The telecoms industry is facing many challenges ranging from low broadband penetration, high cost of bandwidth, insufficient infrastructure, to over-the-top incursions. However, amidst these, the sector fared better in the first half of the year writes Emma Okonji
The last six months, which marked the first half (H1)of the year in 2018, appeared to be rough for the telecoms operators who were faced with some challenges that did not only limit the speed of growth in the sector, but also affected their usual revenue streams from voice calls. During the review period, the telecoms industry regulator, the Nigerian Communications Commission (NCC), came up with measures to grow the country’s broadband penetration from the current 22 per cent penetration to 30 per cent penetration, as contained in the National Broadband Plan(NBP). The low broadband penetration, coupled with insufficient broadband infrastructure, resulted in high cost of bandwidth for internet access and connectivity. While battling with these challenges, over the top (OTT) technology providers made things even more difficult for telecoms service providers, by providing free telecoms services through social media platforms like WhatsApp, Imo, Skype, Facebook, among others, via the internet. Ironically, the OTT technology providers riding on the network of the traditional telecoms providers to provide such voice services free of charge. The situation affected the revenue stream of telecoms operators as most subscribers now prefer to make free calls using the social media platform, than patronising the traditional telecoms operators who hitherto provided the voice service at some cost to the subscribers.
Although telecoms operators passed through all these challenges in the H1 of the year, but they were still able to survive them all and even did better as a result of regulatory conduct and commitment of the telecoms operating companies.
The challenges
Low broadband penetration, high cost of bandwidth, data price floor, OTT incursions and national backbone infrastructure, were some of the major challenges that the telecoms sector contended with in the H1 of 2018. Telecoms activities are majorly driven by broadband, but telecoms operators have been faced with low broadband penetration, which resulted in high cost of internet bandwidth, a situation that slowed down the growth of telecoms activities across networks. Knowing the importance of broadband availability and penetration, the federal government, in 2013, came up with a five year NBP(2013-2018), with a target of attaining 30 per cent broadband penetration by the end of 2018, up from the 18 per cent broadband penetration the country attained in 2013. As at today, the country has grown its broadband penetration to 22 percent, but still short of the planned 30 per cent broadband penetration by the end of 2018, even though the NCC is still optimistic that the county will surpass the 30 per cent broadband target by the end of 2018 due to the measures the telecoms regulator has put in place to achieve the target.
Data price floor is another area of challenge for the sector in the last six months, but the NCC is working on some measures that would soon be released to address the issue of data price floor in the telecoms sector.
Data price floor in technical parlance, is one of the regulatory safeguards normally put in place by the telecommunications regulator to check anticompetitive practices particularly by the dominant operators. It is a minimum price on data services as stipulated by government or the regulator.
NCC had on November 1, 2016, written to the mobile network operators (MNOs) on the determination of an interim price floor for data services after a stakeholder’s consultative meeting of October 19, 2016. As at November 1, 2016, the industry average for data tariff floor for dominant operators including, MTN Nigeria Communications Limited, EMTS Limited (Etisalat), now 9mobile, and Airtel Nigeria Limited, was N0.53k/MB, but the interim price floor as introduced by NCC, which was to commence with effect from December 1, 2016, seeks to increase the industry average for data tariff from 53k/MB to 90k/MB.
Considering the new rate of N90k/MB as contained in the interim floor price for data services, MTN went ahead to inform its over 61 million subscribers that it would increase data tariff with effect from December 1, 2016. The announcement by MTN, raised a lot of dust among subscribers across networks, who started calling on NCC and the operators to rescind the decision of data tariff hike.
Following the complaints from subscribers, NCC decided to suspend any further action in that direction till date. The Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta, however, told journalists last week that NCC was already working on a new tariff plan for data price floor that would be released soon.
The services of OTT technology providers in the last six months, also added its own challenges to the telecoms sector. The OTT services are rendered by social network providers who ride on the infrastructure of MNOs like MTN, Globacom, Airtel, among other GSM operators, to offer free voice and instant massaging services such as: WhatsApp, WeChat, Skype, Facebook, Viber, Imo, at no cost to the subscribers.
Chairman of the Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, had raised concern that social network operators do not invest in infrastructure, but ride on the infrastructure of MNOs to provide free services to customers at the detriment of MNOs who have invested so much to build their infrastructure and are still investing in the maintenance of such telecoms infrastructure.
He said the new development was causing MNOs to lose revenue strings hitherto coming from their voice and data services because subscribers now prefer to patronise the social network operators who provide the services at no cost to the subscriber.
