Telecom: Of risks, investment and fair profits (1)

A recent declaration of two players as dominant operators in two segments of the telecommunications market by the Nigerian Communications Commission (NCC) has brought the sector under renewed public scrutiny. There have been a number of analyses and opinions published in the media, including one entitled “Impact of telecom sector expansion” written by one Abdulahi Umar and published some days ago. That article, like a number of such articles spawned by the NCC declaration, was founded on a rather poor understanding of the issues.

First of all, it would seem that a majority of the critics firing furious darts at the two operators declared dominant by NCC are not adequately conversant with the intent of the declaration. And this is somewhat curious because the regulator in making the declaration took due care to guide against misconception of its announcement by explaining that it was not a negative thing to have dominant operators in a telecom sector. NCC’s director of Public Affairs, Tony Ojobo, said on the contrary it was actually a positive indication of the effectiveness, resourcefulness and strategic decisions of the operators in question. Additionally, it is a more relatable crystallisation of the immense potential of the country, which many other investors ignored about a decade ago.

What should be the concern of the regulator, as Ojobo also observed, is the use to which the operators put their dominant status. Will the operators use the status to stifle competition or give telecom consumers the short end of the stick? As far as anyone can see, there is no evidence of that yet in Nigeria, and there is therefore no justification for targeting any of the two operators for vitriolic attack for simply investing heavily in Nigeria and managing their investment so well that they outperformed competition.

On the contrary, the operators individually and collectively deserve every accolade they get for taking Nigeria from a position of fewer than 400,000 functional telephone lines in 2001 to the stage we are in today with over 119 million active lines. It is a feat worth rolling out the drums for every year. The most caustic of critics are forthright enough to admit this fact. The prayer of most Nigerians is that the success recorded in the telecom sector would be replicated in other sectors of the economy so that Nigeria can actualise its dream of being among the 20 largest economies of the world by the year 2020.

It is now easy for some commentators, like Umar, to make light of the contributions that telecommunications has made and continues to make to the economy. After all, it seems like ages ago when state-owned operators in the communications sector were veritable drains on the resources of the country. From supporting indigenous operators in the sector with annual subventions, the government today receives steady revenue from the current crop of operators in the sector in the form of taxes, levies, duties and so on. The only operator that openly discloses its figures, MTN, announced recently it had paid almost N1 trillion in various taxes since 2001. By the time the contributions of the others are added, we are looking at a huge and steady stream of revenue for the government outside of the oil sector.

Indeed, a study commissioned by the United States embassy in Nigeria in October 2011 indicated that the ICT sector contributed 8.2 percent to the nation’s Gross Domestic Product (GDP) in 2010, more than the manufacturing, banking and solid minerals sectors combined. As a matter of fact, economic growth in the non-oil sector has been led for many years by the telecommunications sector.

Some analysts, like Umar, try to detract from this major contribution by alluding to the hefty profits the operators are raking in for themselves and their shareholders. Profits are a legitimate expectation of investors. The globally renowned management expert and author, Peter Drucker, in his book Management: Tasks, Responsibilities, Practices, lays the fact bare: an investment or business exists because of quest for profit. “If archangels instead of businessmen sat in directors’ chairs, they would still have to be concerned with profitability, despite their total lack of personal interest in making profits,” he says, adding elsewhere in the book that it is even in the interest of a community for its businesses to make profit. “A company can make a social contribution only if it is highly profitable,” he submits.

The operators that Umar is begrudging for making hefty profits have made huge investments and the profits they are making are commensurate with the level of investment they have put in the economy. 

Oguntimehin writes from Unity Estate, Alimosho, Lagos.

Send reactions to:

comment@s19080.p615.sites.pressdns.com/en