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Revisiting Nigeria's Telecommunications Industry (Posted 8th Sept, 2003) Tell your friends about this page! Email it to them.

Globacom Office, Victoria Island, LagosThe world is fast becoming a global village and a necessary tool for this process is communication of which telecommunication is a key player. The quantum development in the telecommunications industry all over the world is very rapid as one innovation replaces another in a matter of weeks. A major breakthrough is the wireless telephone system which comes in either fixed wireless telephone lines or the Global System of Mobile Communications (GSM). Communication without doubt is a major driver of any economy. Emerging trends in socio-economic growth shows a high premium being placed on information and communication technology (ICT) by homes, organisations, and nations.

Nigeria is not left out in this race for rapid development as the nation’s economy has been subjected to years of economic reversal via mismanagement and bad leadership. The Nigerian telecommunications sector was grossly underdeveloped before the sector was deregulated under the military regime of General Ibrahim Babangida in 1992 with the establishment of a regulatory body, the Nigerian Communication Commission (NCC). So far the NCC has issued various licenses to private telecommunications operator. These include 7 fixed telephony providers that have activated 90,000 lines, 35 Internet service providers with a customer base of about 17,000. Several VSAT service providers are in operation, and have improved financial intermediation by providing on-line banking services to most banks in Nigeria. These licenses allowed private telephone operators (PTOs), to roll out both fixed wireless telephone lines and analogue mobile phones. The return of democracy in 1999 paved the way for the granting of GSM license to 3 service providers: MTN, Nigeria, ECONET Wireless, Nigeria and NITEL Plc in 2001.

Brief History

The journey to success in Nigeria’s telecommunication milieu has been long and tortuous. Telecommunication facilities in Nigeria were first established in 1886 by the colonial administration. At independence in 1960, with a population of roughly 40 million people, the country only had about 18,724 phone lines for use. This translated to a teledensity of about 0.5 telephone lines per 1,000 people. The telephone network consisted of 121 exchanges of which 116 were of the manual (magneto) type and only 5 were automatic.

Between 1960 and 1985, the telecommunication sector consisted of the Department of Posts and Telecommunications (P&T) in charge of the internal network and a limited liability company, the Nigerian External Telecommunication (NET) Limited, responsible for the external telecommunications services. NET provided the gateway to the outside world. The installed switching capacity at the end of 1985 was about 200,000 lines as against the planned target of about 460,000. All the exchanges were analogue. Telephone penetration remained poor equalling 1 telephone line to 440 inhabitants, well below the target of 1 telephone line to 100 inhabitants recommended by ITU for developing countries. The quality of service was largely unsatisfactory. The telephone system was unreliable, congested, expensive and customer unfriendly.

Arising from the foregoing, in January 1985, the erstwhile Posts and Telecommunications Department was split into Postal and Telecommunications Divisions. The latter was merged with NET to form Nigerian Telecommunications Limited (NITEL), a limited liability company. The main objective of establishing NITEL was to harmonise the planning and co-ordination of the internal and external telecommunications services, rationalize investments in telecommunications development and provide accessible, efficient and affordable services.

Almost 43 years down the line, the Nigerian Telecommunication Plc, NITEL had roughly half a million lines available to over 100 million Nigerians. NITEL the only national carrier had a monopoly on the sector and was synonymous with epileptic services and bad management. On assumption of office on May 29, 1999 the President Olusegun Obasanjo administration swung to gear to make a reality the complete deregulation of the telecom sector, most especially the much touted granting of licenses to GSM service providers and setting in motion the privatisation of NITEL. This proactive approach by the government to the telecom sector has made it possible for over 2.5 million Nigerians to clutch GSM phones today.

The Role of Private Telephone Operators

The International Telecommunication Union (ITU) recommends a minimum teledensity of 1 telephone to 100 inhabitants. In a bid to meet up with the ITU standard, the government inaugurated the NCC in July 1993, who set out guidelines for private sector participation and issued licenses to a number of companies for the following telecommunications undertakings:

  • Installation and operation of public switched telephony;
  • Installation of terminal or other equipment;
  • Provision and operation of public payphones;
  • Provision and operation of private network links employing cable, radio communications, or satellite within Nigeria;
  • Provision and operation of public mobile communications;
  • Provision and operation of telephones;
  • Provision and operation of value-added network services;
  • Repair and maintenance of telecommunications facilities; and
  • Cabling.

