Telecom
Preparing for Expected Broadband Revolution
The growth in telecommunications sector of the country is expected to move from growth level to development where service providers are to consolidate on improved quality of service. Presently, over 80 percent of telephone and internet access in the country are through mobile communications facilitated by satellite and microwave technology. It has been observed by telecom experts that quality of service delivered by operators using the above mentioned technology is affected by atmospheric condition making the technology not suitable for reliable service delivery compared to optic fiber also known as terrestrial infrastructures.
A fibre optic cable is made from a glass or plastic core that carries light surrounded by glass cladding that (due to its lower refractive index) reflects “escaping” light back into the core, resulting in the light being guided along the fibre.
The greatest improvement in access to telephones has had positive impact in virtually all facets of life, including political, social and economic activities, thus resulting in an exponential growth in the subscriber lines due to the widespread of networks across the country.
Currently, the growth and potential earnings accruable from telecommunication services in Nigeria economy is comparable to other markets in the world, and the current rate of network growth across the country is impressive. Quite a number of global technology corporations are extending their operations to Nigeria with a multiplier effect on the economy and international trade between us and other countries of the world and in particular the West African sub region. The result of this is more competitive market environment and high potential for wired line network service providers.
However, it is encouraging to note that despite the current rapid development of telecommunications in Nigeria, there is still a great opportunity for further development as Nigeria being the most popular country in Africa, has an estimated addressable telecommunications market of 120 million subscriber lines, and in view of our landscape, the country remains major market for long distance network operators due to increasing demand for multi service, such as voice, data, broadband internet service, rural telephony access and unified service which provides a biggest prospect for wired line service providers.
Some telecom analysts have argued that due to the mobile nature of Nigerians, and as the demand for mobile services continues to grow, that there will be no room for wired line operators. Experience has shown that in order for predominantly mobile operators to improve on their quality of service they must invest in fibre optic backbone, and in order for them to capture multi service segment of the market, they must invest in last mile terrestrial copper infrastructure: there are two ways around this, one is to begin massive investment in this regard, or to invest and or acquire small and medium sized wired line local loop operators.
As the telecommunications industry evolves, it provides increasing opportunity for wired line networks, as operators are challenged to ensure that every city, towns, villages, hamlets, rivers and creeks in Nigeria are covered with multi services: voice, data, video and broadband internet.
Particularly in the new license regime holders are allowed to provide more than one service under the same license.
Preparing to Move forward
The absence of terrestrial infrastructure in the telecommunications industry is being felt in all service deliveries especially as the industry will soon witness an unprecedented capacity with the landing of two undersea cable Glo 1 which landed last year and MainOne expected to land in few weeks. For instance, in direct-to-home satellite television broadcasting it is a common occurrence for service to be disrupted each time it rains. More so, the hope of offering a broadband internet service cannot be realized with a fibre optic infrastructure. Its absence is responsible for narrow band service rendered in the sector.
It is against this backdrop that telecommunications giant Globacom began its fibre optic ring project across the country. So far, it has completed Abuja to Kano, Minna, Enugu, Owerri among others, even as work on other parts of the country is still ongoing.
Nigeria Telecommunications Limited (Nitel) has fibre optic ring that is not being used probably because it has not found its bearing in the industry with controversies in its privatization process, which resulted in the company’s refusal to lease out the infrastructure to other operators that requested for it to enhance their service delivery to last mile.
This however led to them embarking on similar project. Today, MTN in order to meet the fast growing high- capacity transport and connectivity needs has completed a world-class quality Metropolitan Area Fibre Networks in Ibadan, Kano, Warri and Aba. The implementation supports the rolling out 3G services. This is in addition to 3,885km of fibre optic backbone networks popularly referred to as “Blaze” network. Blaze was implemented in four phase namely: Phase 1&2: Southern and South Eastern rings with a total span of 2,422km Phase 3: Northern ring with a total span of 1,116km Phase 4: Niger Delta (completed in October 2007) with a total span of 347km.
Zain Nigeria is also expected to complete its fibre optic project that spans over 4,000km. All these are geared towards high data rate and wide bandwidth.
