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GSM & Nigeria's Teledensity: One Year After (Posted 28th October, 2002) Tell your friends about this page! Email it to them.

A GSM User in Lagos, NigeriaTelecommunication arrived in Nigeria over 100 years ago. At independence in 1960, the country only had about 18,724 phone lines for use by a population of roughly 40 million. From independence, various governments made several attempts to increase the number of telephone lines to Nigerians. However, these attempts failed woefully due to certain reasons, chiefly amongst these are monopoly of this sector by the country's public utility, Nigerian Telecommunications PLC, NITEL, and its inept and corrupt management. By the beginning of 1999, there were roughly 500, 000 lines available for a population of around 120 million Nigerians.

Whatever uncomplimentary things, justified or not that many may have to say about the Olusegun Obasanjo administration since its inception in May 1999, one thing has become incontrovertible; this government successfully brought us a deregulated telecommunications sector, by auctioning 3 Global Systems for Mobile (GSM) Licences in January 2001 for $285 million each and further reserved a licence for NITEL. The administration succeeded where others before it had failed. In the end, only 2 out of the 3 companies at the auction, MTN Communications and ECONET Wireless and NITEL were awarded full GSM Licences. The third successful company, at the auction, Communications Investment Limited, CIL was refused a licence on the grounds that it did not meet payment deadline.

An underlining vision for the introduction of the GSM by the Nigerian Government was to expand the Nigerian teledensity and directly make telephone communication cheap and accessible to the common man.

First off the block to commence services was ECONET Wireless who commenced operations on August 6, 2001 with its contract package which was followed by its post-paid package, popularly referred to as pay-as-you-go. MTN communications opened its doors to its customers two days later with similar packages. Trust Nigerians. Eager subscribers promptly bombarded both network operators to grab the available lines. The third network, NITEL was nowhere to be found mainly due to its un-preparedness and internal disequilibrium. The rest, as the cliché goes, is history. These, two companies, according to their image makers, have within 12 months added more telephone lines - over 1 million as at the last count - into the Nigerian environment, more than was ever the case in 40 years of independence.

One year after, GSM has come to stay in Nigeria. In fact, many have called the introduction of the GSM telephony a revolution in a way, but one can also refer to GeeSeeM as a quantum leap for Nigeria's infrastructure capacity building, which is a major ingredient for the much-debated jump-starting of the strangulated national economy.

According to a World Bank comparative study on Information and Communication Network between 1994-1997 in some African countries, Nigeria was discovered to have 4 phone lines per 1000 people as opposed to 5 in Cameroun, 9 in Kenya, 11 in Senegal and 15 in Zimbabwe. Another study contained in the World Development Report, 1999/2000 situates Nigeria as having merely 4.00 telephone mainlines and 0.00 mobiles telephones respectively as at 1997. This illustrates the dilapidated Nigerian telephony infrastructure 5 years ago. It also underlines the great enthusiasm with which Nigerians embraced the GSM at its introduction. Expectations had always been high for the introduction of a mass based telephony which is both convenient and cheap to acquire.

An ECONET Mobile Phone ShopNITEL, the state telecom company, a couple of months back, finally started its own GSM services by releasing 118,574 to the market. It has also promised to release another 400, 000 lines by this December. Meanwhile, the two front-runners are also not relenting in giving up their first entry advantage and are still pushing out more lines and also connecting and hoping to connect more cities by December this year and beyond. According to the MTN website, the company currently covers 21 cities in the country and hope to add another 25 to this before the end of the year. We were unable to get the figures for ECONET. However, the 3 current GSM operators cover at least 24 Nigerian cities and towns.

In the process, the national treasury benefited through licence fee payments and import duties, though discounted and will continue to benefit through payroll and other taxes from these companies. Many direct and derived jobs have also been created. These include workers absorbed by the individual operators, to the franchise dealers, to direct and indirect dealers, to street re-charge/refill card hawkers, to downright touts selling second-hand handsets and accessories (often stolen or imported from Dubai, United Arab Emirates). Also lives have been transformed and the socio-economic setting has been re-energised and further empowered with easy-to-acquire and reasonably reliable telecom facility.