At present a wide range of telecommunication services are offered in the country: Telephony; Telex; Cellular Mobile Telephony; Facsimile; Gentex (Extension of Telex Terminals to Rural Areas); Voice Cast/Press Receipt; Private Leased Circuit; Alternate Leased Circuit; Maritime Mobile Service, INMARSAT, ShipShore, Etc; Global Mobile Personal Communications Services (GMPCS); Data Communications; High Speed Data Transmission; Telegraphy; Public Payphones; Value Added Services; Business Network Services; Computer Networking; Internet Service; Telecommunications Consultancy Services; Paging Services And Mobile Radio Trunking Services.

Some of the PTOs granted license by the NCC to provide wired and fixed wireless telephone lines to eager Nigerians are: Intercellular, Multi-links, Starcomms, G. S. Telecomm, Mobitel, Cellcom, Reltel, Odua Telecoms, 21st Century.

Recently, the 2003 Nigerian Communications Act was made public by the National Assembly. The Act granted more powers to the NCC thereby reducing the role of the Minister for Communications to policy making. The Act grants an almost absolute independence to the NCC in making industry regulations.

Effect of GSM & Employment Creation

As a matter of fact, the GSM service providers have completely changed the tempo of the Nigerian business terrain by creating countless opportunities for small and medium businesses in franchises, dealerships, retailer-ships and value added services within the GSM market. The duo of MTN and Econet Wireless have caused employment explosion both directly and indirectly. Over 2.5 million Nigerians now have a convenient way of communication; this development has greatly affected positively our business environment.

This scenario was further spiced when the NCC granted a license for Second National Operator (SNO) to Globacom, Nigeria on August 12, 2002. The motive is to create an alternative network to the government owned NITEL, whose service is nothing to write home about. Globacom paid the mandatory 200 million dollars for the license before the August 30, 2002 deadline. The license involves the following:

  • National Carrier Services;
  • Digital/Mobile Services;
  • Long Distance Communication; and
  • Fixed Wireless Access Service.

Obligation to be met by Globacom includes the provision of 150,000 digital lines on its mobile network and 100,000 fixed line network within first 12 months of operation. In trying to meet the challenges of its predecessors in the GSM industry, Globacom recently signed interconnectivity agreement with MTN Nigeria and appointed over 350 dealers nationwide. On Friday 29th August 2003, Globacom now known as Glo Mobile rolled out their services in Abuja, Nigeria’s Federal Capital City, FCT. True to their earlier promise, they introduced a per second billing system with a tariff of 80 kobo per second for the pay-as-go subscribers. Reliable information reveals that a sim line (card) costs 8,400 naira with a mandatory 2,000 naira credit and 18,400 naira for a sim line and phone set. They also promised to roll out their services in Lagos, Port Harcourt, Abuja, Ijebu-Ode and Ibadan before October 1, 2003 and they hope to be in 76 cities before December 2003.

Though, it is expected that Globacom will be able to create a more competitive environment in the industry. Currently, two teething problems face the Nigerian GSM industry; one is that of poor and epileptic service delivery and two, the high cost of call tariff from the early networks. The recent close door meeting between President Olusegun Obasanjo and the GSM service providers is perceived to address these issues.

A Peek into the Future

No doubt, Nigeria has become an irresistible lure to telecom investors notwithstanding the purported high cost of doing business in the country. The sheer size of Nigeria and her teeming population is enough incentive for investors to confront the Nigerian business challenge frontally. The successes of both MTN, Nigeria and Econet Wireless Nigeria in terms of GSM line subscription (over 2.5 million subscribers) and revenue accruable from recharge card sale alone in just 2 years is quite reassuring.

This does not excuse the Federal Government and the NCC in effectively playing their stated role(s). On the part of Government, revenue accrued through the GSM license was not properly disbursed to meet the infrastructural needs of the telecom sector. This has forced the operators to spend huge sums of money to put in place infrastructural facilities like security, power generating sets, air conditioning etc, to service their operations. The NCC on the other hand is quite lax in their regulatory roles as the GSM operators have almost become lord of the manor. The cries of Nigerians about the services of the operators and the high costs of calls fell on deaf hears until recently when the National Assembly and the Presidency took up the gauntlet.

With more proactive legislations and proper planning the Nigerian telecommunication sector will surely compete favourably with Europe and the Americas in the next five years. The 2003 Communications Act is a positive step in this direction. The NCC with her new powers must kick-start the industry by ensuring fair and transparent regulation. Incentives should also be put in place by all relevant agencies to lure investors to the sector.

© NigeriaBusinessInfo.com

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