Projects of this sort are required by operators to deliver last mile services that are going to be available when the undersea cable infrastructure begins to sale bandwidth to operators at a cheaper cost which is the expected broadband revolution.
Going forward, there will be no longer any difference between mobile service providers or private telephone network operators (PTO) and fixed wireless operators as the technology barrier is removed with the unification of licenses, which in turn is an opportunity for hitherto mobile only operators to harness their network resources and offer bundled application.
However, there is the high risk that smaller ‘legacy’ operators with limited local loop coverage may not have a place in the market, as the bigger players begin to offer services which were mainly offered by smaller local loop operators which is now happening.
In essence, Nigeria will begin to see emergence of mega telecommunication operators that would offer unlimited services to their subscribers, with massive expansion of their network, and enormous benefit for their existing market goodwill, and a significant increase in the demand for multi-service.
A significant impact of this opportunity for the market is to streamline end-of-line service delivery to consumers.
Unification of licenses has finally resulted in genuine unification of services with providers offering attractive discount deals to end-users which will soon be the order of the day in no distant time in telecom landscape.
The market will begin to offer bundled services, as costs are driven down, the competition between wireless and wired line services would continue to grow.
The power of service bundling is becoming manifest, as the market grows and it offers major prospects for wired line service providers.
What this combination means is that the next few years may see wireless ‘only’ providers emerging as largely long distance wholesale carrier providers, and landline telecom companies would remain largely as retail terrestrial and local loop entities.
In many cases, wireless carriers are saddled with high cost of frequency and bandwidth channels, as such ability to offer consumer friendly rates for multi-service at high quality.
Mr. Gbeng Adebayo, Chief Executive Officer, Communications Network Support Services, said wired line Telcos have introduced very proficient retails rates in the market. “The cost per new customer for a typical wired line subscriber is relatively low and with excellent quality of service. In addition, wired line operators are able to offer multi-service such as broadband internet, high speed data communication and video communication at a very affordable rate without compromise on quality of services,” he said.
Most importantly, because of the fixing nature of infrastructure, the wire line Telco has an ongoing long term relationship with their customers; therefore their customer loyalty is much higher than that of mobile operators.
Market research has shown that in the urban areas, a large number of residential consumers have a higher retention of their fixed lines which offers value added services such as the internet and data connection than their mobile lines.
The Internet today is the largest single network in the world and it will continue to remain for a long time to come as well as a major source of income for wired line operators as the mobile operators continue to battle with high bandwidth charges.
The challenges for wired network operators in Nigeria range from the difficulty in infrastructure deployment multiplicity of right of way approval processes, non willingness of operators to co share underground ducts and exchange of dark fibre, as well as willful and unwilful damage to cable network infrastructure.
However, the major advantage lies in the size of the market, the need to grow the national fibre optic transmission backbone and the increasing demand for bundled multi-service: voice, data communications and broadband internet services which today can be delivered at affordable rates and best quality by fixed network operators.
As the industry prepares for broadband revolution orchestrated by both developments in the sector which is moving away from voice services to value added as will as the expected availability of the much needed bandwidth capacity stakeholders in the industry should collectively address issues relating to making broadband services available to end users.
Africa Mobile Networks Group (AMN) has said that its first of its base stations in Nigeria to connect to SpaceX’s Starlink constellation is now live and using the LEO satellite network for backhaul connectivity.
It’s the first AMN base station to connect to Starlink since AMN and SpaceX signed a commercial deal in July 2023 to use Starlink for remote base station backhaul connectivity across Africa.
AMN said in a statement that Starlink’s low-latency connectivity enables its multi-carrier RANs to sustainably provide 2G, 3G and 4G services in remote, rural areas of Nigeria. AMN also said it also paves the way for the launch of 5G services, which AMN plans to do before the end of this year.
AMN, which builds, owns, operates and maintains mobile network infrastructure for African mobile network operators, currently operates 1,600 base stations across Nigeria.
