Having made appreciable progress in the tele-density in country’s telecommunications space with 56.4, operators are now looking at the next stage of service delivery which will centre on providing internet services as well as other value added services.
This is coming against the backdrop of recent development in the sector such as the landing and commercial rollout of service by MainOne Cable and Glo. Also, West Africa Cable System is expected to land by next year. These initiatives have further helped in the availability of bandwidth which before was scarce and costly.
Nigeria CommunicationsWeek gathered that already price war has begun in the bandwidth market which saw MainOne and Glo 1 slashing price from $800 per mega byte to $300 per mega byte.
More so, Nigerian Communications Commission is making effort to kick start delivery of mobile broadband through the licensing of spectrum for that purpose. What these means is that operators need to make reasonable investment in this direction to plug into the broadband revolution. Telecommunications operators require a lot bandwidth to offer various lines of services be it voice or data related.
Nigeria as one of the largest and fastest growing markets offers particularly attractive opportunities, starting with the fact that less than 40 percent of the country has been covered with telecommunications access as well as its large population which is the basis for telecommunications business.
In spite of huge success recorded so far in the sector especially in the mobile space of the industry growing to about 76 million, there is need for more investors and existing operators to increase their investment in providing capacity. Existing players in all market sectors requires additional funding for expanding their networks and services at record pace in order to keep up with demand, and the unified licensing regime opened up new opportunities to existing and new players alike for the provision of next-generation converged mobile, fixed and internet services.
The few investors who entered the Nigerian market in 2001 and 2002 when it was still considered very risky have experienced triple-digit growth rates every year and amassed huge profits. In the improved economic and operating environment, the market is now also attracting strong interest from leading global telecoms players and international investors, but new technologies, a decline in infrastructure costs and continuing deregulation will maintain opportunities for smaller player as well.
This report provides potential investors with an overview and analysis of the Nigerian telecommunications market and delivers insights into current and future investment opportunities that exist in the various market segments while at the same time pointing out the problems and risks involved.
The first seven years of the 21st century have continued to witness an upsurge in the application and use of telecommunications and information technology in nearly all aspects of human endeavor. The wireless revolution, the pre-paid billing platform and the internet phenomenon have accelerated access to information resources and changed the way people live and transact business.
Telecommunications/information technology industry has therefore continued to take center stage in world affairs and will continue to be so far into the foreseeable future.
The wave of market liberalization sweeping across he world has positively impacted the continent with several countries opening up to foreign direct investment in the telecommunications sector. It is reassuring to note that it is now widely acknowledged that Africa currently represents the most fertile ground for telecom investment. Notable success stories have been recorded since several African countries embraced market liberalization, thus encouraging others to move in the same direction.
For instance in Nigeria, Dr. Eugene Juwah, executive vice chairman, Nigerian Communications Commission (NCC) said that the role of the commission is to encourage investment and protect all stakeholders in the industry, he explained that the advent of new technologies like broadband would encourage penetration to remote areas of the country and help bridge digital divide.
He promised new regulations that would urgently promote broadband technology and encourage investors to come into the sector.
Today, owing to several factors including governments’ genuine deregulation policy, and the huge potential of the Nigerian market, so much has been achieved within a very short time. Through the national regulatory authority, the Nigerian Communications Commission (NCC), government has approved itself fully committed to the liberalization of the telecom market. Since year 2000, Nigeria has transparently licensed major competitive operators, settled interconnection disputes, constantly held open consultations with stakeholders, enacted new telecom laws, regulations and guidelines, and provided custom duty concession on equipment imports, among others.
These activities have encouraged investment and promoted competition in the industry, resulting in the exponential growth in the number if subscriber lines. It is instructive to not that the growth in subscriber lines has come as a result of a boom in private investment in the telecommunications sector. Recognizing the huge unmet demand and hunger of consumers for phone services and the potential of the Nigerian market, investors pumped in close to $4.00 billion USA into the sector by December 2003. Today investment in the telecom sector ranks second only to that in oil industry. In Nigeria, the telecom liberalsation has allowed the inflow of investment in the sector from USD50 million in the year 2000 to over USD 12 billion as at present.
