobile Observatory report.

This worrying development, according to analysts, does not speak well for Nigeria's strategic objective of becoming one of the top 20 economies by the year 2020.

It also highlighted the need for significant investment in network expansion initiatives, if Nigeria, Africa's most populous nation, intends to be at par with economies it aspires to be like.

According to the Deputy Manager, Financial Advisory & Investment Banking, Financial Derivatives Company Limited, Dubem Arah, to what scale does the current economic, social, and regulatory landscape provide a conducive environment for additional capital investment.

Report has it that telecom companies' investments in network expansion initiatives are expected to rise by over 200 percent this year following intense regulatory pressure over the abysmal quality of service (QoS) being offered subscribers.

Recalled that in 2012 and 2013, MNOs spent an estimated N347 billion and N979 billion, respectively, on infrastructure expansion. These figures show a 182 per cent increase in network expansion spend year-on-year.

At a post-event interview in Lagos, the Executive Vice Chairman of NCC, Dr, Eugene Juwah said the sector would become more competitive by way of fresh investments.

Juwah, who recently became the chairman of Commonwealth Telecommunications Organisation (CTO) said the commission would encourage investments in critical infrastructure rollout.

"We want to encourage more investment in critical infrastructure to ensure there is adequate investment by operators on each subscriber. Fourth generation regulation will place emphasis on quality before growth but will also stimulate growth through the release of new licenses and this will happen before the end of the year. It is our pledge to sustain the industry as the envy of all other sectors of the economy and by so doing surpass our contributions to the transformational agenda of Mr. President, Dr Goodluck Jonathan", he stated.

In a recent interview also, the President of the Association of Telecommunications Companies of Nigeria (ATCON), Lanre Ajayi said he projects telecoms operators doubling investments in network rollout this year, stressing that the demand for telecoms services is so enormous and operators would want to take full advantage of it.

To the minister of Communication Technology, Dr. Omobola Johnson, major investments are required to build the country's desired broadband network.

Johnson, while appreciating the currently $32 billion investments in the sector, noted that three times more investments still needed.

She called on investors and MNOs to work with Government on the Connect Nigeria initiative.

While appreciating calls for more investments in the sector, the Chairman of Association of Licensed Telecoms Operators of Nigeria (ALTON), Gbenga Adebayo, who believed that Nigeria's telecoms sector is very competitive, said there are many barriers that may affect further investments.

Adebayo said issues of multiple taxation; over regulation; vandalism and theft; erratic power supply from the grid; insecurity are challenges operators face daily in the delivery of services, stressing that such impacts are not much in other countries.

Like Adebayo, Arah said from a decision-making standpoint, rolling out more equipment in an environment where the assets are not protected presents a significant risk.

He said delays in investment are also encouraged by market uncertainty due to the current antagonistic environment between operators, regulators and government.

Speaking to The Guardian, Kehinde Aluko, protection of telecommunication infrastructure in the country, especially in remote areas, is a paramount need for operators. There have been recent talks of the potential passage of a bill by lawmakers, which seeks to give telecommunication infrastructure the status and legal protection of Critical National Infrastructure as well as other critical infrastructure such as power, "this bill must be passed. It is part of what would encourage operators to invest." Aluko also called for improved power generation, especially from the grid, stressing that only about 15 per cent of all BTS in the country are connected to the power-grid, which leaves operators dependent on fuel-powered sites.

"Fuel costs associated to operating BTS in the country account for about 60 per cent of operators' network costs. To put it in perspective, network costs in Nigeria are about two to three times more expensive than in other African markets due to fuel costs. It is estimated that Nigerian operators spend over N10 billion a year to power their base stations', he stated.

Corroborating the impact of poor power supply on the telecoms sector, the Chief Executive Officer, Funke Opeke simply said, "this is a challenge that cannot be over emphasized. Operators spend billions independently to power their BTS across the country. That does not include buying of new generators among others. The problem is complex." Copyright The Guardian. Distributed by AllAfrica Global Media (allAfrica.com).

[ Back To TMCnet.com's Homepage ]