Telecoms Industry Report - Web PDF

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9th September, 2011
IndustryReport
Telecommunications Industry in Nigeria

a decade of phenomenal growth and investment potentials
PanAfrican Capital Plc
Contents
Executive Summary
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3 5 6
Nigerian Telecommunications Radical Revolution from Grass to Grace Current Development in Telecommunications Sector
Price War among Mobile Operators Good for Nattering among Subscribers 6 Industry Performance a Display of Key Statistics Analysis of Industry Leaders and Laggards Origin and Constitution of the Nigerian Communications Commission (NCC) Some of the Functions of NCC A few Objectives of NCC Nigerian Telecommunications Limited (NITEL) Origin and Ownership Status Nigerian Telecommunications Regulatory Framework Nigerian Communications Act, 2003 8 9 11 11 11 13 14 14
Policy Initiative
Telecommunications as a Transformational Tool for Economic Growth CDMA Subsector Opportunities Hang on Regulation Broadband Explosion The Next Phase of Opportunities and Growth Bracing Telecoms Infrastructure A Strategy for Cutting Operating Cost Impediment to Investment in Telecommunications Sector SWOT Analysis of the Nigerian Telecommunications Industry
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15 16 21 26 32 33
Opportunities for Capital Market Operators from the Field Survey
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Power Sector Reform: Unlocking the Investment Opportunities Benchmarking Nigerian Telecoms with India an Imminent New Face of Growth 37
Investment Opportunities in Nigerian Telecoms Sector Summary of Findings Intelligence Gathering Conclusions and Recommendation s Appendix 1: All Mobile Operators in India
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PanAfrican Capital Research
Executive Summary
The sector has witnessed radical transformation since year 2000 when it was first opened up to liberalization as a result of the new telecommunications policy and eventually to Global System of Mobilecommunication (GSM). Within few years, four GSM operators (Econet, MTN, Mtel and Globacom) entered Nigerian market and mobile telecommunications awareness became heightened. Communication among Government officials, individuals and businesses became easy and improved as many people greatly reduced rate of travelling from one distant location to the other just because they want to deliver oral message. Telecoms market in Nigeria has been fully liberalized where law of competition has been put in place by Nigerian Communications Commission (NCC) in order to remove barrier to market entry and allow natural market forces to promote market sustainability. Price war in the nations telecoms sector is an age long occurrence in the nations Telecoms sector . In the early stage of GSM in the country, MTN Nigeria, Mtel and Econet stated categorically that it was not possible to do per second billing, so consumers were exploited to the fullest. When Globacom Nigeria came on board, the company experimented and started per second billing, this action marked the beginning of price war in Nigerian and other companies that have proved impossibility immediately followed suit and tariffs were seen on a downward trend. All along, it has been mentioned that the industry is basically divided into three subsectors namely; GSM, CDMA and Fixed Wired/Wireless. Available data shows that GSM subsector is the industry leader among the three operational telephony standards in Nigeria with 81.196 million active lines (not Subscribers) while Fixed Wired/Wireless is the industry laggard with 1.050 million active lines out of 88.348 million total active telephone lines in Nigeria. Nitel was formed in 1985 after the merger of Nigerian External Telecommunications Ltd, responsible for external telecommunications, common carrier services and the telecommunications arm of the Department of Posts and Telecommunications of government. Recently, government proposed to merge the company with Nigerian Communication Satellite Limited (NigComSat). Latest development about NITEL is governments desire to engage Willing buyer, willing seller option against the bidding option which has failed the privatization process. Many local and foreign firms are on the brings of negotiation. Increase in access to telephone and broadband services all over the world in the past 15 years has been unprecedented. This growth has been driven primarily by wireless technologies and the liberalization of telecommunications markets, which allowed for faster and cheaper rollout of mobile networks and broadband services. This growth effect of the mobile phones is higher than that of fixed-line phones, but less than internet access or broadband. This shows that broadband has most impact on economic development in telecommunications than other aspects such as telephony, television etc. As the exclusive right given to the Global System of Mobile Communication (GSM) operators by the Nigerian government expires, Unified Access License was granted by Nigerian Communication Commission (NCC) to Code Division Multiple Access (CDMA) operators so as to offer multiple services such as mobile telephony, fixed telephony, internet broadband and long distance services. Survey has shown that minimum of 31 million Nigerians have access to internet services where many consumers use internet for socializing, research, entertainment, education and others. Broadband service in Nigeria is majorly driven by wireless access technologies operated by mobile operators due to poor state of wire-line infrastructure. Telecoms operators in Nigeria have realized the fact that strategy for success in the industry is hinged on the ability to cut operating costs which industry experts believed can be best achieved in collocation or sharing of facilities. Operators in Nigerian telecoms have realized the fact that strategy for success in the industry is hinged on the ability to cut operating costs which industry experts believed can be best achieved in collocation or sharing of facilities. Investment in telecoms in Nigeria has faced sequence of hurdles which are crippling existing investment in the sector and scaring the prospective ones. Power is a major factor described as an encumbrance making
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it impossible for operators to perform optimally and this situation has impacted negatively on the operation of the sector. Nigerian telecommunications sector has been deregulated long time ago and investment are still welcome by the government to further strengthen the sector and the nations economy. The following are the findings discovered during the course of this work on telecommunication sector in Nigeria: Broadband has most impact on economic development in telecommunications than other aspects such as mobile telephony, pay-television, etc Survey has shown that minimum of 31 million Nigerians have access to internet services where many consumers use internet for socializing, research, entertainment, education and others. Statistics has shown that Nigeria has the highest internet penetration per population in the African continent which accounts for one-third of those that use internet in the entire Africa Existing GSM operators lost parts of their market share to new entrants in 2010 due to innovation and Value Added Services (VAS). CDMA operators are losing market shares to GSM operators Population has helped telecoms penetration in Nigeria among African countries Power is a major factor described as an encumbrance making it impossible for operators to perform optimally and this situation has impacted negatively on the operation of the sector An industry source revealed that some mobile operators such as Globacom and Airtel have begun outsourcing parts of their operations such as customer care etc. in order to cut cost. The following recommendations have been suggested to government and stake holders for Nigeria and the rest of Africa to have robust telecommunications services. Government (NCC) should do all things possible to promote and uplift CDMA technology among mobile subscribers to avoid total collapse of the subsector and the aftermath consequences. Mobile operators should redevelop and improve on value added service (VAS) such as ringing tone music, movie, person to person SMS, Mobile-banking, ATM-recharge, Ticket booking etc. Government should endeavor to tackle power problem in order to have improved quality of telecommunication services. Mobile operator should focus on aggressive penetration of the core Northern states and the underserved rural areas for expansion and increased subscribers base.
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Nigerian Telecommunications - Radical Revolution from Grass to Grace