Adebayo had last year, called on NCC to consider the regulation of OTT services but NCC made it clear at that time that it was not ready to regulate the OTT technology in order to avoid a process that would lead to the stifling of technology advancement in Nigeria. But recent developments have shown that the NCC may be compelled to regulate the activities of the OTT players in order to save the telecoms industry from total collapse. Going by recent developments in the telecoms sector, the NCC may likely set up a regulatory framework for the control of OTT technology services.
This will, however, be made possible if NCC eventually validates the findings of the study carried out by the Commonwealth Telecommunications Organisation (CTO) on the benefits and challenges OTT services in Nigeria.
The CTO report, which was presented recently to the Nigerian ICT industry, presents key issues and recommendations on OTT services. The CTO report is sequel to a stakeholders’ consultation session organised by the NCC on May 30, and the report is expected to provide the industry with an opportunity to discuss and validate the findings.
Another challenge faced by telecoms operators was the lack a national backbone infrastructure that will transmit broadband capacities from the shores of the country to the hinterlands, where the broadband services are in high demand. Nigeria has avalanche of broadband capacities from undersea cables berthed at the shores of the country by MainOne, Glo1, MTN WACS, SAT 3, among others. In spite of the abundant broadband capacities at the shores of the country, less than 10 per cent of the total broadband capacity is being utilised because the country lacks the national backbone infrastructure that will transmit the capacities from the shores to the hinterlands. The situation affected telecoms operations in the last six months, leading to disparity in the prices of broadband within Nigeria, which slowed the pace in the rollout of telecoms services across the country.
Success story
In spite of the listed challenges the industry players performed very according to industry statistics released recently by the NCC.
The statistics showed increased subscriber number and increased teledensity. The increase, NCC said, underscored the reason for improved service quality in the telecoms sector in the last six months.
The Nigerian telecoms sector achieved steady teledensity growth in the last nine months to reach 114.66 per cent in April this year, occasioned by the rise in telecoms subscribers number, which reached 160,524,590 across all networks as at the same April this year.
The growth in teledensity, came after the country experienced a slide in its teledensity between January 2017 and July 2017, before picking up in August 2017 and maintained a steady growth up till April 2018, where it reached its highest peak of 114.66 per cent.
In technical parlance, teledensity is defined as the number of active telephone connections per one hundred inhabitants living within an area and is expressed as a percentage figure.
According to the figures released, after a slide in teledensity between January 2017 to July 2017, from 110.8 per cent to 99.39 per cent respectively, the country’s teledensity picked up again from 99.39 per cent in July 2017 to 99.60 per cent in August same year. It grew to 99.93 per cent in September; and 100.55 per cent in October. Again it grew to 101.66 per cent in November; 103.61 per cent in December same year; 105.21 per cent in January 2018; 106 per cent in February 2018; 106.64 per cent in March 2018, until it reached 114.66 per cent in April 2018, which is the highest ever since the inception of GSM network rollout in 2001.
According to NCC’s figures, the current 160 million plus subscriber number is a clear indication of a steady growth of subscribers across networks.
Giving reason for the steady growth in teledensity and subscriber number in the last nine months, the Chairman, Association of Licensed Telecoms Operators of Nigeria (ALTON), Mr. Gbenga Adebayo, attributed it to better regulation, availability of telecoms services, improved reliability of telecoms services and steady economic growth of the country.
“Regulation is not counter productive, there is availability of telecoms services that have improved over the past months and the economy is showing signs of good growth, which when combined together, gave telecoms subscribers the confidence to patronise telecoms operators more than before,” he said.
Other areas that contributed to the successes recorded in the first half of the year, were the speedy approval on right of way given to telecoms companies for network rollout following the intervention of the NCC. The Executive Vice Chairman of NCC, engaged with state governors who had before now, refused the approval of right of way to telecoms operators operating in their states, while demanding for exorbitant fees from the telecoms operators before approval on right of way was given. The engagement of NCC with the state governors concerned, opened doors to quick approval of right of ways, which also opened the doors of opportunities for telecoms operators to rollout services in different parts of the state. This helped in no small measures in improving service quality, and also increased subscriber number and teledensity.
The positive disruptions brought about by financial technology (FinTech) players, also contributed to the growth the telecoms industry in the last six months. They were able to develop technology solutions that are not only driving financial transactions in the banking sector, but also driving mobile money payment transactions that ride on the infrastructure of telecoms operators.
The handling of the ongoing sale of 9mobile, which the NCC and the Central Bank of Nigeria played a major role, helped in stabilising the telecoms sector growth in the last six months, according to experts views.
