Progress in the Midst of Storm: Review of Telecoms Sector in 2007

By ‘Gbenga Sesan and Titi Omo-Ettu

Is a reason once used to explain high telecommunication tariff also useable in the explanation of poor quality of service?

Mobile operators in Nigeria did not bargain for what they got when, midyear, quality of telephone service degenerated to an unbearable level and condemnation of mobile services became widespread. Federal legislators stepped in and the music changed as they dragged in the regulator to share in the bashing for the mess. The latter also didn’t bargain for what it got, or so it seemed. But for the fact that Nigerians and their politicians are not exactly good bedfellows, both the regulator and mobile operators would have been thoroughly bruised.

Dysfunctional public power supply (the same condition under which telecom operators and everyone else in the economy operate); arbitrary taxes (‘multiple taxation’ in operators’ parlance but hardly a unique problem of the telecom sector); theft of infrastructure (‘armed’ and ‘unarmed robbery’ in consumers’ parlance, a mantra of the Nigerian system); dysfunctional NITEL (the very reason why the operators were let loose on the consumers in the first place); and much more. These are the reasons mobile operators gave for why consumers have to pay more than in other climes where the markets are smaller and the business, even less lucrative.

It was when the same reasons were being advanced for why quality had to dip so low and text messaging — a cheaper and more convenient communication solution — started to play annoying games that Nigerians woke up to the reality that they were in fact in deep ‘s**t’.

In the days of NITEL, the problem was about getting a phone. When the better days came, the problem changed to using a phone. Among other myriad of problems of its monopoly days, a notable malady of NITEL was its emphasis on engineering to the detriment of product marketing and customer care. The new comers changed the music, and rightfully so. Technology is a tool for solving peoples’ problems, albeit as good business. It is not marvelous just for its own sake and that point is now succinctly made. The new comers, however, have now over-emphasized the marketing aspect to the detriment of the engineering. Something must give – and when it actually did, chaos reigned. Lessons must have been learnt by all concerned: the regulator, operators and the hype-loving consumers.

Looking back at the expired year, it is important to recognize the good (network expansion, improving internet access, commencement of market induced consolidation, etc); the bad (poor services, lack of human capital); and the ugly (political interference in industry regulation and the attempt by state governments to take a huge bite in the cake which the industry is baking, among others).

Only three of the five operators forecast for buy-over in the expired year actually made it into buyers’ hands while another two, which were not known to be ailing, got bigger players to buy heavily or totally into them. One was particularly a good buy. Reading from the performance table, and going by feelers within the industry, this year may witness the acquisition of five ailing operators by existing and incoming big players while those who are migrating to higher technology platforms may also expand into underserved locations, thus boosting the spread campaign.

NCC has published a figure of 37.9 million which it calls ‘active’ mobile lines as at October 2007, with another 1.4 million being the figure for fixed and wireless lines. Discounting attrition, multiple-ownership and allowing a little inflation of figures on the part of every provider, there may well be some 30 million active mobile users. That may account for a 21% penetration, which means the market remains good in terms of unmet but suppressed demand. Emerging technologies abound, begging, to provide smart solutions and major providers are expected to eye the Nigerian market, a queer one that is both difficult and lucrative. A few weeks ago, France Telecom got Kenya’s nod to take control of its national carrier while India’s Reliance Communications Ltd picked up a license in Uganda, just as our own Globacom also won a license in Republic of Benin – where it has already made initial test calls on its ready-for-service network. Globalstar Inc. announced recently that it is backing a Nigerian company, Globaltouch West Africa Ltd, to commence Global Mobile Personal Communications by Satellite (GMPCS) services in Nigeria by the second half of 2008.

Reluctant licensee, Mudabala-Etisalat’s emergence is important but really and largely to the extent of the big bucks it placed on the table. It will be a pleasant surprise to see a radical influence similar to how Globacom forced every player to go ‘per second’ and to make SIM card price roll down the hill with high velocity when it emerged in 2003.

For 2008, two players to watch are Starcomms and Visafone.

Starcomms has shown indication of optimum marketing of a technology standard just as it carefully watches over its engineering flank while Visafone, a new entrant which immediately bought over an ailing operator, has the challenge of spread as mandate. The promoter of Visafone comes necessarily into analysis since he has a record of aggressive approach to marketing banking products with a strong base in Information Technology. Considering the complimentary strength of his earlier and new efforts, he may spring some surprises and make good strategic influence in the fixed wireless services arena. Will he take Visafone to the capital market the way he did Zenith? Only he and time can answer.

