A new report by Ernst & Young, has posted a poorer outlook this year for smaller mobile operators like those of the code-division multiple access (CDMA) segment in Nigeria, tracking a stringent operational conditions as the possibility of government bailout appears bleak, Nigeria CommunicationsWeek can report.
According to the Ernst & Young’s global report on ‘top 10 risks in telecommunications 2012’, the survival of CDMA operators hangs in the balance.
Specifically, the report assets that worldwide, telcos face daunting task of staying afloat due to competing demands for new products and service.
Ernst & Young, specialist in assurance, tax, transaction and advisory services in their latest report stated that a lack of will to move away from a defensive business strategy would be the most heinous crime for failure by telecom operators in 2012.
Jonathan Dharmapalan, global telecommunications leader at Ernst & Young says: “Telecom operators across the world face changing demands from customers, competitors and regulators, creating new pressures across their organizations. Failure to shift their business models to cater to data services is mission-critical for all and is this year’s leading sector risk.
“New approaches to pricing are crucial and operators have an important role to play as telecoms infrastructure become central to the development of other sectors, such as healthcare and utilities.“ he added
This sync with Nigeria CommunicationsWeek’s report of February 12, which quoted Alex Dadson, managing director, Qualcomm West Africa as saying that poor business strategy was responsible for failures among small operators, specifically the CDMA sector in Nigeria.
“The CDMA while an early entrant was also disadvantaged. We did not start out with nationwide CDMA licensing. There were riggings. The interconnect regime weighed against CDMA. All these problems have been subsequently fixed but CDMA took a beating as a result of business strategy, as a result of environmental factors,” said Dadson.
Mrs. Omobola Johnson, minister of communication technology acknowledges the challenges faced by small operators in Nigeria. She told reporters in Lagos recently that her ministry was looking into ways of reducing cost of business operation for them.
“From an investigation we carried out, we discovered that their greatest challenge arose from the cost of carrying their traffic to the point of destination. The cost deploying bandwidth and data from the undersea cables to their areas of need in Nigeria is quite expensive and this has brought a lot of strains on their interconnect charges from other operators,” said Johnson.
“We are presently working with them so that we can resolve their challenges. There must be a level playing ground for all the players in the sector for them to succeed,” the minister enthused.
But the regulatory agency, Nigeria Communications Commission, (NCC) thinks otherwise as its chief executive stated that CDMA operators have no peculiar operational problems that warrant any government bailout at the moment.
Dr. Eugene Juwah, executive vice chairman & CEO of NCC stated in Lagos that the Commission had asked the operators about their condition and they had not told him of any such challenges.
“We are a regulator and we provide a level-playing ground for all the players. There has not been official request from the CDMA community on any issue as per them facing any challenge – except issues that I read in the papers. As I speak, I don’t think they have any problems. I have not got any formal notice that they are having problems,” said Juwah.
Nigerian CDMA operators may have lost business valued at above N10 billion in 2011. The key indicator of revenue loss follows an arithmetic loss of customers from 6.1 million in January to close at 4.6 million by December 2011. The revenue loss calculation is predicated on average ARPU per month of N1, 000 in Nigeria.
Dharmapalan states that for operators to survive under the prevailing global harsh economic climate, they must “keep pace with changing user expectation.” The report ranks as #2 changing customer mindset as a major hiccup operators need to keep pace with to remain afloat. “Failure to do so would mean that demand cannot be turned into value.”
Ernst & Young ranks lack of regulatory certainty as number 10 key concerns among telcos. Adrian Baschnonga, Senior Telecommunications Analyst notes that “regulation of legacy parts of the business is well understood yet policies are evolving quickly in areas such as mobile spectrum release and super-fast broadband deployment. Engaging with a range of stakeholders is needed to help incentivize industry investment.”
“Failure to formulate clear viewpoints on privacy, in terms of responsibilities to end-users and other industry players, could undermine operators’ roles in the digital age” concludes Baschnonga.
More Headache for CDMAs as Report Paints Gloomy Year