The company said it will continue to install new sites throughout 2024 in Nigeria, as well as Democratic Republic of the Congo, Cameroon, Madagascar, Cote d’Ivoire, Benin and Rwanda. AMN also has operations in Bissau, Ghana, Guinea, Liberia, Sudan, and Zambia.
Starlink has been commercially available to consumers and enterprise customers since January 2023. Last week, according to a report from Nairametrics, Starlink slashed the price of its internet router by 45%, although its monthly subscription rate remains unchanged. No reason was given, but the report suggests the move may be related to the naira’s recent appreciation against the US dollar and other foreign currencies.
According to figures from the Nigerian Communications Commission (NCC), Starlink had over 11,200 subscribers in the country as of the third quarter of 2023 – which also makes it one of the top ISPs in Nigeria, the report said.
Ikemesit Effiong, Chairman of the Technology Committee of the Nigerian Bar Association Section on Business Law, has raised concerns about the sustainability of Nigeria’s telecoms sector amid ongoing economic challenges.
In an insightful article titled “The Imperative of Upholding Nigeria’s Telecoms Lifeline,” Ikemesit delves into the sector, emphasizing its pivotal role as both an economic engine and societal enabler. With approximately 15,000 direct employees and a significant 16% contribution to Nigeria’s GDP, the sector’s health is crucial for the nation’s well-being.
Ikemesit highlights various obstacles facing the telecoms industry, including frequent fibre optic cable cuts due to road construction and vandalism, multiple taxations, and challenges in acquiring rights-of-way. These issues, compounded by exploitative rent-seeking practices, have persisted despite efforts to resolve them.
“Central to the sustenance of any industry is a conducive economic environment that allows for sustainable growth and innovation,” writes Ikemesit. However, regulatory constraints that limit tariff adjustments hinder the sector’s ability to adapt to market dynamics unlike other industries.
Recent data from the National Bureau of Statistics (NBS) indicates a rise in inflation to 33.20% in March 2024, up from 31.7% in February 2024. This poses significant challenges for businesses striving to manage staff welfare and make necessary investments amid economic strains.
The inflationary pressures have led to price increases across various sectors, including agriculture, beverages, and services. Companies such as Nigerian Breweries Plc and Netflix have adjusted prices multiple times this year to cope with rising costs.
Recently, the quality of service has become a significant concern for subscribers across the country. Available data indicate that this issue may persist for the foreseeable future. The 70% broadband penetration target set by Bosun Tijani, Nigeria’s Minister of Communication, Innovation, and Digital Economy, was severely impacted in 2023, experiencing a decline of 14.2% from a peak of 48.28% in March to 41.87% in November.
With operators reporting financial losses in 2023 and a challenging outlook for 2024, it is evident that funding will pose a significant challenge for the necessary investments needed to transform the sector.
Describing the challenges of the sector in 2023, Engr. Gbenga Adebayo, Chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON), said, “ALTON’s members currently pay at least 49 different taxes and levies. Additionally, our members continue to bear the brunt of multiple taxation and coerced compliance with tax and levy demands that have no legal basis by sub-nationals. This threatens investment, sustainability, and industry growth.
“Instances include – exorbitant Right of Way fees, increases under the Finance Act 2023 (such as an upward review of Tertiary Education Trust Fund Tax from 2.5% to 3%, imposition of Value Added Tax on cell towers (Base Stations), imposition of import levy on goods, removal of capital allowance on telecommunications goods and services under Section 32 of the amended Companies Income Tax Act), amongst others.”
In the past 10 years, telcos have maintained the same charges for calls and data, despite inflation rising from 8.05% in 2014 to 33.20% in 2024, and the dollar increasing from 185 naira in 2014 to about 1,000 naira in 2024.
Considering that this sector supports Nigeria’s 221.7 million active voice subscriptions and 160.2 million data subscriptions, with immense consequential economic and social value, leaving it to resolve its challenges independently or risk collapse poses significant threats to Nigeria’s socio-economic stability. Stakeholders in the sector are urging the government to either invest in the sector as needed or adopt a cost-reflective tariff to facilitate necessary investments.
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