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Nigerian Telecoms: Thorny challenges for virtual economy

By Samson Unamka

Despite the current economic recession, Nigeria’s telecoms industry has remained resilient, having overcome several obstacles to sustain service to millions of customers. In the face of these challenges it has also become a reliable platform for banks and other services in the country with mobile subscriber base growing to 182 million. In 2019 Nigeria’s telecoms market is expected to generate US$10.9 billion as it forms the key to diversify the country’s economy to keep Nigeria as biggest market for mobile subscription in Africa

In the face many drawbacks, Nigerian telecoms industry has continued to render quality services to over 140 million mobile subscribers with positive impact to the economy. In September, National Bureau of Statistics (NBS) revealed that Nigeria’s telecoms sector recorded its biggest addition to Gross Domestic Product (GDP) in six years contributing as much as 9.8 per cent of the nation’s GDP. This is about N1.6 trillion to the nation’s GDP in the second quarter of last year.

Pyramid Research forecasts a positive outlook for the telecoms market in Nigeria, with the mobile subscriber base growing to 182 million in 2019. It added in the report that Nigerian telecoms market is expected to generate US$10.9 billion in same period growing at a Compound Annual Growth Rate (CAGR) of 2 per cent over the next five years, with mobile data increasing at 16 per cent up until 2019.

According to Nigerian Communications Commission, the active mobile broadband penetration released by the United Nation’s Broadband Commission for Sustainable Development shows that the nation has reached a penetration of 20.95 per cent. On the percentage of internet penetration, the country has reached a milestone of 47.44 per cent, second only to South Africa in the continent. Teledensity, measures the percentage of a population with access to telecoms service, climbed to record 107.01 per cent in June while subscribers hit 149.8 million in during same period. However, these milestones were not without impediments.

The challenges are numerous ranging from infrastructure, security, and human capital development. Others also stem from multiple taxation, multiple regulation, unfriendly terrain, unstable political environment, among others.

Multiple taxation

Taxation is one of the many ways through which governments all over the world generate income to be able to discharge their duties to the citizens. The rapidly dwindling revenue platform of the Federal, State and Local Governments, occasioned by the fall in oil prices in the international market would have triggered action by the three tiers of government for aggressive tax enforcement regime that would create room for implementation of multiple taxation and engagement of illegal tax consultants for different kinds of levies. As expected, telecoms are the first victim. There are 26 different taxes and fees levied on mobile operators and consumers, including national and local taxes on revenues, businesses and business sites as well as regulatory fees such as spectrum and permits fees.

Infrastructure and vandalism

With over $38 billion investments in 16 years, Nigeria telecoms industry has enabled a complex value chain that includes vendors, service providers, and users in addition to thousands of direct and indirect employment and associate businesses.

Regretably, in Nigeria operators build their own infrastructure and other resources from the scratch unlike in most parts of the world where service providers including telecoms link up to existing but reliable resources like stable power, security, and good road network.

Yet, according to KPMG, Nigeria is telecoms operators are required to invest some $10 billion over the next five years in order to facilitate the development of requisite internet broadband infrastructure needed to sustain government’s plan to diversify the economy away from oil. Nigeria as a nation needs a lot of investible funds to build infrastructural facilities and provide employment for her teeming population and especially our growing youth.

As we know that Nigeria’ telecom industry still needs 50,000 base stations to be able to improve on Quality of Service and to reach the unserved and underserved parts of the nation.  Cases of vandalism by criminals and terrorists as well as denial of access to overhaul or upgrade BTS sites by local residents demanding levies, have had dire consequences on the industry, affecting other sectors like banking & finance, emergency services, air traffic controls and local businesses. Boko Haram, the Islamic extremist sect, had destroyed a total of 120 MTN sites between 2013 and 2014 alone. And 80 sites were destroyed during the last quarter of 2014, according to the company.

