Monday, 3 September 2007

Nigeria Celebrates Six Years of GSM Mobile Phones

It has now been six years since GSM was introduced to Nigeria, and the telecoms regulator, the NCC has published a review of how telecoms in the country has changed since those first mobile phone licenses were sold. Prior to 2001, the number of connected phone lines in the country before the introduction of GSM services was a mere 450,000 for an estimated population of 120 million at the time and the level of investment in the telecommunications sector was just about US$50 million only. Six years on, the growth of the telecommunications sector is unmatched by any other sector and it has recorded a phenomenal growth both in terms of subscriber's base and infrastructural development in the country. In January 2001, the Commission conducted an auction for Digital Mobile Licenses. This auction was acclaimed locally and internationally as one of the best in the world due to the high level of transparency associated with the exercise.

The auction brought about the emergence of three mobile Operators; ECONET Wireless now (CELTEL), MTN and MTEL, a subsidiary of the incumbent operator. The Nigerian Telecommunications Limited (NITEL), which was also awarded an operating license as a National Carrier. In 2002 a fourth Digital Mobile License (DML) was issued to Globacom (Glomobile) through another transparent auction process. To further increase competition a fifth Mobile License (with GSM spectrum) was awarded to Emerging Market Telecommunications Services Limited, early this year.

The transparent manner in which the Commissions handled the DML gave the impetus to other licensing auctions that followed. These include, the Second National Operator (SNO) granted to Globacom, Fixed Wireless Access (FWA) licenses granted to 24 companies on Regional basis, the Unified Access Service Licenses (UASL), 3G Licenses granted to 4 companies. Through the award of these licenses the NCC facilitated a phenomenal expansion of telephone lines in Nigeria, from about 450,000 connected lines in May 1999 to over 38 million lines by July 2007, boosting teledensity growth from 0.4% to 24%. The capacity for growth in the number of phone lines in the country over the next decade remains quite high, as some parts of the country are yet to be covered.

Investments in the Telecommunications Sector

Prior to the licensing of the Digital Mobile Operators, private investment in the telecommunications sector was just about US$50 million. Between 2001 and now, the sector has attracted over US$9.5 Billion, substantial part of which are direct foreign investment. With the rapid expansion plans by many of the major service providers, another US$3 Billion of investment is expected before the end of the year. Nigeria has thus become one of the most desired investment destinations for ICT in Africa . This could not have been possible without a conducive and predictable regulatory environment.

Revenue to Federal Government

In addition to this, the Federal government has earned over US$2.5 Billion from Spectrum licensing fees alone between 2001 and now. Import duties and taxes from the telecom industry have also contributed substantial revenue to the Federal Government.

Review of Tariff Rates

By the introduction of competition, telecommunication services are now easily available at affordable prices. Before the advent of digital mobile services in 2001, cost of subscription to Mtel analogue mobile services was over N60,000. In 2001, GSM subscription started with a price of N20,000 per line and today, has fallen to almost zero. The introductory tariff was high at N50 per minute and can be as low as about N25 per minute on-net (mobile to mobile). Instead of intervention in retail call rates, the Commission has instead intervened in determining interconnect rates for the industry.

The combined effect of the two interconnect rate determinations in 2004 and 2006 was a reduction of the mobile termination rate from N18.00 per minute to N11.40 per minute. This has enabled the fixed operators to reduce their retail tariffs for calls to mobile networks to as low as N20.00 per minute. The Commission will be initiating a process for reviewing the interconnect rates in the next few months in line with international best practice. Ownership of phones now cuts across the various social classes, opening good opportunities for the e-health, e-education, e-security, e-commerce and e-banking in the country.

The outstanding growth in the telecommunications sector has correspondingly created a significant number of new jobs in the economy. Also, other sectors such as advertising, real estate and finance have gained tremendously from the ripple effect of the growth in this sector. Today the telecom sector is a key contributor to the nation's Gross Domestic Products (GDP)

Socio-Economic Impact

The great improvement in access to telecoms in the country has had a positive impact on virtually all facets of life in the country's political, social as well as economic. Government's interface with the citizens is now faster, people now contact their folks in most parts of the country from anywhere instantly whenever they wish and clients now easily reach their various service providers such as mechanics and tailors, all thanks to the telecommunications revolution!