We should not neglect the fact that GSM has actually created the habit of time management in Nigerians. This can be noticed right from the curtailment of expansive Nigerian salutations while contributing to the reduction of motor accidents on major Nigerian highways due to the elimination of long journeys for pleasure and business. It is now convenient to place a call to business associates or relatives rather than waste valuable time embarking on sometimes, needless journeys. Top among its benefit is the gait the Nigerian business environment has assumed with improved cost and efficiency. It has also improved Internet and information technology awareness through WAP services (Wireless Application Protocol), E-Commerce through mobile payment systems called M-Payments among others. Further, investors feel more secure investing in the economy now as the GSM as offered a corner stone in Nigeria's race towards attainment of adequate infrastructure.

One though has to ask, are there any downsides, either temporary or enduring, bedevilling GSM operations in Nigeria? According to most users, the greatest worry and drawback that GSM bears is cost of maintenance. Most have argued that call charges are far too exorbitant at around 50 Naira per minute (38 US cents). One has to bear in mind though, that the Nigerian currency, the Naira, currently exchanges for 131 to the Greenback. It is also instructive to remember that average per capita income per year in Nigeria is only US$300. The telecom companies on the other hand have insisted that they are still making losses and would probably not break even until 2005. They have both ruled out direct tariff reductions for now. Hear the Managing director of MTN, Adrian Wood speak sometime in August: "... the realities of the enormity of operating costs required by the business at this stage, do not unfortunately make a downward review feasible for now". Indeed, he stated, the company is seriously battling to keep its current tariffs in the light of the slides the Naira has witnessed in recent times. This notwithstanding, he stated that MTN's tariffs remain comparable to tariffs charged in different parts of the world by GSM networks at the stage of maturity of Nigeria's. "Even the UK and continental European networks that are now at 6 to 7 years maturity, charge on average 15% to 20% higher than we do". Factor purchasing price parity into the equation and you will get the true picture.

ECONET and MTN have both claimed that their supposedly high tariffs result from the enormous start up cost they had to endure due to virtually nil telephony infrastructure when they arrived in Nigeria and also an inefficient and disorganised power sector. To top it all up, these companies added that the US$ 285 million they paid for the licences were too high. Indeed there is some truth in these claims. However, it will be difficult for any discerning mind to accept that the US $285 million ECONET and MTN paid is on the high side. One has to consider the size of the Nigerian market, if well served and harnessed, would generate enormous revenue for these telephone companies in the medium to long term.

To ask a simple question: In how many countries have they started operations within a year and sold over a million lines? Nigeria's communications regulator, Nigerian Communications Commission, NCC, has been called upon by very many Nigerians to put a check on the pricing structure of these GSM companies.

With NITEL lately coming into the frame with a N22 per minute talk-time at peak period, it is perceived that the competition will be more balanced if it is able to push adequate lines with reliable service into the market. In the process, the tariff of both ECONET and MTN would have become untenable.

Another GSM menace, probably in the short term, is the lackadaisical attitudes of motorists in handling the sets while driving. This has necessitated the Lagos State Government to carve out a law banning the use of GSM while driving. GSM may also have increased the volume of armed robbery and assassinations in the country. Even banks have disallowed the use of the device within the banking hall. This though could be described as the failure of the Police than anything else. If you are a stranger or visitor to Lagos, the first rule of the game is not to flaunt your GSM set. If you do, you may well be the next victim of professional GSM vandals, who serve as the conduit pipes to the striving GSM black market.

GSM Phone Card Hawkers in Action...The low/slow data-carrying capabilities of GSM telephones means that businesses, government agencies, educational institutions, individuals, etc. are still not fully reaping the benefits of telecommunications. The Internet and fax capabilities of GSM mobile phones still leave a lot to be desired in these areas and make the development of fast and efficient land and fixed wireless telephone network in the country imperative.

What lies in the future? The operators have promised wider coverage, better connectivity, more value added services etc. Indeed, kudos should be given to the operators for a job well done. Within 12 months they have covered over 24 cities and still expanding the network.

The recent victory of Globacom at the auction of the Second National Operator (SNO) license is a plus in this direction. The more the players, the fiercer the competition and in the long run, the subscribers will have cause to smile with quality service and cheap cost of owning and maintaining a GSM mobile phone line.

One cannot but say that the GSM has made tremendous impact on the multifaceted Nigerian society. It can be firmly asserted that its benefits far out-weigh its demerits. What do you say?

Why don't you contact us today and tell us your comments about the GSM telephony in Nigeria and how it has impacted on your personal and business life?


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