Nigeria’s shifting telecoms landscape

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A new mobile operator, ntel, commenced 4G LTE services in Lagos and Abuja in early April, increasing competition in the 170m-person telecoms market.

Operating on the 900-MHz and 1800-MHz bands, ntel is looking to challenge the four major telecoms operators in Nigeria – South Africa’s MTN, India’s Bharti Airtel, UAE’s Etisalat and local Globacom – with the promise of internet speeds of up to 230 Mbps.

Ntel first announced it would be entering the market in the autumn of 2015, beginning with coverage in Lagos, Abuja and Port Harcourt, and eventually spreading out to smaller cities and towns across Nigeria. The first phase of the firm’s operations is set to begin with 800 tower sites and is intended to grow to 2000.

The company has ambitious targets, with plans to attract more than $1bn worth of investment by 2020 to expand its mobile broadband network, Kamar Abbas, CEO of ntel, told local media in April.

Smile Communications, a broadband service provider, is also making a push into the Nigerian 4G LTE space, with particular emphasis on voice over LTE (VoLTE), which allows users to make calls through an application or VoLTE-enabled handsets. The company unveiled its network, which operates on the 800-MHz band, in March.

Industry potential

The entry of ntel and Smile underscores the potential for growth in the Nigerian telecoms industry, particularly in the mobile broadband space.

“With a market of more than 170m, the potential for ICT is massive and, like many other major multinational companies, it is one of our most important markets,” Frank Li, managing director of Huawei in Nigeria, told OBG.

Although the figure includes users with multiple SIM cards – a common trend in emerging markets – the number of mobile subscribers is projected to increase from 148.6m to 229m by 2020, driven by growth in mobile internet, according to ntel’s Abbas. Mobile broadband users are expected to number close to 200m by the end of the decade, compared to just 30m-35m at present.

According to the World Bank, this trend could have significant economic benefits, with a doubling in the usage of mobile broadband data typically resulting in a 0.5 percentage point increase in annual GDP per capita growth.

Changing mobile trends

However, ntel’s entrance comes at a time when operators are grappling with slowing revenues, and looking to data coverage to improve income. Flattening average revenue per user (ARPU) rates are being seen throughout the African continent, as competition and regulation drive down tariffs for voice services.

MTN Nigeria’s ARPU fell by 11.5% year-on-year, for example, dropping to N994 ($5) in the third quarter of 2015, according to company figures.

As a result, data is becoming increasing important to maintaining margins. Operators across Africa have benefited from the rollout of new 3G and 4G LTE networks, and Nigeria is no exception, with subscribers on data networks providing significantly higher revenues. According to MTN Nigeria, ARPU for smartphones is roughly 3.5 higher than for non-smartphones, suggesting there could be significant return on investment if operators develop the necessary infrastructure to support growing data use.

Incentivising infrastructure

With ARPU growth plateauing, telecoms operators are also looking to reduce input and capital costs. In Nigeria, mobile firms continue to face obstacles to infrastructure investment, including multiple taxation, difficulties obtaining the necessary permits to lay fibre-optic cables and damage to existing infrastructure.

Overlapping federal, state and local taxes place a strain on operations in the industry, according to Gbenga Adebayo, executive chairman of the Association of Licensed Telecommunications Operators of Nigeria (ALTON).

“Taxes and levies should be broad based and fairly distributed across all sectors of the economy,” he told local media in early April. “We are calling for a cross-sector, multi-stakeholder approach to reduce [the] growing burden of taxation on our industry.”

Government plans in the pipeline to restructure sector taxation are expected to improve conditions in the ICT market, Adebayo Shittu, minister of communications technology, told OBG, which could free up greater resources for infrastructure development.

“We are cognizant of operators’ grievances and have plans to introduce a streamlined tax collection system,” he said.

In addition, operators have cited fees and delays for obtaining right of way permits, which allow operators to dig and lay infrastructure, as another obstacle to investment.

Earlier this month Umar Garba Danbatta, CEO of the Nigeria Communications Commission, the federal regulator, called on state and local municipalities to ease right of way bottlenecks and provide greater protection for existing infrastructure, which has been subject to sabotage and vandalism in some parts of the country.

For its part, ALTON has urged the National Assembly to pass the National Critical Infrastructure Bill, which would classify telecoms infrastructure as vital to national security and lead to more protective measures.

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