Telecoms industry, an investor’s haven

Nigeria, Africa’s most populous black nation, has been identified as one of the countries strongly positioned to achieve success in broadband development. The country’s national broadband plan will further open up the sector to further investments, writes BEN UZOR JR.

Without doubt, Nigeria has made great strides in mobile telephony penetration over the last 10 years. Telephone penetration currently stands at 81 percent as at December 2012 according to statistics published by the Nigerian Communications Commission (NCC).

The Broadband Commission (a joint initiative of the International Telecommunication Union (ITU) and the United Nations Educational, Scientific and Cultural Organisation (UNESCO) postulates that the Internet and other Information Communications Technology (ICT) platforms now constitute critical modern resources and are vital prerequisites for participation in today’s growing digital economy.

Eugene Juwah, executive vice chairman of NCC, had said the contribution of the Information and Communication Technology sector to the GDP was anticipated to rise to about 15 percent by 2015. He said this would be achieved by the government’s structured investment and regulatory intervention.

Since the introduction of the Global System for Mobile Communications (GSM) in Nigeria, it has significantly impacted the economy in a variety of ways, enhanced personal and corporate communications and generally improved the quality of life across the country.

Nigeria’s teledensity

Latest data by regulator of the nation’s telecommunications industry says tele-density has increased from less than 63.11 percent by end of year 2010 to 85.25 percent in June 2013, which represents a 22.14 percent increase. In addition, active mobile subscriptions in Nigeria has grown to over 120 million in the last 12 years.

Teledensity is the percentage of connected lines in relation to the population in a given period of time, and its growth is proportional to the growth in telephone subscriber base.

The Commission said active telecoms subscriber base in the country peaked at 114.1 million as at the end of January 2013, an increase of 18.3 million lines or 19.1 percent, compared with the figure in the correspondent period of last year. According to the NCC, in 2012, the industry ended the year with combined subscriber base of 113.1 million up from 95.8 million in January, 2012.

Highlights of the latest industry data also reveals that telecoms firms continue to spend more on network upgrades to accommodate more subscribers and reduce teething challenges associated with quality of service.

Growing FDI

New Pyramid Research Report on Nigeria taking a five-year look at the country’s communications sector believes the fast-paced growth and the huge population, which exceeds 170.1million, will continue to make the country one of the most attractive markets in Africa and the Middle East.

The study, ‘Pyramid Perspective 2013: Top Trends in the Global Communications Industry’ provides information on top trends in telecoms landscape in Africa and Middle East (AME), Asian Pacific, Europe and Americas.

According to the study, eco nomic growth in emerging markets is expected to nearly quadruple the economic growth in developed markets. Telecom service revenue in emerging markets will increase five times faster than in developed markets.

The report sees massive growth and opportunities in the country’s telecom sector, particularly with the 2012 end subscription base of 113.1 million, which places Nigeria ahead of Egypt’s 95.5 million; and South Africa’s 71.8 million. Giving credence to the report’s assertion, the latest data published by the NCC puts the telecom subscriber base at over 120 million.

According to the report, the demand profile is high; the largest in Africa as the telecoms industry generated $9.3 billion in revenue in 2012. Also, regulatory architecture is creating more level playing field as emphasis are now on quality of service, hence operators are fined for failing to meet Key Performance Indicators (KPIs) put in place by the regulator.

Mobile Number Portability

To further deepen competition in Nigeria’s vibrant telecoms market, the NCC implemented a progressive lowering of interconnect rates; and introduced Mobile Number Portability (MNP), after due consultations with operators and stakeholders. Furthermore, the competitive landscape is putting pressure on operators to roll out new infrastructure to improve coverage and quality.

Operators are investing billions of dollars to improve their services and to reach the undeserved regions of the country. Industry is benefiting from these investments. It is projected that mobile revenues will increasing at a rate of 4.5 percent in local currency terms between 2012 and 2017. According to the report, many opportunities exist in Network expansion, improved quality of service and infrastructure development.

The report noted that with mobile penetration at only 66.3 per cent in 2012, opportunities exist for operators to increase subscriber base by investing in improving and expanding their networks. Mobile number portability presents further opportunity to attract competitors’ customer by offering better deals and quality of service.

ITU conference

While the Commission had pledged the readiness of the government to give incentives to private investors who would invest in taking broadband to the un-served and underserved areas in the country, the 2013 ITU World Conference held in Abuja in October, came as a great opportunity for the country to sell her broadband idea to the world.

Namadi Sambo, the vice president, who represented President Goodluck Jonathan, while addressing prospective international investors assured them of government’s readiness to give necessary incentives and create the enabling environment for their investments in the country.

Sambo explained that Nigeria having a population of about 167million people, owns an investment altitude of about $15billion in the ICT sector and affirmed that Nigeria has the opportunity to grow.