In Nigeria, the introduction of telecommunications services dates back to nineteenth century. The facility was mainly used for promotion of administrative functions of government during the period rather than the socio-economic development of the country. This probably was responsible for the little attention paid to its expansion with the result that at independence in 1960, the country had only 18,724 telephone lines for an estimated population of 45 million people, a teledensity of 0.4 telephones per 1000 people. The telephone network then consisted of 121 exchanges of which 116 were manually operated magneto-type, while the remaining 5 were automatic. Nigerian Telecommunications sector has witnessed radical transformation since year 2000 when the sector was first opened up to liberalization as a result of the new telecommunication policy and eventually to Global System of Mobile-communication (GSM). Within few years, four GSM operators (Econet, MTN, Mtel and Globacom) entered Nigerian market and mobile telecommunication awareness became heightened. Communication among Government officials, individuals and businesses became easy and improved as many people greatly reduced rate of travelling from one distant location to the other just because they want to deliver oral message. In 2002, first national long-distance license was offered to MTS First Wireless and NITELs national carrier and international gateway license became operative. Towards the end of the year 2004, three national long-distance operator licenses became operative and all operators introduced per-second billing which was spearheaded by Globacom Nigeria. The introduction of unified access licenses by Nigerian Communication Commission (NCC) was hailed by stakeholders. About thirteen (13) companies such as MTN, Zain (now Airtel), Multi-Links and Starcoms were granted the license. In July 2006, Transcorp bought 75 per cent into NITEL and a national carrier license was awarded to Prest Cable & Satelite TV Systems. NCC issued 3G UMTS license to MTN, Zain, Glomobile and Alheri Engineering (A member of Dangote Group) in the second quarter of 2007. NCC also awarded fixed wireless licenses within the period. Etisalat Mobile Services (New buyer of Alheri Engineering telecoms license) launched its services in October 2008. In May 2009, NCC awarded licenses in the 2.3 GHz band to four operators. The Telecoms industry has developed over the past ten years driven by a successful liberalization program and the overall potential of the market. The sectors contribution to GDP (figure 1) continued to be on the increase since inception and greater percentage of the population were directly and indirectly employed by the sector. Figure 1: Percentage Contribution of Telecoms Industry to GDP (2001 to 2008)
Percentage Contribution of Telecoms Industry to GDP (2001 to 2008)
3.5 3 2.5 2
2.9 2.39 1.91 1.53 1.27
1.5 1 0.5 0
0.85 0.62
1.06
2001
2002
2003
2004
2005
2006
2007
2008
Source: NCC
Current Development in Telecommunications Sector

Telecommunications market in Nigeria has been fully liberalized where law of competition has been put in place by the regulatory body, Nigerian Communications Commission (NCC), in order to remove barrier to market entry and allow natural market forces to promote market sustainability. At some point in time, the Nations telecoms giants (MTN, Globacom an d Zain i.e. Airtel) made moves to acquire the Code Division Multiple Access (CDMA) telecoms firms so as to increase their coverage but the prices offered by these companies were too high and the deals failed eventually.
Price War among Mobile Operators: Good for Nattering among Subscribers
Price war in business economics is a term used to indicate a state of intense competitive rivalry accompanied by a multi-lateral series of price reduction. It happens when a competitor lowers its price, and then others lower their prices to match up. If one of them reduces their price again, a new round of reductions starts within the sector. Price war is an age long occurrence in the nations Telecoms sector. In the early stage of GSM in the country, MTN Nigeria, Mtel and Econet stated categorically that it was not possible to do per second billing, so consumers were exploited to the fullest. When Globacom Nigeria came on board, the company experimented and started per second billing, this action marked the beginning of price war in Nigerian telecommunications industry and other companies that have proved impossibility immediately followed suit and tariffs were seen on a downward trend. Figure 2: Mobile Peak Period Off-Net Tariff in Naira (2001 2009)
Mobile Peak Period Off-Net Tarrif in Naira (2001- 2009)
60 50 50 40 30 20 10 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 15 50 47.5 41 41 41 41.4 42 36
Source: NCC
Lately, price war ensued in the industry especially among the GSM operators as they are doing all things possible to surpass one another in the areas of Revenue Market Share and Subscribers Market Share. All these operators have offered competitive tariffs to subscribers which excited broad-spectrum of the populace. It was reliably gathered that the price war was kick-started at this time by Airtel to further deepen its market share and revenue before MTN and others followed suit. Airtel crashed its call rate to N9.00 per minute from the industry rate of between N35 to N42 per minute across all network. After all other networks followed suit to reduce call rate to their respective convenient zones, the industry average stands at N15 per minutes at the end of December 2010 (figure 2). In the last five years, the nations telecoms sector has witnessed new entrants into the market to take positions in different segments such as GSM, CDMA, Equipment Providers and WiMAX & Data. Most of them have also hinted that the only way to penetrate Nigerian market and compete with long standing telecoms giant is to crash price of per unit call.
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Indias Experience of Price War among Operators
In Mumbai earlier this year, it was learnt that mobile phone stores were all bustling with customers debating on mobile phone call plans which shows the affordability of mobile calls by greater percentage of the populace. India has almost 600 million active mobile phone subscribers, about one for every two people, including babies. India has the lowest prices anywhere in the world due to uncontrollable price war at a time during the sector growth process. Indias mobile phone industry has been described as a glimmer of hope for the countrys development with the presence of the home-grown, world class operator, Bharti Airtel. This scenario has helped to bring services to the masses from mobile banking to accurate crop prices. India has about 13 operators (Appendix 1) while most countries of the world have only 3 to 6 on the average. Hyper-competition is good for staying on the phone for a long time since prices have fallen to a level the poor can afford. Telecoms firms have become leaner, Bharti Airtel outsources furiously most of its operations, most companies share radio towers and have learnt how to compress traffic so as to cut cost. All these are a result of falling revenue and profit as a result of price war.
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Industry Performance a Display of Key Statistics

