The completion of a recent spectrum auction in Nigeria represents a big step forward for the mobile broadband networks. However, given the challenges and costs of maintaining the infrastructure for high-speed access, there is increasing attention from both the public and private sector to reducing overheads and improving infrastructure efficiency.
In late February, the Nigerian Communications Commission (NCC), the sector’s regulator, announced Bitflux Communications was the winner in an auction for a 10-year licence to provide wholesale wireless access services in the 2.3-GHz band. Bitflux, a consortium of three firms (VDT Communications, Bitcom Systems and Superflux International), clinched the licence with a bid of $23.25m. Lagos-based Globacom – which as one of four GSM operators in Nigeria already provides mobile internet to retail users – was the only other participant.
While the sale had initially attracted expressions of interest from 27 companies, just Bitflux and Globacom went on submit the necessary documents to pre-qualify for the auction.
The move to license additional spectrum is part of Nigeria’s plan to improve access to broadband internet, mainly through wireless connections. According to the National Broadband Plan 2013-18, the current broadband penetration rate stands at 4-6%, a figure the government would like to see raised to 42% by 2018 and 76% by 2020. Coverage is also set to increase to 95% by the end of the decade.
In a late February statement, Eugene Juwah, executive vice-chairman of NCC, said the regulator was planning to auction spectrum in the 700-MHz, 2.5-GHz and 2.6-GHz bands before the end of 2015.
Regulator proposes new industry structure
Juwah added that the government remains committed to offering financial incentives to the winners of so-called infrastructure licences, another component of Nigeria’s broad push to boost high-speed internet access.
Towards the end of last year, the NCC released a document outlining its proposal to license seven “infrastructure companies” to provide wholesale bandwidth services on “a non-discriminatory, open-access, price-regulated basis”. This would replace the current model in which integrated operators offer end-to-end services and long-distance operators provide wholesale services, Juwah said at an industry forum in Lagos in November.
Industry participants have reacted coolly to the proposed changes. In December, Gbenga Adebayo, president of the Association of Licensed Telecoms Operators of Nigeria, said any financial support to the new licensees would represent unfair competition to the telcos, which have already heavily invested in infrastructure.
“Unless the teething challenges of infrastructure rollout is addressed, as currently being experienced by telecoms operators, the idea of licensing infrastructure companies will be an exercise in futility,” Adebayo said.
According to the association president, challenges facing telcos include sabotage of equipment and delays in getting government right-of-way approvals.
Need to protect investments
Equipment sabotage, combined with high operating costs for network towers and related structures, has made it challenging for telecoms operators to stabilise costs. According to some estimates, the cost of operating diesel generators to power base stations during blackouts can add anywhere between 30% and 50% to overall annual expenditures. As a result, Airtel’s Ogunsanya said in an interview with the local media in March, it is important the telecoms infrastructure be classified as “critical national infrastructure” in the effort to support Nigeria’s “socio-economic well-being and national security”.
In January, the minister of communications technology, Omobola Johnson, said the ministry was working to ensure the Critical National Infrastructure Bill, submitted to parliament in 2012, was passed into law, noting the ministry was “doing everything possible” to protect the private sector’s $25bn investments in the industry.
That Nigeria’s large population of 170m offers a huge potential market for telecoms operators goes without saying, particularly if mobile providers can increase data consumption and the usage of value-added services to boost average revenue per user. However, doing so will be a challenge until infrastructure is made more accessible and more affordable.