Operators have made huge investment in the sector in building their network as well as expansion. Notable among them are Globacom’s national optic fibre, MTN Yello Bam among others. India’s largest phone operator Bharti Airtel said it will invest 600 million dollars in Nigeria’s mobile market following a huge recent acquisition deal spanning 15 African nations.
The nine years of Telecom Sector Reform has brought about substantial private sector investment, increase in number of market players, unprecedented growth in the Network, Expanded geographical coverage, empowerment of the citizenry, employment creation and economic stimulus.
The role of a regulator in a developing economy is typically very demanding and encompasses far reaching and multi disciplinary issues. To be successful, the function should be based upon a well defined set of objectives which typically includes attracting investment, infrastructure planning and development, sector efficiency improvement, quality of service improvement encouragement of competition, eliminating barriers to market entry for new operators, protection and empowerment of the customers and promotion of the general socio-economic well being.
Regulatory functions cover virtually every aspects of telecommunications network and service provision including tariff, technical standards, allocation of scarce resources, fair competition and inter-operator issues such as interconnectivity and interconnect termination rate.
President Goodluck Jonathan had said at the 3rd Ordinary Session of the African Union Communication and Information Technologies Ministerial Conference that his government have plans to set up an Internet Exchange Point project to ensure broader internet penetration to all parts of the country.
The president further stated that Nigeria’s satellite, NigcomSat-1 which developed technical problem after its launch in 2003 would be re-launched next year to enhance ICT penetration in the country. He added that ICT was being deployed in the postal sector in conformity to the international postal and financial systems, adding that the postal sector would soon be liberalized to open it up to private participation and inflow of capital and innovative ideas.
The state has a duty to encourage investment in the sector with the sole aim of making access to good quality information and communications technology resources available to all its citizens at affordable prices.
Regulation therefore draws its relevance from the widely accepted role of the state as a motivator and impartial umpire.
In order to optimize and accelerate growth in telecoms sector in Nigeria, attention must continue to be paid to key issues that affects investment flow such as: sound economic and fiscal policies; minimum investment risk; guaranteed investment protection; improved support infrastructures; minimum political and bureaucratic interference; stability of government and government policies; independent and strong regulatory institution; good enabling laws for the sector, and so on.
Telecommunications technology has been nationally acknowledged as presenting copious opportunities for the creation of unprecedented wealth and employment in Nigeria.
Former President Obasanjo’s government demonstrated the political will necessary to foster an environment conducive for investment in this sector. Nigeria has progressed in the telecommunications revolution, which is opening up new possibilities and frontiers across business, political, social and economic landscape.
The sector today requires massive inflow of private investments for infrastructure upgrade and expansion. Half-hearted market liberalization measures have denied many African countries access to investment dollars that could have been available to the sector both from within and outside such countries.
The need for government to provide the right environment that will attract serious investors and for market forces to thrive cannot be over emphasized.
All policies must of necessity be aimed at attracting new sources of capital, accelerating network expansion, improving pricing, enhancing quality of service, introducing of new technologies and providing access to ICT resources to all citizens at affordable prices.
The expansion of telecommunications facilities must go side by side with the development of the human resource capacity that will support the industry. We must develop the complex networks of wireless systems, fibre optics, satellite systems, computers, internet webs and a host of other telecommunications and information technologies.
Manpower requirements for ICT infrastructural development do not only stop with the engineers and technicians. Well trained personnel in other specialized areas such as financial planning, law, accountancy consultancy services, business management, personnel management, among others, are also required. Such skilled staff, which are mostly needed in the middle and upper management levels, need to be well trained and up-to-date.
Network operators should see development of human capital as an integral aspect of their investment in network expansion in order for such network elements to perform optimally as they prepare for the next frontier in development of the scetor.