The outburst of telecommunication industry in Nigeria has led to many helpful effects in the nations economy ranging from expansion of investment opportunities in different sub-sectors of the industry and creation of direct and indirect employment. This occurrence in the industry also added to government sources of income in terms of licensing fees and taxes. The mobile telecommunication services market in the country has grown from about 500, 000 on 2001 to 88,343,026 in the year 2010. Growth in Nigerias mobile market as far as mobile penetration (Teledensity) is concerned has been in geometric progression from just 0.33 per cent of the population in 2001 to 58.90 per cent in 2010 (figure 4 and 5). Figure 4: Annual Total Subscribers
Annual Total Subscribers (2000 - 2010 in millions)
100.00 90.00 80.00 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 88.35 74.52 64.30 41.98 33.60 19.52 0.59 0.87 2.27 4.02 10.20 70.00 60.00 50.00 40.00 30.00 20.00 10.00 0.00 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3.35 0.51 0.73 1.89 16.27 8.50 24.18 29.98 45.93 53.23
Figure 5: Annual Subscribers Teledensity

Annual Subscribers' Teledensity (2000 - 2010 in %)
63.11
Source: NCC
Source: NCC
Research has shown that the major drivers of subscription level in telecommunication industry in the country since the liberalization of the sector includes severe competition, use of prepaid payment plans, low cost handsets and the rapid expansion of mobile networks to different parts of the country. Nigerian telecoms sector is basically made up of three standards for telephone system namely, Global System of Mobile communication (GSM), Code Division Multiple Access (CDMA) and Fixed Wired/Wireless. Since the liberalization of the sector, telephone users in the country have sought to adopt any of the standards of communication for businesses and at home. Statistics has shown the share of the telecommunication standards where GSM accounts for 92 per cent of the entire subscribers, CDMA accounts for 7 per cent and Fixed Wired/wireless accounts for just 1 per cent of the entire telephone users (Figure 6). Figure 6: Percentage Distribution of Telecommunication Services
CDMA, 7% Fixed Wired/Wireless, 1%
GSM CDMA Fixed Wired/Wireless GSM, 92%
Source: Nigerian Communication Commission At the inception of GSM in Nigeria in 2001, a total of 266,461 lines were subscribed for and this increased consistently to 32,814,861 in 2006 and largely to 98,684,272 in 2010. The rate of growth in the number of subscribers in the GSM subsector has been alarming. Active lines of the GSM mobile service stands at

81,195,684 while the installed capacity stands at 131,319,542. CDMA standard of telephony commenced operation in Nigeria in the year 2006 after issuance of license to operators by NCC and after the expiration of the exclusivity right given to GSM operators in 2006. Available data shows that 12,132,584 lines are connected to CDMA as at December 2010 out which 6,102,105 lines are active. The installed capacity for the CDMA mobile service is 17,172,670. Total connected lines for Fixed wire/wireless standard in the industry was 600,321 in 2001 which we believe included NITEL existing lines. This figure rose to 1, 673,161 in 2006 and 2,736,373 in December 2010. The fixed wired/wireless active lines stood at 1,579,664 in 2007 but reduced to 1,050,237 in December, 2010. Table 1: Annualized Telecoms Subscriber data and Teledensity as At December 2010
Operator
Mobile (GSM) Mobile (CDMA) Fixed Wired/Wireless Total Teledensity (%)
Connected Lines
96,684,272 12,132,584 2,736,373 111,517,229 80
Active Lines
81,195,684 6,102,105 1,050,237 88,348,020 63
Installed Capacity
131,319,542 17,172,670 9,347,771 157,839,983 -
Source: NCC Table 1 above shows that all GSM operators in Nigeria as at December 2010 have 96,684,272 connected lines while 81,195,684 were active out of 131,319,542 installed capacity. The entire CDMA mobile standard operators have 12,132,548 connected lines where only 6,102,105 lines were active out of 17,172,670 installed capacity. The Fixed Wired/Wireless lines that were connected as at December 2010 stood at 2,736,373 with 1,050,237 installed capacity, the total installed capacity remains at 9,347,771 (Table 1). Teledensity can be conceptualized as a measure of telephone availability, expressed as the number of main lines per 100 inhabitants in a country. The adopted system of determining the teledensity by Nigerian Communications Commission (NCC) has been the use of active lines of telephone service providers against the 2006 population census (Table 2), although in some countries number of lines connected have been used. The teledensity of the Nigerian telecommunications sector stood at 63 per cent as at December, 2010.
Analysis of Industry Leaders and Laggards