According to former president of  Association of Telecommunications Companies of Nigeria (ATCON) , Lanre Ajayi , vandalism had become regular occurrence as all telecomm operators in Nigeria had stories to tell in this particular regard.“This particular challenge is estimated to be costing the industry billions of naira annually and constituting serious hindrances to better quality of service from the operators,” he explained. To substantiate further, it costs about N24,750,000 (at N155/$1) to install a single base station together with its tower, special antennas and two generators to power the station.

Power

The issue of power represents the biggest challenge to the industry. Responsive and responsible legislation would take into account the power challenge facing Nigeria telecoms especially at a time price of diesel is double and electricity supply is in comatose.  Operators have over 25000 diesel powered generators across the country to sustain service.

Take for example; when the price of diesel was N140, operators spend N6.30 billion per month for 42 million litres of diesel to power Transceiver Stations that ensure that 140 million subscribers continue to enjoy service. Then, that amounts to some N75.6 billion annually to fuel generators that power BTS nationwide. Co-located tower which houses 3 to 5 base stations use 27KVA generator to supply power while a tower that houses a single base station uses 15KVA generator. A 27KVA generator consumes 3 litres of diesel per hour depending on the age of such generator, which means that 20,000 of co-located towers in the country that uses 27KVA generator consumes some 1.2million litres of diesel a day, while towers that house single base station which are 5,000 consume 200,000 litres of diesel a day bringing the total consumption of generators deployed in towers around the country to 1.4m litres per day.’’ It was learnt that this quantity of diesel consume by generators at different towers cost tower operators about N196million at diesel pump price of N140 per litre. Today the story is different.

Telecoms operators overcoming challenges

Nigerians expect telecoms operators to be perfect under very uncertain business environment where nothing is sure. It is reasonable but it has to be realistic. It is important to note that operators build their own infrastructure and other resources from the scratch. Whereas in most part of the world, service providers including telecoms link up to existing but reliable resources like stable power, security, good road network, and stable government.

They have been overcoming these obstacles through strategic decision. Investment in human resources, foreign direct capital flow, good corporate social responsibility programmes, and government and regulatory engagement. They comply with payment of fines, expansion and co-location, simplifying recharge credit cards, excellent customer care centres.

Furthermore, there is need to educate Nigerians as well as to create awareness about the dangers associated with vandalism of telecom infrastructure because without these infrastructures there will be no telecom services.

In Nigeria, the systems and structures that make up these infrastructures are often taken for granted to the point that certain state governments and government agencies move in with their agents to shut down BTS sites thereby causing disruptions to network services and in the process affecting Quality of Service delivery in areas linked with those masts.

There need for a legal framework, policies aimed at protecting important facilities that ensure Nigerians enjoy voice and internet service.

Report has it in some parts of the country, Abuja to be precise, operators have not been able to mount BTS towers because of excessive demand from local, government agencies and multiple regulation.

If vandalism of telecoms equipment and installations continue unabated, Nigerian subscribers could experience higher frequency of dropped calls, incoherent transmission, and undelivered text messages.

They lament that community leaders, local, state and national agencies collect levies from operators.

There is also such attacks including incidences of cable cuts and theft, generators theft at site and snatching of site maintenance equipments from the site engineer, terror attacks just as the one witnessed in some parts of the country last year where more than 30 base stations were destroyed by suspected terrorists.

Other such attack against telecoms facilities come in form of destructions caused to underground fibre cables by road construction workers while state agencies, more often than not, also see the shutting down of operators sites as a routine, as a threat measure to collect certain statutory ad frivolous taxes and levies.

Foreign Direct Investments according to NCC now stands at over $38 billion in the past 16 years. Executive Vice Chairman NCC, Prof. Umar Danbatta said investors need to be aware of the teaming local talents and harness the potentials by investing in the sector.  “Our story of successes is very long but we, as regulators, are not resting on our oars. We are not there yet; what we have is work in progress. According to him, the industry is convinced that, by 2018, the anticipated 30 per cent broadband penetration will not be impossible to achieve.

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