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Why Nigeria’s Telecoms Sector Needs Government, New Regulatory Interventions

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Prof. Umar Garba Danbatta, executive vice chairman (EVC) of the Nigerian Communications Commission (NCC).

The Nigerian Telecommunications industry is currently considered a key sector that contributes to economic growth and one that can help lift Nigeria out of recession.

Obviously, the impact started at the point of liberalisation of sector almost two decades ago, catalysed and opened up the sector to local and foreign direct investment (FDI) estimated at over $68 billion as at November 2016.

It has created approximately over 2.5 million jobs over the past 10 years, its impact reaches across all industries and holds the potential to modernize multinationals, SMEs and their supply chains.

The sector continues to provide mobile banking services to help bank the unbanked, provides access to e-learning platforms to help facilitate training and development, and brings healthcare services to rural regions, via telemedicine and text message counselling, amongst many other services.

Until June 2016, the telecoms sector was growing rapidly and comprised 9.8% of Nigeria’s GDP but this growth has now stalled, with the sector at a strategic crossroads. Several factors have converged simultaneously, which could materially impact the industry and undermine its potential to drive economic growth and stimulate the Nigerian economy as a whole.

For starters, from a systemic standpoint, the current weakness in the local economy has resulted in relatively low consumer purchasing power and continues to place pressure on the industry and its operators.

The weak Naira has made the importation of much needed telecom equipment into the country difficult, and the upgrading of towers and service capacity expansion too expensive to conduct on a large scale.

Operators are now either deferring or delaying upgrades or expansion of their networks and customers are starting to feel the impact. Signal quality has been affected, incidences of dropped calls have increased, and overall customer service quality has declined. Nigerian consumers have every right to demand more and should never have to settle for poor network quality or services.

To further compound matters, consumers continue to move away from legacy voice services and are switching to data bundle packs, which allows them use over the top (OTT) service providers such as WhatsApp, Skype and Facebook to make phone calls inexpensively over broadband connectivity not minding the often poor quality of these services.

While it’s clear that the simple solution to addressing this trend is massive investment into telecom tower network densification, as new 3G and 4G technologies are rolled out, these network upgrades can only be done if there is adequate financing and a suitable business case.

Moreover, there is an ongoing data bundle “price war” between incumbent telecom operators and internet service providers; with a frantic race to deliver cheap gigabytes of data, for rock bottom prices.

On the surface, these prices appear good for the consumer in the short term, but in the long run, this price war will put many operators out of business, as these current bundled offerings are priced well below their actual costs to network operators.

According to Research ICT Africa, the price of data has decreased by over 65% over the past two years, squeezing margins and pushing smaller mobile network operators to the brink of collapse.

Short Term versus Long Term Gains
Artificially low data prices are designed to drive out competition. This type of practice is called “predatory pricing” in respect of which there are restrictions in many parts of the world. These pricing wars never work out well for consumers, as they typically result in initial temporary low service prices, just long enough to force out the competition.

Then, all of a sudden, the few remaining players monopolize the market and suddenly double, or even quadruple prices, as they are the surviving and dominant game in town. It’s easy to identify anti competitive pricing, as we know what it costs the telecom industry to secure internet bandwidth.

A good example of healthy competition which has led to improved quality and product service offerings is mobile phones. The competition between Apple and Samsung and others has forced all parties to constantly launch new and improved products.

Competition leads to fair market pricing which has enabled mobile phones to be purchased by the masses. The current problem in the telecoms sector is that we don’t have fair market pricing -the price of data bundles in Nigeria is presently amongst the lowest in Sub Saharan Africa.

While market forces drive the industry, governments and regulators must shape the mobile economy by setting the policies and regulations that will deliver a healthy, competitive and sustainable mobile sector alongside consumer protection for all citizens.

Feasible Solution
Given the tremendous potential that telecommunications has to jump start and stimulate the Nigerian economy at all levels, we need the help of government and regulators to play the role of referee and establish a level playing field.

Fatai Folarin, Tax & Regulatory Services Lead Partner at Deloitte noted that, “The telecommunications industry in Nigeria is one that can currently be described as self-aware and steadily adapting to the stark realities of business – changing trends, intense rivalry, regulatory uncertainties etc. There is a general understanding that to remain sustainable, there is a need to recreate existing products, diversify into new areas for which the capabilities and resources are near, improve on general business processes and navigate through the regulatory landscape.”

We recognize the free market principles of business and competition, but we also note the artificially low prices that are having a negative effect on investment and growth within the sector.

Both large and small mobile network operators are currently working to try and mitigate the current challenges related to squeezed margins, and in other cases generating losses, and lack of direct access to foreign currencies, with the smaller firms struggling the most to compete. Reduced competition will be a lose-lose situation for all operators, and the public as a whole.

The recent default status of Etisalat Nigeria, is a prime example of how it can all go wrong. Etisalat is the fourth largest telecom operator in the country, but as a direct result of the company’s razor thin margins on its current service offerings, and against the backdrop of the devaluation of the Naira, the company has failed to meet its obligations to its lenders.