All along, it has been mentioned that the industry is basically divided into three subsectors namely; GSM, CDMA and Fixed Wired/Wireless. Available data (Table 1) above shows that GSM subsector is the industry leader among the three operational telephony standards in Nigeria with 81.196 million active lines while Fixed Wired/Wireless is the industry laggard with 1.050 million active lines out of 88.348 million total active telephone lines in Nigeria.
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Figure 7: Market Share of GSM Operators (December, 2010)
Etisalat, 8.36% Mtel, 0.32%
MTN Airtel, 19.50% MTN, 47.64% Globacom Airtel Etisalat Globacom, 24.17% Mtel
Source: NCC In the GSM subsector, there are five mobile telecoms companies with certain percentage of the industry share. Figure 7 above shows that MTN Nigeria with 47.64 percent is the sector leader within the GSM subsector while Mtel, a mobile subsidiary of Nitel, with 0.32 percent is the sector laggard. Comparing 2009 data with the year 2010, some players in the subsector lost their market share to others within the subsector (Table 7). Table 7: Loss of Market Share by Some GSM Operators GSM Operator December, 2010 December, 2009 MTN 47.64% 47.04% Globacom 24.17% 26.01% Airtel 19.50% 22.55% Etisalat 8.36% 4.01% Mtel 0.32% 0.39% Total 100% 100% Source: NCC
Change 0.60% -1.84% -3.05% 4.35% -0.07% -
Globacom Nigeria, Airtel and Mtel lost their market shares to MTN Nigeria and Etisalat Mobile Service in 2010. Globacom has 26.01 per cent market share in December 2009 which declined by 1.84 per cent to 24.17 per cent in December 2010 (Table 7). Airtel also lost its market share by 3.05 per cent while Mtel lost 0.07 per cent to competitors. In contrast, MTN gained 0.60 per cent market share in 2010 while Etisalat gained 4.35 per cent market share during the same period. This occurrence has been attributed to innovative tendencies of MTN and Etisalat vis--vis making available Value Added Services (VAS) to subscribers. Also we have linked the rise in market share of the two companies to the relentless aggressive penetration of the core Northern states and the underserved areas. CDMA market has been facing serious challenges in the recent time. The four major dominant operators of the CDMA subsector are Starcoms, Multilinks, Visafone, Intercellular and Zoom-Mobile, these five have been pronounced as the subsectors market leaders with substantial active subscribers base.
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Origin and Constitution of the Nigerian Communications Commission (NCC)

The Nigerian Communications Commission (NCC) was created under Decree number 75 by the Federal Military Government of Nigeria on 24th of November 1992. NCC is the independent regulatory body for the Nigerian telecommunications industry and was saddled with the responsibility of regulating the supply of telecommunications services and facilities, promoting competition, and setting performance standards for telephone services in Nigeria. The commission is headed by a board of nine commissioners, composed of the Chairman, the Executive Vice Chairman/Chief Executive Officer, two Executive Officers, and five nonexecutive commissioners. There are five directorates, fourteen departments, and five units. All these offices report to the office of the chief executive. The commission has been adjudged the foremost Telecom regulatory agency in Africa over the years. The Commission is hoping to catalyze the use of Information and Communications Technology (ICT) for different aspect of national development. The Commission has initiated several programs such as State Accelerated Broadband Initiative (SABI) and Wire Nigeria Project (WIN) to help stimulate demand and accelerate the uptake of ICT tools and services necessary for the enthronement of a knowledge society in Nigeria.
Some of the Functions of NCC

The facilitation of investments in and entry into the Nigerian market for provision and supply of communications services, equipment and facilities. The protection and promotion of the interests of consumers against unfair practices including but not limited to matters relating to tariffs and charges for and the availability and quality of communications services, equipment and facilities. Ensuring that licensees implement and operate at all times the most efficient and accurate billing system. The promotion of fair competition in the communications industry and protection of communications services and facilities providers from misuse of market power or anti-competitive and unfair practices by other service or facilities providers or equipment suppliers. Making and enforcement of such regulations as may be necessary under this Act to give full force and effect to the provisions of this Act. Management and administration of frequency spectrum for the communications sector and assisting the National Frequency Management (NFM) Council in developing a national frequency plan.
A few Objectives of NCC

To promote the implementation of the national communications or telecommunications policy as may from time to time be modified and amended. To establish a regulatory framework for the Nigerian communications industry and for this purpose to create an effective, impartial and independent regulatory authority. To promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services and the widest range there-of throughout Nigeria.
Registration of Subscriber Identification Module (SIM) Card

The Nigerian Communication Commission (NCC) pursuant to its power under Sections 1 and 70 of the Nigerian Communications Act developed the SIM Card Registration Regulation. The Commission stated that it was optimistic that the Regulations would enhance the security of lives and property of Nigerian citizens and ensure an appropriate database that meets international standards. The commission conducted a public enquiry on the SIM card registration in order to throw more light on the position of the
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regulatory body on the exercise. The following stands were stated by NCC as far as the SIM card registration exercise is concerned. No operator is allowed to retain biometrics information of subscribers, all biometrics (digital images and fingerprints) information must be forwarded to the Commission for storage in the central database Proxy registration of SIM card is not allowed, however several SIM cards can be registered in the name of one person for use by other people for which such person is to be held liable for the use of those cards Subscribers should not be requested to provide a form of identification in order to register. The request for a form of identification is for sighting only by the operators/registering officer is enough Operators are entitled to deactivate any unregistered SIM card after the expiration of the 6 months time frame specified for the exercise. Other obligations for subscribers will also be specified The Commission will consider the inclusion or exemption of foreign SIM cards from being registered After the public enquiry, the SIM registration started last year across the country and it was being carried out by telecommunication service providers. But the Nigeria Communications Commission (NCC) recently in Abuja flagged off of its own arm of the registration project which is expected to be completed in September, 2011. SIM registration would allow the country to achieve a central data base for all mobile phone users. It is important to note that this pool of data will assist other agencies of government such as security agencies (e.g. police and State Securities Services) and National Identity Management Commission in carrying out their duties in national interest.
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Nigerian Telecommunications Limited (Nitel) - Origin and Present Status

