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NITEL's GSM Gamble (Posted 16th Sept, 2001) Tell your friends about this page! Email it to them.

“NITEL is the ‘Baba’ (father) lets wait for it to rollout,” said one observer after the disappointment of the bunch of services of the two private GSM operators, Econet Wireless and MTN. This sense of dashed expectations is perhaps shared by many Nigerians due to the high charges announced by both GSM Companies. Thus, when NITEL announced its own GSM services recently, the highlight of which was a promise of cheaper tariffs it had perhaps succeeded in rekindling hopes of an affordable GSM service in the country.

The press conference on the rollout by the national Phone Company however proved to be a hollow ritual. The GSM service or facilities are not ready yet. Worse, there is no indication that it would be ready soon. Asked pointedly when exactly Nigerians could expect GSM service from NITEL, “very soon”, said Martin Igbokwe, NITEL’s chairman, evasively.

Igbokwe who addressed the press flanked by Bello, NITEL’s technical director for mobile services, and Tayo Ekundayo, its public relations chief, added that NITEL intended to provide 118,000 GSM lines, hopefully before December.

Whereas, MTN and Econet are asking potential subscribers for N20,000 and N15,000 respectively as connection fee, NITEL says it will charge just half of that (N10,000). Call for a minute by NITEL for local calls would also cost N22.00, compared to the N35.00 per minute by MTN, and N30.00 per minute by Econet. But international calls are almost at par with N110 per minute for NITEL and N125.00 for both private phone operators. Where NITEL’s tariffs also looks very attractive is its free access, whereas both Econet and MTN have a controversial fixed access charge of N4,000 monthly. This would be paid by subscribers whether or not the phones are used.

Yet, NITEL’s move raises crucial question, why announce a tariff structure when the GSM lines are not ready? What happens if costs later make it impossible to provide this service at the announced rates?

Already, there are charges that NITEL’s announcement of cheaper tariff were meant to pull the rug from under the feet of the two private GSM companies. Given that NITEL’s own GSM service is not ready now, the charges appear quite plausible. Nonetheless, Igbokwe gave reasons for the national phone utility’s lower charges. “One of the factors considered is that NITEL is owned by all Nigerians. And as such, the same people should benefit from the gains of technology through affordable tariffs” he said.

But rather than dispel charges of possible under cutting, NITEL’s statement seems to have reinforced it. Moreso, there is the suggestion that NITEL might be aiming to charge less because it does not need to make such profits, considered normal by the private GSM operators.

This unfolding scenario, say observers would accelerate calls for the quick privatisation of NITEL, by these private interests, in order to have a level playing field. On the other hand, however, many believe the presence of NITEL, a public company, would moderate the likelihood of the private GSM companies forming a cartel, to fix “high” prices.

At the moment, despite several announcement of NITEL’s impending privatisation, earmarked for December, its future remains uncertain. Although since early in the year, the company had been handed over to the Bureau of Public Enterprises, BPE to prepare for eventual privatisation.

The phone utility seems to be carrying on as if it was not on the privatisation slab. To pay for its GSM license in March, the phone utility had obtained loans of $180 million from First Bank, among others. It has also awarded multimillion-dollar contracts to Alcatel and Erisson to help expand it fibre optic network and repeater stations to boost its mobile services. Such big-ticket expenditure when privatisation is supposedly around the corner raised fears that its large debt portfolio may make it unattractive to would-be investors. But Igbokwe says, “stopping the (GSM) rollout will reduce the value of the company, when it is eventually been sold,” adding, “the core investor will be fully briefed on the company in terms of its liabilities.” The privatisation of NITEL, he said, “is ongoing”.

A day before it announced its GSM tariffs, NITEL had signed an interconnection agreement with Econet and MTN. This was aimed at guaranteeing good connection between the private GSM network and the bulk of the country’s existing phone owners numbering over 250,000, who are NITEL subscribers. Igbokwe declined to give details of the agreement.

On the contracts awarded earlier to Alcatel, the NITEL chairman said it was aimed at strengthening transmission lines, “to avoid congestion”. This, he adds was also necessary in view of the heavy demands for inter connection, which GSM operators will make on NITEL. The project is for the Benin-Lagos-Benin Oluku lines. This line also extends to Abuja, the federal capital and back to Benin. Sometime ago, NITEL suffered the vandalisation of an undersea cable running from Lagos to Port Harcourt in the Niger delta area that, Igbokwe said has made connection to Abuja and some eastern state difficult.

“Dial Abuja, you would hear ‘all trunks are busy’. It worries us. But it is because of the vandalisation we suffered.” This, also would make connecting GSM phone users wanting to reach NITEL lines difficult, right now, until the ongoing work on the Lagos-Benin project is completed, in December. Replacing the undersea cable would cost N2 billion. While, two weeks ago, two generator sets worth N5 million were also stolen at NITEL’s Gene Repeater station, according to Ekundayo.

The company has also moved quickly to recover some of its outstanding debt owed by subscribers amounting to over N10 billion by early in the year. This has reduced by more than half, according to Ekundayo. Thus, improving the company’s financial position.

In addition, in June, NITEL had increased domestic phone charges at short notice. The new rates are more than double the old ones. Intra city calls, for example, went up to N4.30 per minute from N1.90; while trunk calls (beyond 700-kilometre radius) increased to N42.90 per minute from 19.00. Monthly access charge also increased from a mere N50 to N500. All these, according to a NITEL source, are meant to prepare the company for privatisation. Yet its GSM gamble may be the biggest test of the company’s viability in coming months. But the company’s top officials appear very optimistic about its future prospects.

Perhaps the GSM provides a good example. “We were underrated that we couldn’t pay (the USD$285 million GSM license fee.) we paid,” says Igbokwe, adding, “This is going to be another shocker from NITEL.” We can but only wait and see.

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