Concerted regulatory efforts need to be made to ensure that all sides survive and the quality of service levels continue to be enhanced, by having the regulatory bodies insist the mobile network operators focus on additional customer metrics such as, measuring their signal reach, network uptime and improved quality of a data services.

A regulated price minimum price level will help stop the downward spiral of the telecoms industry and allow all telecom players, big and small, to compete on network service and customer service quality. Policy makers must therefore ensure that all current players survive.

The Nigerian Communications Commission (NCC) can issue more spectrum licenses and make up revenues when additional spectrum is auctioned and mobile network operators roll out into new rural areas.

We also need to consider the telecoms sectors as critical to our nation’s economic development and, as such, place the sector on the critical national infrastructure list

This important designation will give operators priority access to much needed foreign exchange and the procurement and purchase of telecom upgrade equipment for the networks.

In conclusion, mobile network operators serve millions of SMEs and multinationals that are dependent on internet access and other enterprise solutions – a half day service disruption results in large revenue losses for various businesses throughout the country.

It is therefore very important that the government, regulators and international institutions continue to define and refine strategies to increase growth and ensure the long-term sustainability of the Nigerian telecommunications sector, thereby also boosting investors’ confidence and signalling to the international community that we truly remain open for business.

 

Nigeria CommunicationsWeek believes that technology makes life more exciting and helps improve the lives of people around Nigeria and indeed the world.

So since 2007, we have devoted our energy to independent reportage of technology and how they affect lives.

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Shittu Commends NCC on Impeccable Use of social Media

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The Nigeria Communications Commission,NCC, has been recently commended by the Minister of Communications, Honourable Adebayo Shittu, for impeccably deploying social media networks for public communication and urged all stakeholders to emulate the Commission to expand the frontiers of public sector communication, good governance and national development.

Shittu’s voice was amplified by Abdulaziz Mashi, the Permanent Secretary of Federal Ministry of Communications at the 2-Day Seminar on “Social Media for Good Governance Seminar: Leveraging ICT for National Development”, held at Treasure Suites and Conference Centre in Abuja.

The Seminar Organized by the Federal Ministry of Communications was supported by Facebook, Google and Microsoft, as well as by all the agencies supervised by the Ministry – NCC, NITDA, NIPOST, NIGCOMSAT, and Galaxy Backbone Plc.

Shittu said “in an era when the social media have become very strong platforms for information dissemination and public discourse, it is imperative for government and key players in the private sector to pay extra attention to feedback from, and utilize these new media to provide platform for government-citizen and business-public engagement in an online, real-time and interactive manner”.

He added that the seminar and retreat was designed among other goals, to share knowledge and information oriented in recent research and analysis of social media use; and to review good practices on policies and programmes promoting social media for good governance and other effective uses of the communication networks.

The Minister noted those uses to include creating means to improve governance, opening up access to government and government officials, saving time and money, and creating new ways of working.

Accordingly, “government will not limit Nigerians’ access to social media solely on the basis that it may be used to express views critical of government or the social-political system.

“Protecting critical expressions on the Internet is the standard by which governments are now held to be genuinely democratic” Shittu told the large gathering of delegates from all the agencies in the Ministry, journalists and other communication professionals and a galaxy of other stakeholders.

The Minister however bemoaned the use of the social media networks for “divisive, tribal, parochial, fabricated and sentimental information, messages and ideas capable of disintegrating the country”.

Shittu urged Nigerians to draw inspiration from enterprising young Nigerians across industries who have used social media to achieve phenomenal strides that have shaped our lives qualitatively.

Tony Ojobo, NCC Director Public Affairs, who presented the lead paper on Public Communication in the Era of New Media, and drawing on NCC’s and other exemplary practices, demonstrated in a concrete sense how social media can be deployed for greater effectiveness in public sector communication in Nigeria.
There were other presentations by Ade Atobatele, Akeem Adeniji-Adele, and Abdul-Hakeem Ajijola, which focused respectively on The Magic of Words; Digital Transformation; and Social Media as a Tool Against Weaponization: Hate Speech, Fake News, were also enthusiastically received and discussed by the audience.

The Ministry of Communications plans to organize series of seminars and a Social Media Week for communication professionals in all Ministries, Departments and Agencies (MDAs) of the Federal Government in 2018.

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Group Decries Nigeria’s Poor Ranking on ICT Development Index

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By peter oluka

Broadband 2018 Coalition has expressed deep concerns over Nigeria’s poor ranking on the latest Information and Communications Technology (ICT) Development Index (IDI) published in the annual “Measuring the Information Society Report (MISR)” by the International Telecommunication Union (ITU) where the country was rated 143rd globally, a significant downward shift from its 137th position in 2016. On the African index, Nigeria placed 15th behind countries like Mauritius, South Africa, Kenya, Gabon, Ghana, Zimbabwe and even Cote d’Ivoire.