Undersea cables

Nigeria is seen as one of the countries strongly positioned to achieve success with the broadband revolution. This is not unconnected with the fact that the country already has a huge capacity of bandwidth lying on its shores and waiting to be fully exploited, thanks to the private operators who have invested fortunes in delivering fibre cables to the country.

In addition to SAT 3, the country now has three undersea cables. SAT 3, with a design capacity of 320GBit/s remained Nigeria’s sole option for last 11 years, connecting Nigeria to Europe, through Portugal. However, the arrival of Main One Cable in August 2010 put an end to that monopoly. With a design capacity of 1.92TBit/s, Main One connects Nigeria to Ghana and Europe (through Portugal) in Phase 1. Glo 1 berthed in October 2010 with a design capacity of 640GBit/s 2.5TBits/s and connecting Nigeria to UK. Glo 1 is in the process of deploying various last mile access technologies to cater to various business segments.

Also, an additional fibre optic capacity also landed in the country late 2011. And that was the West Africa Cable System (WACS). The WACS, another high capacity submarine cable system linking Europe, West Africa to South Africa. The Cable is a project of a consortium of 11 Operators from nine countries; including MTN, Angola Telecom, Portugal Telecom, Tata/Neotel, Telkom, Broadband Infraco, Vodacom, Sotelco, Togo Telecom, among others.

Investment destination

Juwah, at a forum held recently, declared that Nigeria remains a telecoms investment haven as long as foreign and local investments into the booming telecommunications sector are duly protected by existing telecoms laws. Juwah said this had remained the strength of the sector in the past 12 years of its liberalisation.

He noted that the Nigerian Communication Act (NCA) 2003 has been the major source of industry success. The NCA is largely regarded as one of the most progressive laws in the country. It gives the regulator absolute power, devoid of government or other external interferences, to regulate the industry according to best global practices as enshrined by the ITU and other regional telecoms regulatory bodies.

According to Juwah, the power of the NCA guarantees a safe market for investors that they can bring their money into Nigeria and be sure that the law is there to protect their investment.

Contribution to GDP

The telecoms sector contributed 8.53 percent to the country’s Gross Domestic Product in the first quarter of 2013, according to the latest statistics released by the NCC. From 2006 to 2012, the industry was said to have contributed 1.91, 2.31, 2.92, 3.66, 4.56, 5.67 and 7.05 percent, respectively to the GDP. Juwah also said that the contribution of the Information and Communication Technology sector to the GDP was anticipated to rise to about 15 percent by 2015. He said this would be achieved by the government’s structured investment and regulatory intervention.

The NCC boss traced the phenomenal developments in the country’s communications industry and said current programmes and strategies would put Nigeria on a faster lane in broadband deployment and development. He lamented the dearth of infrastructure in the sector, which he said had affected projections and growth when placed side by side the country’s huge population, resulting in only six percent data penetration at present.

Juwah canvassed a synergy between the government and the private sector in infrastructure funding. This, he said, would aid infrastructure building in order to stimulate demand and competition. He said the country’s broadband roadmap would encourage the government to give financial incentives to service providers that would take services to far-flung, un-served and under-served areas. Such incentives, according to him, will influence a commanding reduction in the cost of bandwidth and expectedly put it in the hands of those who needed it but cannot afford it.

In a bid to bring the growth aspiration to fruition, the Federal Government had said it would encourage service providers to increase the number of telecommunications base stations in the country from the present 27,000 to 60,000 to meet the national target of five-fold increase in broadband penetration by 2018.

Interconnect Regime

Following the expiration of the old interconnect regime last year, the NCC reviewed the old rates to enable it introduce a new regime. Also referred to as termination rates, interconnection rates are the charges which one telecoms operator charges another for terminating calls on its network and one of the key premises for open and fair competition in a telecoms market is an effective interconnection regime.

The NCC decided to adopt the asymmetric rates for the new interconnect regime in recognition of late entrants and the commencement of the Unified Service Licensing Regime to create an enabling environment for healthy competition in the telecoms market.

Price cap on SMS

With effect from February 5, 2013, the Nigerian Communications Commission directed that all domestic off-net Short Messaging Service (SMS) must not cost more than N4.00. The new price cap is a 60 percent reduction from the former price that was N10 per SMS for off-net and N5 per SMS for on-net text messages.

This directive was contained in a statement issued by the Reuben Mouka, head of media and public relations, and signed by Josephine Amuwa, the director, legal and regulatory services of NCC. The NCC arrived at the new price cap after due considerations of the submissions made by the operators at various consultative meetings but will not place a price cap yet on International SMS. “There was a general consensus that the cost of SMS was too high, especially in view of the interconnection rate of N1.02 for SMS as determined by the Commission in 2009.”