Inadequate human capital may haunt the industry more than any other thing, even though it may not be a topic of common discourse. It has really never been. Lack of improvement in available indigenous capacity, especially in technical areas, may stall rapid bailout from the poor quality of service syndrome that taunted the industry in the expired year and ever since. Deliberate effort may just be required to put the industry in shape in that regard. The Nigerian Communications Commission, NCC, did well by establishing the Digital Bridge Institute a few years ago and it must have been evaluating what influence the Institute made on the overall available capacity. It has been mentioned that the NCC was granted the right to acquire NITEL’s former Training Centres in Lagos and Kano. Hopefully, it will consider licensing smart trainers to meet the challenge of putting the facilities to good application rather than doing it by itself.

The telecommunications industry has grossed $10 billion, and still counting, into the Nigerian economy since deregulation. Figures for the direct inward financing for 2007 are yet to be put together but things are certainly looking up.

It is a pity that a few state governments have been unable to appreciate the direct benefits of the nationwide spread of telecommunications to their citizens, hence their desire to take a direct bite in the cake which the industry is baking in their backyard. Some resorted to drama in the pursuit of the objective. One has acted ultra vires while at the same time over-dramatizing the benefits which co-location of infrastructure could yield to the industry. Their pronouncements, desperate and combative, sound like co-location is war (which it is not) rather than an industry management tool (which it is). When the chips are down, there is really nothing sacrosanct in co-location of infrastructure going by the interplay of emerging technologies.

The National Assembly added an ironic twist to a brewing confusion by commencing a regime of issuing directives to operators as if there were no laws governing the industry. Good a thing they have been largely ignored. If committees of the National Assembly begin to issue industry intervention directives whenever they get annoyed with one industry player or the other, we may expect a rise in the number of litigations — a potential drawback to rapid growth in the telecommunication industry. Nigeria has enjoyed an unusual speed in its telecom growth partly because the industry has been managed in such a way that due process guides regulatory intervention and the negative effects of rash litigations have been curbed so far. At a time when legislators would do well to study the industry and fine-tune existing laws to make sanctions issued to erring operators more prompt and effective, they went about chasing the shadows of an accomplished Commission.

A few legislators, in a show of annoyance, told us that the Nigerian Communications Commission was incompetent. Of course that is untrue and the whole wide world, knows it. Things may be slower than we all want in some aspects of regulatory intervention but who does not know that due process is slow but that it remains the best option when the chips are down. There are lessons to learn in all of these as part of our growth, including lessons on the relationship between legislative oversight functions and industry regulation.

Are research establishments also industry/business managers? Or should they be?

The question begged for an answer when managers of Nigerian Communications Satellite Company Ltd, NIGCOMSAT (a subsidiary of National Space Research Development Agency, NARSDA), claimed they got President Obasanjo’s nod for their participation in telecommunications service delivery, apparently in mindless disregard of the need for a licence to do so. The issues eventually brought to fore a few other monstrous creations of the past government, all in the name of providing rural communications — a path once traveled with resounding failure and wasted resources. The Rural Telephony Project, a loan initiative of a consortium of Chinese investors, had gulped N5 billion before it could no longer fly while those who run NIGCOMSAT asked the National Assembly to appropriate $150 million for their operations. The rest is history-yet-to-unfold and maybe 2008 will complete the story for the records. Would NITEL reincarnate in ‘NIGCOMSAT’ in 2008? The world must be watching.

NITEL finally took a bow in 2007 when privatization managers gave it out, the year earlier, to a government ‘conglomerate’ known as Transnational Corporation, Transcorp. That was the final step needed to make it sleep for a long time if not forever.

Unification of ICT as one industry took a step forward, two backwards as federal authorities took decisions that showed either that there must have been competing power blocs within the bureaucracies which concern the subject matter or that the whims of the ultimate decider was yet unclear.

On the international scene, Apple it was that used AT&T as official carrier to drive its iPhone into the US market, and much later Europe, thereby making itself a company to watch in 2008 and beyond. Did someone say that the Google’s Android Challenge is a sure sneak-in on the Apple/AT&T plan? Well, whichever way the various competitions go, such innovations and the recent electronic numbering (ENUM) protocol — which is the result of the Internet Engineering Task Force’s work, and supported by the ITU — will bring the customization of our phone lines along our personal identities closer home. We cannot wait to see it happen.

And for Google? When some folks put billions of dollars on the table for frequency under auction, it makes it a reality that they are on the 2008 watch list.

No doubt, 2007 drove home the point around the role of ICTs in effecting socio-economic change but that change has to be embraced and led by all stakeholders — regulators, industry players and consumers. It was a turbulent but certainly remarkable year with good lessons to learn.

The regulator would by now have commenced a regime of taking measurements in all its ramifications and at all times while operators should have learnt how not to make product campaign a replacement for the product itself; just as the consumers, sooner or later, will live to love hype less.

This report has been published by Technology Times (5th January), Daily Independent (8th January), Nigerian Tribune — Reference (8th February), Digital Divide network (8th January), Forex PR (8th January), Financial Standard (9th January), ThisDay (10th January), Loan Consolidation – Google News (10th January), Independent Online (10th January), (10th January) and CyberschuulNews


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