The ICT Development Index is a composite measure that combines 11 indicators into one benchmark index to monitor and compare ICT developments between 176 countries across the world. The three-dimension frameworks used to measure the IDI are Access (level of ICT readiness which includes five infrastructure and access indicators: fixed-telephone subscriptions, mobile-cellular telephone subscriptions, international Internet bandwidth per Internet user, households with a computer, and households with Internet access);

Others are, Use (level of ICT intensity which includes three intensity and usage indicators: individuals using the Internet, fixed broadband subscriptions, and mobile-broadband subscriptions) and Skills (Capabilities or skills which are important for ICTs and include three proxy indicators: mean years of schooling, gross secondary enrolment, and gross tertiary enrolment).

Expressing his shock at the development, Danjuma Yusuf, the coalition convener and technology expert, pointed that Nigeria’s technology landscape needs urgent intervention given its sharp stagnation and decline in recent years and tasked the Federal and State Governments and other relevant regulatory agencies to quickly focus on strategies that would increase the country’s global competitiveness in ICT.

According to Yusuf, Nigeria has become an object of ridicule on global ICT rankings, been bested by countries with much lower Gross Domestic Product.

He mentioned that with direct connections to 5 submarine cables ($7bn of Africa’s $20bn submarine cable investments), Nigeria has no excuse for not leading the African index ahead of South Africa (with 4 submarine cables), Zimbabwe and Gabon with 2 cables each, and urged the Federal Government to declare a state of emergency in Nigeria’s ICT sector.

Yusuf cited as example, Kenya, which also launched its Broadband Policy in 2013 but is currently leading Africa in internet penetration with over 30 million people having (67%) internet access according to the Jumia Business Intelligence and GSMA ‘White Paper 2017: Trends from the Kenyan Smartphone and eCommerce Industry’.

He stressed that proactive regulation and a government-funded National Optic Fibre Backbone Infrastructure (NOFBI) project rolled out hundreds of thousands kilometers of fiber optic cables across Kenya’s 47 counties.

According to him, Kenya’s leadership initiatives have ensured the country remains one of Africa’s leading recipients of foreign direct investment and the fastest advancing country in ICT on the continent.

Mr. Yusuf urged speedy implementation of the five-year Broadband Plan stating broadband has played an outsized role in transforming societies and economic opportunities across the world, facilitating education and knowledge dissemination, enabling trade and commerce and contributing to growing entrepreneurship across the world.

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NCC, CBN Query Barclays’ Transparency in Sale of 9mobile

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The handling of the sale process of 9mobile by Barclays Africa, the financial advisers, has come attack from the Central Bank of Nigeria (CBN) and the Nigeria Communications Commission (NCC), according to the Cable.

 

Barclays Bank has been saddled with the responsibility of finding investors for 9mobile based on the decision of Nigerian lenders.

 

In a joint letter to GTBank, which is the facility agent for the 9mobile syndicated loan, Umar Danbatta, the executive vice-chairman of NCC, and Godwin Emefiele, the governor of CBN, expressed displeasure with the “unwillingness of Barclays Africa” to follow due process in the bid.

 

In the letter, dated November 4, 2017, the two regulators said they made it clear from the outset that the sale process must be “transparent and fair, with the financial and technical capabilities of the final bidders without question”.

 

They said they now have “serious concerns” since the appointment of Barclays Africa as financial advisers.

 

“They have repeatedly exhibited signs of opacity in the sale process for 9mobile. Given the overriding public interest in the company and the need for transparency, we advised that Barclays advertise the call for ‘expression of interest’. Barclays declined, insisting instead that the company being a private one, should not be taken through a public sale,” they wrote.

 

“This lack of a transparent process has proven to be selective and arbitrary, leading to allegations that the process is being teleguided to a rigged and predetermined outcome. The CBN and the NCC will not fold their arms and allow this to materialise.”

 

Danbatta and Emefiele said they had received reports and petitions from various stakeholders, including some bidders, which have further heightened their concerns — but their suggestions to the board of 9mobile and Barclays on how to restore credibility to the process have been ignored.

The CBN and NCC then directed that all steps and decisions taken by the financial advisers as well as other advisers from the end of “expression of interest” must be communicated to CBN and NCC, who will have to approve in writing.

They also directed that the final bid process must be “open and transparent” in line with international best practices.

 

Danbatta and Emefiele said the December 31, 2017 deadline for the handover of 9mobile to the preferred bidders “remains sacrosanct”.

 

On Monday THISDAY reported that 1o firms have moved to the financial stage of the bid process.

 

The companies listed are: Globacom Nigeria Limited, Bharti Airtel, Alheri Engineering Limited, Smile Telecoms Holdings, Helios Towers, Centricus Capital, Africell, Abraaj Capital, Teleology Holdings Limited, Ericsson, Africa Capital Alliance (ACA) and The Carlyle Group.

 

The company formerly knows as Etisalat Nigeria changed its brand name to 9Mobile in July after the Mubadala Group, the major investor from the United Arab Emirates, pulled out of Nigeria’s fourth largest mobile operator following a N541 billion debt.

 

The debt is owed to a consortium of 10 banks, with GTBank acting as the facility agent.

 

The sale of 9mobile, with 21 million subscribers, is expected to bring in the needed capital to restore it to good health.

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