Nigerian Telecommunications Limited (Nitel) was formed in 1985 after the merger of Nigerian External Telecommunications Ltd, responsible for external telecommunications, common carrier services and the telecommunications arm of the Department of Posts and Telecommunications of government. Services offered by NITEL includes; leased lines, fixed telephony, broadcasting services, satellite services, IP services, Telex services, Telegraph services, Fax services, Value added services and Terrestrial Wide Area Network to corporate customers. NITEL, which operates 427,205 lines, has operations in each of the 36 states in Nigeria with 4,647 employees as at April 2009. NITEL is a company duly registered and validly existing under the laws of the Federal Republic of Nigeria, and is duly authorized to carry on its business as it is currently being conducted. In June 18, 1992 the company was transformed to the status of a public liability company when its name was changed from Nigerian Telecommunications Limited to Nigerian Telecommunications Plc. NITEL has 100 per cent shares in the mobile operator subsidiary MTEL, 7.3 per cent in South Atlantic Telecommunication (SAT3), 6.91 per cent shares in Regional Africa Satellite Organization (RASCOM), 0.21 per cent share in International Telecommunication Satellite Organization (INMARSAT), 0.6% share in International Telecommunication Satellite Organization (INTELSAT), 0.07% shares in ICO Global Communications Ltd (I-CO).
Successive Ownership of NITEL and the Controversies

A consortium consisting of UAE incumbent Etisalat, local Nigerian company Transnational Corporation (Transcorp) and BT of the UK won the bid to acquire a controlling stake in NITEL in 2006. The consortium acquires 51% of NITEL for an amount of US$500m. After being announced the winner, it was revealed that Transcorp was unable to pay off NITELs debts and invest in the operators network in mid -2007, BT pulled out of the management consortium, citing financing problems. NITEL and its mobile telephony subsidiary, MTEL, ceased commercial operations since the end of 2008, due to an employee strike motivated by the non-payment of their salaries. The government, on 1st June 2009, announced the revocation of the sale of 75 per cent holding of the national telecommunications carrier to Transcorp, on the basis that Transcorp breached the share Sale Purchase Agreement (SSPA) it signed with the federal government. Thereafter, a new set of bidding process was opened for the acquisition of 75 percent of the moribund national telecommunications carrier for the fourth time, NITEL and its mobile arm, MTel. The three major successful bidders were New Generation consortium with its offer of $2.5 billion, Omen International emerged reserve bidder with $956 million and Brymedia with $551 million. However, the bid hit the rock due to controversies surrounding process with which New Generation Consortium emerged as the preferred bidder cum inability of the consortium to pay up the stipulated $750 million out the $2.5 billion within 10 days. BPE had written the National Council on Privatization (NCP) on this issue and sought to concede the sale to Omen International, the next successful bidder. Recently, government proposed to merge the company with Nigerian Communication Satellite Limited (NigComSat). Latest development about NITEL is governments desire engage Willing buyer, willing seller option against the bidding option which has failed the privatization process. Many local and foreign firms are on the brings of negotiation.
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Nigerian Telecommunications Regulatory Framework

The year 1999 began the journey to stop federal government of Nigeria, like its counterparts around the world, from being a service provider and a regulator or a player and a referee when the country returned to a new political dispensation. This intention led to the establishment of Bureau of Public Enterprises (BPE) to allow government to hands off several businesses through privatization programme. The Nigerian Telecommunications industry has made a paradigm shift in the life of many Nigerians because it has been tagged as one of the major infrastructure drivers like power, road, transport facilities etc. which are the critical components of overall socio-economic development of the nation. Nigerian telecommunications industry has come a long way in the last 10 years and it has witnessed series of reforms and regulations during the period. The regulatory and policy changes of the Government, through Nigerian Communication Commission, played a major role in this phenomenal growth during the last 10 years. NCCs functions are recommendatory, regulatory and ensuring accurate billing system.
Nigerian Communications Act, 2003

Primary aim of the act is to create and provide a regulatory framework for the Nigerian communications industry and all matters so as promote the implementation of the national communications or Telecommunications policy, establish a regulatory framework for the Nigerian communications industry, promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communications services, encourage local and foreign investments in the Nigerian communications industry and the introduction of innovative services and practices in the industry in accordance with international best practices and trends. Also, to ensure fair competition in all sectors of the Nigerian communications industry and also encourage participation of Nigerians in the ownership, control and management of communications companies and organizations. In our review of the act, we found that the act was passed into law to ensure fair competition between service providers and to deal with the impact of changing technology on the way business are ran.
Policy Initiative
The nations telecoms sector has been described as one of the most deregulated telecommunications market in the world. Private participation is permitted in all segments of the industry GSM, CDMA, Fixed wireless, Broadband, Telecoms Infrastructure e.t.c and a number of value added services. Federal government decided to liberalize telecoms sector in order to achieve the following objectives: To promote the implementation of the national communication or telecommunications policy. To promote the provision of modern, universal, efficient, reliable, affordable and easily accessible communication services. To encourage local and foreign investment in the Nigerian communication industry To encourage the development of a communications, manufacturing and supply sector within the Nigerian economy. To protect the rights and interest of service providers and consumers within Nigeria
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Telecommunications as a Transformational Tool for Economic Growth

