Investment is critical to development of any sector of an economy. Massive investment in a sector is an ingredient of how vibrant, and competitiveness of that sector which result in good quality of service delivery to consumers in that sector. Against this backdrop that stakeholders in the telecommunications sector of the country’s economy are craving for an increased investment in the sector. However, the high growth rate recorded in the sector is premised on the investment and vibrancy of telecommunications as a sector in the economy.
Engr. Ernest Ndukwe, chief executive of the Nigerian Communications Commission, has said that telecoms investment in Nigeria in the last eight years has exceeded USD18 billion.
The current investment figure is made up of about US$12 billon from foreign direct investment while the balance is from investments made within the country since 2001.
He said government’s invitation to the private sector for participation in the industry has paid handsomely and led to the current success indices in the sector.
The NCC boss said that the decision by Nigeria to implement a technologically neutral regulation has resulted in investments in both the GSM and CDMA based services and made diverse services available in Nigeria with investors attacking services from different points thereby providing choices for the Nigerian consumer.
Aside the $2.6 billion generated through licensing fees from the GSM, notable investment witnessed in the sector especially through acquisition of local operators by foreign ones include, Telkom of South Africa’s 100% acquisition of Multi-Links for $350 million, MTN acquisition of VGC Communications at $65 million, MTN acquisition of XS Broadband for $32.1 million and Zain acquisition of over 60% stake in Vmobile for $1billion. Also, Sudatel has acquired 70% stake of Intercellular at $60 million. On the local front Visafone acquired some CDMA operators to become the largest operator in that space. The acquired CDMA operators are Independent Telephone Networks (ITN), Bourdex and Cell Communications although the company refused to disclose the cost of these acquisitions but industry watches believed the deals worth over N3 billion.
In fact, the eight year of telecom sector reform has brought about substantial private sector investment, increase in the number of market players, unprecedented growth in the network, expanded geographic coverage, empowerment of citizenry, employment creation and economic stimulus.
The role of a regulator and government in developing telecommunications sector is demanding and encompasses far-reaching and multi-disciplinary issues. To be successful, the functions should be based upon a well defined set of objective which typically includes attracting investment, infrastructure planning and development, sector efficiency, encouragement of competition among others.
As the economy of the nation continues to look up and with pressures from global financial markets, and the position of Nigeria as a major commercial centre in the West Africa region, the demand for reliable and modern telecommunication infrastructural facilities is heavy.
Nigeria must therefore be viewed as a major market for telecommunications equipment and services in technology areas such as: digital transmission system (including microwave, satellite and optic fibre), submarine communications, digital exchanges (wired and wireless), billing systems and data communications networks including primary rate ISDN and Broadband ISDN services. The Federal Government of Nigeria should be interested in attracting local and international operators to come and participate, in the urgently needed expansion of her telecommunications infrastructure by providing the enabling environment for the intending investors to play in.
Obstacle to investment
There are challenges in the telecom sector that are inimical to investment which need to be addressed if the country will attract the desired massive investment she is looking for to sustain growth as well as bring development in the sector.
Some of these challenges according to Gbenga Adebayo, chairman of the Association of Licensed Telecommunications Operators of Nigeria (Alton), could hinder the sustenance of the growth, if they are not nipped in the bud. He listed some of the challenges as multiple regulation, government interference in telecom matters, multiple taxations, insufficient broadband rollout in the industry, security of infrastructure, quality of service, inadequate power supply, and state of access roads, among others.
He advocates the independence of industry regulator such that the regulator must be free from political interference which was witnessed in the licensing of 2.3 GHz spectrum. Multiple regulation he said is a bane of growth and government must continue to provide the right regulatory and policy environment without crisscross between various arms of government.
Adebayo called for the scrapping of all forms of levies and fees charges by various agencies of government on right of way approvals, insisting that they are all inimical to a true regulatory framework in any society.
He also explained that capacity building is critical for the sustenance of telecom development and that more effort is needed from government to ensure that the technical manpower requirements for the information and communications technology (ICT) industry were met. This, he said, was traceable to challenge in the socio-economic environment and the guaranteed minimum quality of lives and that the industry was loosing a number of highly trained personnel to other countries with less potential, but with better social security and standard of living and economic values, better healthcare, better education guarantees for their children, better security of lives and properties and quality of living.
He reiterated the fact that telecommunications in Nigeria remained the most functional and reliable public social infrastructure, while calling on stakeholders to continue to do the needful to sustain the growth and stability of the telecom sector of the economy through the provision of enabling environment for investors both local and foreign.
In order to optimize and accelerate development in telecoms sector in the country, attention must continue to be paid to these key issues that affect investment.
The sector today requires massive inflow of private investment for infrastructure upgrade and expansion. Half-hearted liberalization measures have denied many African countries access to investment that could have been available to the sector both from within and outside such countries. Governments must therefore resist pressures to protect incumbent operators to the detriment of truly competitive markets.
The need for government to provide the right environment that will attract serious investors and for market forces to thrive cannot be overemphasized. 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 human resource capacity that will support the industry. We must develop knowledge, skills and competencies to understand, plan and deploy the complex networks of wireless systems, fibre optics, satellite systems, and a host of other information and communications technologies.
Industry watches that spoke to Nigeria CommunicationsWeek believed that attracting massive investment in the telecom industry goes beyond providing a good regulatory framework which NCC has done, and that environmental as well as operational challenges are very key to achieving it.
They cited instances of bureaucratic bottleneck in securing approval for deployment of telecom infrastructure which state and local governments give. They also decried unending demand by government agencies for one levy or the other, for example, MTN disclosed that an environmental agency demanded that it pays N1million every year on its mast. Recently, some manufacturing companies in the country have started relocating their production factories to neighbouring countries that have improved social infrastructure especially power which accounts for over 60 per cent of cost of production in the country. Telecommunications sector is not different, imagine where an operators do not have to provide generators and its rising maintenance cost on its so 5,000 base station what such operator would be saving.
Such an operator will be saving the cost of 10,000 generators at a cost of N2million each as well as cost of fueling such generators where it runs on it for 17 hours in a day. Operators will not face the problem of theft of these generators that is now target to armed robbers.
All these challenges make nonsense of most business projections and speculation of foreign investors into the country, which has resulted in scaring them away from investing in the country. The earlier these issues are addressed the sooner the realization of the much needed massive investment in telecommunications space that will bring about development in the sector.