The Digital Bridge Institute

The growth of the number of skilled manpower in the telecom industry over the last six years has been remarkable. The NCC took certain timely initiatives to ensure that the dearth of skilled Nigerians to run the fast expanding telecom industry in the country was remedied. A milestone was achieved on May 20, 2004 when Mr. President commissioned the ultra modern Digital Bridge Institute (DBI) in Utako, Abuja , established by the NCC as an international centre for advanced telecommunication studies. Apart from training technical manpower, the DBI trains personnel in other specialist areas such as economic analysis, financial planning, law, arbitration, mediation, interconnection, e-commerce, business management, human resources and consultancy services. The Telecommunications Training Schools in Kano and Oshodi have been recently transferred to the Commission by the Federal Government and are being resuscitated to become campuses of the DBI. It is planned that from next year the expanded DBI will be providing multifarious ICT training programs for over 2000 graduates annually to service both local and international markets.

Quality of Service Challenges

Though tremendous progress has been witnessed in the telecommunications sector, there remain numerous challenges. One of such challenges is the present poor quality of service being experienced in the network. However, the Commission is working assiduously to ensure that the quality of service improves significantly within the shortest possible time. The Commission is now working with operators to achieve network optimization and speed up the rate of deployment of new base Stations, switches and transmission infrastructure. In addition, the Commission has stopped all Service Providers from all promotional activities that will lead to increase in the volume of traffic until such a time that there is substantial improvement in the Quality of Service on the networks. We condemned in absolute terms the irresponsible action of major mobile operators in embarking on promos that their networks were ill equipped to carry.

NCC has further directed that as long as the poor Quality of Service persists, service providers should not place any restriction or time limitation on validity of airtime credits so that subscribers are not compelled to utilize their call minutes within restricted time frames. It is believed that these measures will further reduce the pressure on the networks of service providers and thus contribute to an improvement in the Quality of Service. The major contributor to the current QoS challenges is network capacity constraints. The operating companies have not been able to expand their networks fast enough to meet the ever growing demand by subscribers.

This was further aggravated by a few factors such as the near total collapse of Nitel Long distance transmission infrastructure which a number of Service Providers depended on for their interstate links. With the fall of Nitel also came the collapse of Mtel which depended heavily on Nitel for its transmission requirements. Thus several subscribers to the Mtel service migrated to the other three networks with its attendant effect on aggregate network capacity generally.

Other issues such as major deterioration in the public power supply situation in the past twelve months; security challenges; theft; transmission cable cuts; delay in securing approval for siting of new base stations; etc, have also contributed in various degrees to the problem. With the current rapid expansion programs being implemented by all the service providers, and other measures the Commission has put in place, the QoS situation has started to record improvements.

The recent intervention of the Ministers of Information/Communications and the FCT in the case of Abuja will also translate to major improvement in QoS in the Federal Capital Territory . To ensure that this situation remains the focus of the industry stakeholders always, the Commission has constituted an industry working group on Quality of Service. Also, Guidelines on Infrastructure sharing which was published last year will be strictly enforced to encourage infrastructure sharing at all levels

The Future Outlook

At the present rate of network growth it has been predicted that Nigeria will overtake South Africa to become the largest Telecom Market in Africa. A lot of emphasis is also being placed on growing Nigeria’s data capability by promoting large scale broadband internet and optic fiber rollout across the country.

Sourced from Nigeria 2Day, an online publication – Sept 3rd 2007


Anonymous said...

Yes! Yes!! Yes!!! Considering the fact that Nigerian administrators rarely tell the public aboutits operational services/activities, you did an excellent job with your presentation... You fed me nice and danddy.
All hands up for you.

With respect to IT development in Nigeria (and Africa)...I will like to know you better:

Bayo Adekanmbi said...

As the market transits to stable growth, Nigerian telecommunications will remain bullish for some time to come and the winner will be the consumers who will be better empowered to determine how they want to be served. It’s the new era of customised offerings on easy-to-use, accessible and more reliable platforms.
Growing consumer trends like rotational churn, dual SIM on one device and discerning consumption pattern will create intellectual demand for business survival and be a true test of player’s marketing prowess. Issues of long-term and sustainable lock-in strategy will be critical to securing a significant consumer lifetime value.