There has been unprecedented increase in access to telephone and broadband services all over the world in the past 15 years. This growth has been driven primarily by wireless technologies and the liberalization of telecommunications markets, which allowed for faster and cheaper rollout of mobile networks and broadband services. In recent years, sharp price reductions, driven by technological advances, market growths, and increased competition, have contributed to the rapid expansion in telecommunications services in many African countries. The World Bank recently conducted a new study to assess the impact of telecommunications penetration on economic growth rates based on country. According to this study of 120 countries, for every 10 percentage point increase in the penetration of mobile phones and broadband, there is an increase in economic growth of 0.81 percentage points in developing countries, against 0.60 percentage points in the developed countries. Figure 8: Economic Growth Effects of Telecommunications Technologies (Percentage)
1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 0.43 0.73 0.6 0.81 0.77 1.12 1.21 1.38
Fixed Lines
Mobile Lines High Income Economies
Internet Low and Middle Income Economies
Broadband
Source: Qiang, 2009 This growth effect of the mobile phones is higher than that of fixed-line phones, but less than internet access or broadband (Figure 8). This shows that broadband has most impact on economic development in telecommunications than other aspects such as telephony, television etc. The study also found that all information and communications technologies promote growth more effectively in developing countries than in the developed ones. This is because telecommunications services help improve the functioning of the markets, reduce transaction costs and increase productivity through better management in both the public and private sector.
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CDMA Subsector - Opportunities Hang on Regulation

After the long period of exclusive right given to the Global System of Mobile Communication (GSM) operators by the Nigerian government, Unified Access License was granted by Nigerian Communication Commission (NCC) to Code Division Multiple Access (CDMA) operators so as to offer multiple services such as mobile telephony, fixed telephony, internet broadband and long distance services. These operators were not allowed to operate mobile services before 2006 but only concentrated on fixed wireless and mobile services within the states they secured license to operate. If any operator wishes to operate in another state outside its primary state of operation such operator could be required to apply for a license to operate in such location. This made it more difficult for the CDMA operators to get more subscribers as it was a herculean task for them to compete with GSM operators whose coverage is universal. Under the unified access, CDMA were allowed to operate nationally and locally but most operators opted for national license. CDMA 2000 was the most widely used 3G technologies in 76 countries of the world with 177 operators serving more than 275 million subscribers. Counting 2G CdmaOne subscribers, there are more than 335 million CDMA users worldwide. CDMA2000 has become the technology of choice for cdmaOne, TDMA, analog and Greenfield operators, and is deployed in the 450, 800, 1700, 1900 and 2100 MHz bands. We believe if regulatory authority can come up staunch policies that will, in short and long term, favour the subsector, CDMA will be in tandem with its GSM subsector so that the opportunities embedded can be tapped by subscribers and government. Table 8: African Countries with CDMA Technologies.
Country Angola Congo Operators Angola Telecom Status Commerical Infrastructure Vendors Motorola Qualcomm CDMA Coverage Luanda Nationwide
Congo Ghana Kenya
African Commerical Telecommunications Incorporated (AfriTel) Telecel Commerical International Kasapa Commercial
Motorola n/a n/a
Kinshasa Accra, Tema etc Entire Country
Telcom Kenya, Commerical Flashcom & Em Communications Mauritius Telecom Commerical
Mauritius Nigeria Nigeria Nigeria Nigeria Zambia
Ericsson Motorola Motorola Ericsson, Nokia Nokia, Motorola Motorola
Nationwide Abuja, Lagos, Port Harcourt 17 states 19 States 24 States Lusaka
Intercellular Nigeria Commerical Ltd. Zoom Mobile Commerical Starcomms Ltd. Visafone Telecel International Commerical Commercial Commercial
Source: CDA Development Group (2009) A review of activities of some Nigerian CDMA operators is shown below:
Starcomms Nigeria Plc

Business History Starcoms, the largest provider of fixed wireless Telecommunications in West Africa was launched in 1999 with the deployment of CDMA technology in 2002 which has rapidly broadened the companys subscribers base all over the major cities in the country. The Nigerian Communication Commission (NCC) granted the company a unified license which enabled it to operate as a mobile CDMA network nationwide. Starcoms launched a 3G mobile broadband Data services in 2006 that gives customers a smart, fast convenient and mobile access. Starcommss recent sale and lease back transaction with SWAP Technologies was generally applauded by stakeholders in the industry. SWAP was expected to take over the operation and maintenance of the passive aspects of the 407 towers. These towers comprises the physical structures and the power components while the core network and radio component remain under Starcomms full access to the towers to operate its network. Starcomms Plc recently appointed Chams Plc as an agent for the collection of its internet subscription fee so as to enable all subscribers to the Starcomms Internet service to pay their subscription electronically through the Chams Access Service Terminal (CAST) Strategic Alliance: Starcoms has continuously partnered with foremost service providers around the world so as to deploy the latest telecommunications equipment for future communication needs. In order to project its innovative brand that is quality-driven, Starcomms has embarked on strategic alliances with world class telecommunication providers such as Qualcomm, CDG, Huawei, Harris, LG, Motorola, Nokia and others. Vision statement of the company is to be among the 3 largest mobile operators and the premier provider of world class, fixed and wireless communication solutions.
Table 9: Quarterly results of Starcomms Nigeria Plc

Financial Year
Turnover Profit Before Tax Taxation Profit After Tax Fixed Asset Investment Trade Debtors Net Asset
Figure 9: Starcomms Share Price Vs NSE Price Index
Q1- Mar,2011
N'Billion 6.051 (2.05) -0.014 (2.06) 41.688 0.829 1.517 21.527
Q1- Mar,2010
N'Billion 7.936 (1.44) -0.091 (1.53) 43.476 1.133 0.282 23.588
% Gain/Loss
-23.75 42.25 -84.62 34.71 -4.11 -26.83 437.94 -8.74
Source: Starcomms Q1 Interim Results
Source: NSE
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Visafone Nigeria Limited

