Against all odds

Nigeria promises to be a telecoms powerhouse, but corruption and crime are stifling growth.

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By  Administrator Published  October 22, 2008

Nigeria promises to be a telecoms powerhouse, but corruption and crime are stifling growth.

Few countries around the world could lay claim to a faster growing mobile market than Nigeria, where mobile penetration rates have rocketed from 0.73% in 2001 to 33% in March this year, making it 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.

Such a rise, coupled with low a penetration rate, in global terms, is why operators, manufacturers and investors are keen to become involved in Nigeria.

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

Milan Sallaba, partner, Oliver Wyman, thinks mobile penetration will continue to boom, reaching about 50% sometime in 2010 and tapering off at around 70-75% by 2013.

"The entry of new players will increase competitiveness of the market going forward which will help maintain the current growth trend," he says. "In short, over the next five years we will likely see a doubling in penetration again compared to today's percentage level in the mid 30s."

It is not just in mobile communications that rich rewards are promised; according to the International Telecommunication Union (ITU), Nigeria currently has an internet penetration rate of 7.2%, with 10 million users: above the average across Africa, which is 5.3%, but still some way short of the worldwide average of 21.9%.

Security concerns

Despite the obvious opportunities in Africa's most populated country, there is a crowded market place to contend with, as well as a number of well-documented security and logistical issues.

For some, the questions surrounding security are too big to ignore. Abdul Hameed Al Sunaid, CEO of i2, which has a presence in 22 countries around the world - including Iraq - says it is enough to deter him from expanding into the country.

"It's a concern for everybody. It's very unstable, very difficult to operate. The country has security issues. We cannot go in there by ourselves, so we need to find a very good local partner. First of all we have to make sure that it is safe."

It is not only the safety of employees that is a concern to operators, but also the cost of running a network in a country that is prone to power cuts and instability.

For Frost & Sullivan ICT analyst, Spiwe Chireka, power cuts are the most significant of all barriers. "Lack of electricity has seen most operators reporting that fuel costs (for generators) have become a significant proportion of their costs. Furthermore, there is the issue of anti-social elements such as communities refusing operators access to sites and thus delaying maintenance work on networks by weeks and sometimes months at a time."

There have also been problems with vandals targeting network infrastructure, with suggestions that contractors working on behalf of networks were behind the cutting of cables, prompting calls for ten year jail terms for those caught in the act.

Role of the regulator

With all of these issues to reign in, the role of the NCC has been to act as peacekeeper as well as regulator, with executive vice chairman Ernest Ndukwe cast in the role of local sheriff.

The seriousness of the problem affecting network's infrastructure has not been underestimated by the NCC boss, who was quoted in the Nigerian press warning that if the vandalism continues, there could be "a total collapse of telecommunications infrastructure and quality of service, setting Nigeria back by several years."

The rate of growth, level of competition and introduction of new technology does suggest that the NCC has performed its duties well; however some analysts say that the NCC is not doing enough to push down the high broadband prices in the country, which Sallaba says is the major reason why broadband has not shown very impressive growth in Nigeria. But Chireka says fines imposed on MTN and Celtel are a good example of what regulators elsewhere in the continent need to be doing.

"Given that quality of service is one of the major issues facing the industry, I would go as far as to say the NCC may have set a precedent for the other regulators," she says.

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