An emphasis on quality: Expanding and upgrading telecoms networks is a key focus

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More than a decade after Nigeria’s telecoms sector was liberalised in the early 2000s, the provision of high-quality, uninterrupted services remains a major challenge for local operators. Dropped calls and other interruptions have become so common in recent years that many mobile subscribers have taken to carrying more than one SIM card and either a dual-SIM phone or multiple handsets. Improving the quality of service (QoS) on offer is central to both the Nigerian Communications Commission’s (NCC’s) new five-year Strategic Management Plan, which was introduced in April 2013, and the mobile operators’ development strategies.

QOS: Broadly defined as the ability of a telecoms network to deliver predictable results in line with international best practices, QoS is among the most pressing challenges currently facing operators. A wide variety of disparate but interrelated components contribute to QoS on any given network, including the type or types of technologies being used, the topography and geography of the coverage area, subscriber usage and power supply, or lack thereof. Nearly all of these factors are in play in Nigeria. While QoS improved in late 2012 and the first half of 2013, the primary hurdle facing Nigerian telecoms operators – a dearth of telecoms infrastructure, particularly terrestrial fibre-optic cables and base transceiver stations – is expected to be a major focus of investment for years to come.

EXISTING NETWORKS: Local telecoms operators use various fixed and wireless technologies in Nigeria. Voice services are primarily provided via 2G GSM wireless technology, which operates on a network of base stations around the country. As of July 2013 Nigeria had around 27,000 base stations – a key component of mobile telecoms networks around the world. The UK – less than one-third the size of Nigeria and home to less than half the population – has more than 65,000 base stations. In an effort to provide service to the greatest number of people at once, the majority of Nigeria’s base stations are primarily clustered in and around urban areas, including Lagos, Abuja and Port Harcourt. Operators have invested less in rural areas. According to Omobola Johnson, the minister of communications technology, the government is targeting a total of 60,000 base stations by 2018. “Nigeria needs 33,000 [new] base stations in the next five years,” Johnson told local press in June 2013. While the regulator is expected to play a major role in facilitating construction of these facilities, ultimately the expansion of Nigeria’s telecoms networks will be led by the private sector.

Four submarine cables provide international data connectivity, linking Nigeria to fibre-optic internet trunk lines in Europe, with a total capacity of 7.78 TB ps. All four come ashore near Lagos, where they feed into terrestrial fibre-optic networks owned by local operators. Existing fibre-optic networks cover a relatively small area, including Lagos and other population centres.

IMPEDIMENTS TO EXPANSION: In many ways the challenges facing local operators are a result of the industry’s successes. Over the past 12 years mobile subscriptions expanded at a compound annual growth rate of 50%, according to the NCC, increasing from less than 1m customers in 2001 to more than 114m as of July 2013. The country’s four mobile GSM operators – which account for more than 97% of total telecoms subscribers – have struggled to roll out new infrastructure to keep up with this rate of expansion. This is partially due to high costs, with fibre-optic cable installation costing as much as $1m per km. “Fibre optics is still a relatively new concept in Nigeria, but the network is growing very fast, with expansion concentrated in economic centres where demand is higher,” Tunji Ayidina, the managing director of Life Link Technical Services, told OBG.

Accordingly, high-speed 3G and 3.5G mobile data services, which have been on offer in the country since 2007, are centred in Lagos and other urban areas, though according to the four major operators 3G subscribers are still a minority. “Telcos will not venture outside major cities, if for no other reason than there is still too much room for growth in data services in the cities, especially with the imminent launch of 4G,” Taj Onigbanjo, the CEO of Africa Digital, a local digital services and consulting firm, told OBG.

In addition to the high cost of installation, which Ogunsanya attributed primarily to multiple taxation as a result of the numerous government entities involved in the sector, other issues have had an impact on QoS, including Nigeria’s large population and size, the diverse topography, power shortages, a highly price-competitive market and stringent regulatory requirements. These issues have been exacerbated by the rapid subscriber growth in the mobile segment.

REGULATORY CHANGES: The side effects of rapid growth have brought scrutiny from the regulator, which has sought to ensure that service levels continue to improve alongside penetration figures. In May 2012 the NCC issued fines worth a total of $7.37m to the country’s four GSM mobile operators. According to the commission, the fines were a result of the operators failing a series of network tests known as key performance indicators (KPIs). The NCC’s KPI test programme, which was launched in mid-2011 in consultation with private sector players, assesses a variety of QoS metrics, including call-completion rates, dropped-call rates and overall network congestion. When the NCC evaluated KPIs again in December 2012, Globacom, Airtel and Etisalat met the requirements, while MTN – which is the largest operator, controlling 47% of the market as of July 2013 – did not and was subsequently fined another $570,000.

A handful of other government-led initiatives could also have a positive impact. The NCC has introduced a number of new regulations in an effort to boost QoS. Mobile number portability (MNP), launched in April 2013, was expected to result in increased competition between operators and lead to QoS improvements.

As of August 2013, 22,000 subscribers had taken advantage of MNP and ported to another carrier, which represents less than 0.05% of the total subscriber base. “MNP increases the choice for consumers and places pressure on operators to improve their services, which is basically a good deal for everyone,” said Brett Goschen, the group CFO of MTN Group.

In 2012 the NCC issued a new regulatory framework for co-location and infrastructure sharing among operators, with the goal of lowering installation costs and improving service quality. “Infrastructure sharing benefits the growth of the industry and reduces diesel consumption,” Rajiv Jaitly, the CEO of telecoms infrastructure provider IHS Nigeria, told OBG. Infrastructure sharing, which is common in more developed markets, is relatively rare in Nigeria, though leasing from third parties is on the rise. An operator is required to accede to any request from a competitor to share towers or enter into a co-location agreement. MTN, for example, has co-location swap arrangements with both Airtel and Etisalat. “Right-of-way issues are key, and sharing infrastructure will mitigate this challenge,” said Ogunsanya.

All four GSM operators have invested heavily in their networks in recent years and announced major investment plans. Indeed, expanding the national telecoms infrastructure is perhaps the only sustainable, long-term solution to overcoming the persistent QoS issues.

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The Report: Nigeria 2013

IT & Telecoms chapter from The Report: Nigeria 2013

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