Calculated risks

Africa’s most populous country Nigeria has great potential for telecom operators looking to expand their business in the region.

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By  Roger Field Published  September 22, 2008

With new mobile and fixed line licences in saturated markets continuing to command multi-million dollar fees, operators – both well established players and newcomers – are increasingly looking at key emerging markets.

And one of the MENA markets with the greatest potential that has been at the forefront of telecom headlines recently is Nigeria.

The country has a large population and low penetration rate, but also comes with a certain measure of risk for telecom operators looking to expand their businesses.

Nigeria is Africa’s most populous country with a population of some 146 million. And with almost 42% of the population aged 14 years or under, operators can look forward to a huge growing base of potential subscribers.

Nigeria’s economy has also been growing rapidly, with a GDP growth rate of 6.4% in 2007. This has been feeding into the telecoms sector, giving rise to one of the world’s fastest growing mobile markets.

Indeed, mobile penetration rates have rocketed from 0.73% in 2001 to 33% in March this year, making Nigeria the largest country by subscribers in Africa, ahead of South Africa. In June this year, the number of mobile subscribers in the country stood at 49.6 million, up from 42.9 million in January – a growth of 6.7 million subscribers in only six months.

Kuwait-based Zain has been operating in Nigeria since 2001, and more recently Vodafone, through its South African subsidiary Vodacom, has been eyeing investment opportunities, and Etisalat will become the latest network to begin operations in the country when its MVNO launches this month.

But starting operations – or buying existing into an existing player – is no mean feat in Nigeria. The market’s potential is tempered by huge challenges, many of which show few signs of abating – in the near future at least.

Among the challenges operators face are a crowded market place, unreliable power supplies, logistical problems, security issues, and corruption.

Vandalism of telecom infrastructure has become so bad that Ernest Ndukwe, executive vice chairman of the country’s regulator, the NCC, has warned that it could bring about “a total collapse of telecommunications infrastructure and quality of service, setting Nigeria back by several years.”

But while these problems may be enough to deter some players, the sheer growth and potential of the Nigerian market is too much to resist for many operators. If the country’s economic growth raises incomes across the population, some of the country’s social problems could diminish, giving an unrivalled opportunity to those operators who are best equipped to tap the country’s potential.

Roger Field is the editor of Communications Middle East & Africa.

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