...your passport to reach the world
Business History
Visafone was born out of strategic acquisition of three CDMA mobile network operators that had been in operation for up to 8 years with 30,000 subscribers and coverage in different parts of the country. The Company was incorporated on 20th June, 2007 and received its Unified Access Service License as a telecoms operator from the Nigerian Communications Commission (NCC) on 1st August, 2007. Visafone displayed a considerable leadership in the CDMA subsector in its Eleven months of operations. The company has been honored with many awards in the industry apart from crossing the 1million subscriber mark in 6 months, amassing 2.5m in 10 months and extending its coverage to 20 states and over 160 cities and towns in Nigeria. Lately, Visafone attempted to acquire the telephony-components of Multilinks-Telkom with about 1.2 million subscribers. This bold action would have given Visafone 4.2 million subscribers in the subsector with just over 6 million active subscribers making the company active segment market leader. Strategic Direction: Visafone formulated inventive and wining strategies encompassing a handset strategy, a marketing strategy, an operational strategy, a financial strategy and HR strategy. The Company has proposed to adopt a bold and revolutionary approach in every aspect of its dealings so as to attract and retains customers. Visafone vision and objectives are to be a market leader in the provision of telecommunication services, to be the telecommunication service provider of choice, to deliver good returns to shareholders and maintain sound financial health and to be a good corporate citizen in its country of operation.
Table 9: Board and Management
Table 10: Product Mix of Visafone Nigeria
Board and Management

Jim Ovia Sailesh Iyer Uche Ojo Parag Sen Sumanta Ray Sam Edoho Kunle Adebiyi Chuks Oko Source: Industry Sources
Status
Founder CEO CCO CMO CTO Director, Sales Director, Sales (North) Director, Compliance
S/N
1 2 3 4 5 6 7
Product
Vsa Free Visa Chill Visa World Visa Profit Visa Power Visa Kampus Klub Visa Super Circle
Benefits
Lowest International Rate from N12/min Free On-net Midnight Calls (1.00 am to 4.30 am) Peak Call Rate to GSM at 42kobo per Second More Profit for you Business Lowest On-net Call rate at 10kobo per second 24/7 free calls amongst Visa Kampus Klub Members No daily, weekly or monthly rental
Source: Industry Sources
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Zoom Mobile Nigeria

Business History Zoom Mobile came into existence on August 25, 1998 as Reliance Telecommunications Limited (Reltel Wireless) to take advantage of the deregulation of the sector by the then Federal Government of Nigeria by obtaining a national license to provide fixed wireless telephone services in Nigeria. Nortel Networks of USA deployed the first state-of-the-art Code Division Multiple Access (CDMA) equipment operating on 1900 MHz frequency. Full commercial operations commenced in Nigeria in November 2001. With the expiration of exclusive mobility period enjoyed by the GSM operators, Zoom Mobile successfully applied for the Unified Access Service License, enabling it to provide full roaming services in all its areas of coverage. In order to actualize its expansion and re-branding plans, the company did a private placement to raise fund which brought in significant Nigerian investors on board and plan to do a public offer in due course. Zoom Mobile Nigeria Targets 10 million subscribers in 3 years: This was revealed by the executive vice Chairman of the company in the disclosure of the company s strategies for 3-year strategic objectives. Vision Statement: To be the leader in Nigeria, offering a wide range of telecommunication services delivered in an efficient and financially rewarding manner.
Table 12: Product Mix of Zoom Mobile Nigeria

Senator Annie Okonkwo Kenneth Aigbinode Tony Okonkwo Air Vice Marshal Canice Uwenwaliri Dr. Tom Adaba Source: Industry Sources
Status
Founding Chairman Executive Vice Chairman GMD/CEO Director Director
S/N Product Benefits

1 2 3 4 5
Zoom Call Zoom talk talk Zoom Profit Zoom plus Zoom Family No daily access charge, no contract Ideal tariff plan for frequent caller It allows a tele-center operator to maximize profit VPN plan specially packaged for staff members of an enterprise It allows call to family member for as low as N3.25/minutes.
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Intercellular
Intercellular Nigeria Limited is a 100 percent private sector-owned competitive telecommunications provider. The company was licensed in 1996 by Nigerian Communication Commission (NCC) commenced operation in 1998 as the first indigenous wireless communications provider in Nigeria. Intercellular has licences to operate VSAT gateways and to provide cellular telephone and terrestrial wireless data and Internet services. At present, the Company provides telecommunication services in Nigeria's commercial capital Lagos, Port Harcourt in the heart of Niger Delta, Kaduna, Zaria, Kano and Maiduguri in the Northern part of the Country. Kaduna/Zaria and Maiduguri have joined the Intercellular national brand drive with 15,000 and 5,000 line capacity respectively. Since then, Management has not looked back as the Company has continued to prosecute its national telecommunications programme with the determination and rare vision to build a wireless Nigeria. The journey to National network infrastructure deployment has been tough yet surmountable, challenging yet rewarding.
Table 13: Coverage Areas
State
Lagos Rivers Abuja Kaduna Kano Borno Source: Industry Sources
Cities
Lagos PortHarcourt Abuja Kaduna, Zaria Kano Maiduguri

Mallam Ibrahim Aliyu
Bashir Ahma el-Rufai
Status
Chaiman
Vice Chairman
Non Executive Director Non Executive Director Non Executive Director Non Executive Director Director
Dr. Babatunde Daniel Arch. Monsur Hamadu Arch. Salisu Garba Hasan A. Dantata Dr. Tom Adaba Source: Industry Sources
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Broadband Explosion: The Next Phase of Opportunities and Growth

Industry analysts have long time ago predicted boom in the telecoms subsector sector and its significant contribution to the national income. This was premised on the huge population of Nigeria which was believed to support the market for telecommunication business. Survey has shown that minimum of 31 million Nigerians have access to internet services where many consumers use internet for socializing, research, entertainment, education and others. Broadband service in Nigeria is majorly driven by wireless access technologies operated by mobile operators due to poor state of wire-line infrastructure. Statistics has shown that Nigeria has the highest internet penetration per population in the African continent which accounts for one-third of those that use internet in Africa.
Figure 10: African Countries Internet Users Top African Countries Internet Users (Million)
Nigeria Egypt Morocco South Africa Algeria Sudan Kenya Tunisia Uganda Zimbabwe 0 44 20.1 13.2 6.8 4.7 4.2 4 3.6 3.2 1.4 5 10 15 20 25 30 35 40 45 50
Source: Industry Sources Nigeria is the most populous nation in Africa and this has helped its internet penetration which has been rated as the highest in Africa (Table 15). Table 15: Country
Nigeria Egypt South Africa Ghana Kenya
Population (2011 Est.)

