After about two years of inactivity in telecommunications industry around the world which was occasioned by the global economic meltdown, things have  started picking up as most multi-national telecom equipment manufacturers as well as operators who drastically reduced their investment especially in developing countries are now ready to massive invest this year.
This is based on a new study published by Technology Strategies International in partnership with BroadGroup TMT Ventures. The report says that even though Nigeria became the largest mobile market on the African continent in 2008, it still has a mobile penetration level of less than 50%, suggesting that there is ample room for expansion of the market. Penetration in the fixed line segment is dismal and there is a vast opportunity to improve internet penetration, the report pointed out.
"One of the things fuelling the growth in the Nigerian ICT sector is the imminent illumination of two undersea cables, which will increase international bandwidth dramatically. The improvement in international connectivity will have a major impact on business in Nigeria," Christie Christelis, President of Technology Strategies International said.
At the other end of the spectrum, there is still huge latent demand for mobile phone services, added Christelis. “Operators in Nigeria are experiencing similar challenges to operators in other emerging economies, with declining ARPUs as the subscriber base broadens to include poorer segments. But companies such as MTN have demonstrated that even at ARPU levels of $12 – and declining – astute operators are able to make above superior margins,” he said.
Christelis noted that the recent political crisis surrounding President Ya’Ardua’s ill-health, and the instatement of Vice President Goodluck Jonathan as acting President, is a temporary setback for the country, and is bound to make investors jittery about the prospects of investing in Nigerian technology companies. But he said that, provided the political transition is well managed, it is unlikely to impede growth in the ICT sector in Nigeria. The Nigerian Government’s Vision 2020 initiative is creating an environment conducive to high growth.
"There is huge momentum behind the growth, and even through the recent global financial crisis investors have managed to source funds for good investment opportunities in Nigeria. One example is the capitalization of the infrastructure sharing venture, Helios Towers. The Helios business model could well be rolled out across other emerging economies."
Key opportunity areas identified in the report include expanding the reach of the undersea cables, building out mobile infrastructure, turning investments into fixed wireless infrastructure into sustainable businesses, expanding the retail network for mobile, fixed wireless and internet services, and in electronics manufacturing. Christelis said that the Nigerian Government is particularly keen to promote an indigenous electronics manufacturing and is doing much to attract investor interest.
Christelis warns, however, that the Nigerian ICT sector is complex and investors must give due consideration to the characteristics of the Nigerian market when evaluating business plans. The sensitivity of the economy to oil price fluctuations can result in a volatile foreign exchange. Regionalism has a big impact on the extent to which services can be rolled out. And corruption weighs heavily on investors’ minds, he added. The fact that the market is liberalized, and hence very competitive in certain segments, provides some safeguards to investors.
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 as well aas 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 Government should be interested in attracting local and international operators to come and participate, in the urgently needed expansion of the country’s telecommunications infrastructure by providing the enabling environment for the intending investors in the sector.
What need to be done
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 that is coming into the ICT sector of the country’s economy.
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.
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 better for the country to position the sector for the incoming massive investment in the sector.