155,215,573 82,079,636 49,004,031 24,791,073 41,070,934
Internet Users Internet Users Penetration per User Growth % Users in (Dec 2000) (Latest Data) Population (%) (2000 - 2011) Africa
200,000 450,000 2,400,000 30,000 200,000 43,982,200 20,136,000 6,800,000 1,297,000 3,995,500 28 24.50 14 5 10 21,891.10 4,374.70 183 4,223.30 1,897.80 37 17 6 1 3
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Swift Networks
The Company is a facilities-based telecommunications provider established in 2002 after its bid for a Fixed Wireless Access (FWA) License from Nigerian Communication Commission (NCC) to provide multi-service broadband connectivity services to businesses and residential subscribers. Swift Networks holds an exclusive wireless spectrum license from NCC so as to be able to operate an end-to-end reliable fiber-like connectivity services in the exclusively licensed and interference-free 3.5GHZ spectrum. The Company has recently attracted foreign direct investment from The International Finance Corporation (IFC), European Investment Bank and Commonwealth Development Corporation under the Capital Alliance Private Equity II fund scheme managed by Capital Alliance Nigeria. Accordingly, Swift Networks has the requisite financial and organizational resources to become the leading broadband connectivity Services provider in Nigeria. Swift Networks claims that its subscribers can leverage on its multi-service network to acquire integrated Data services, Internet access, public switched Voice telephony, Video and surveillance services using the same CPE. Vision Statement To create a full-spectrum telecommunications institution of choice, differentiated by superior quality of service, consistently creating value for all stakeholders through innovative, leading-edge products, delivered by a high quality workforce, utilizing the best in modern technology.
Table 16: Board and Management Table 17: Service Plan and Benefits
Board and Management Status

Richard Kramer Charles Anudu Chukwuma Okoye Richard U. Uche Daniel Agbor Alfred Mkparu Paul Kokoricha Eng. Folorunsho Akinwande Source: Industry Sources Chairman MD/CEO CCO Director Director Director Director Director
S/N Service Plans

1 2 3 4 5 6 7 Residential Plan My 4G Plan Swift Business Plan Enterprise Solution Hotspot Solution Web & Email Hosting
Benefits
Superfast internet connectivity for home comfort Ideal for students to learn, create and explore Faster internet connectivity for businesses Offers state-of-the-art data services to enterprises Faster internet in public places Web and Email hosting to individual and small business owners
Communication Hub Similar to 3G modem
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Direct on PC
Direct on PC has since 2002 completely modified the internet service in Nigeria through its unique products that it continually improves upon and adoption of technology that excites customers and make them happy at any point in time. Today's DOPC is the toast of financial institutions, banks, SMEs, NGOs, government and educational institutions. With its headquarters in Ilupeju, Lagos, DOPC enjoys the extensive technology compliments of its partners like Intelsat, iDirect, Navini, Verso, Hughes, ESS, Juniper, OKI, Onspeed, SkyVision, Main.net, net2phone, Alvarion, Redline, elitescore, among others. Highly innovative, Direct On PC has complete presence in 16 countries in Africa and average coverage in 10 other countries, making it one of the leading ISPs in the continent. And to imagine that all this is coming within a short space of the company's emergence into the Nigerian telecommunications industry, the influence of DOPC on the industry is still described as electric by many people. The company is a member of Bhojraj Chanrai group headquartered in Lagos with branches in Port Harcourt and Abuja
Table 18: Product offering of Direct on PC
Products
VoIP V SAT Unwired Powernet Wireless MDU Wireless WHA Source: Industry Sources
Benefit
Cheaper on net call any where Support High Uplink speeds Excellent WiMAX services Uses normal electrical cables Equipment that can Serve many homes For Wide Area Hotspot
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IPNX Nigeria Limited

IPNX Nigeria Limited started as a division of Telnet Nigeria Limited. Telnet main business focus was provision of data communication services to corporate community in Nigerian in the financial and oil and gas sectors. The network, that time, was built on NITEL facilities since NITEL was the monopoly provider of telecommunication services in Nigeria. In December 1992, the federal government of Nigeria deregulated the telecommunications industry opening it up to competitions and other organizations were allowed to provide telecommunication services. In 2001 Telnet decided to separate the infrastructure based business from the engineering based business, the infrastructure based was detached from the group as new company called Netco Service Limited. Some of the NCC licenses were transferred to Netco and Netco obtained some additional licensed from NCC. The name IPNX came to being when it was discovered that a subsidiary of NNPC had been known as National Engineering and Technical Company (Netco) and this led to a change of name of the telecommunication company to IPNX Nigeria Limited. Vision Statement To be the preferred communications and IT enabler in Africa and beyond. We will do this by providing services with boundless possibilities.
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Mobitel Nigeria Limited

The company was acquired by a new investor consortium in June 2008 led by Omni-Ventures Limited. Mobitel was awarded a national license on the 2.3 GHz frequency in September 2010, and recommenced operations in October rolling out 4G Broadband and Voice services, after an earlier license awarded in 2009 were cancelled due to controversy about the tendering process. With its 4G launch in late October 2010, Mobitel became the pioneer provider of real broadband service in Nigeria with speed starting at 1MB and with capacity to hit 100Mbps for Homes and Offices. Mobitel differentiates on consistency and reliability of speed compared to the current segment leaders. The company aims to spend around US$350 million over the next two years expanding its network, which is also being designed with an upgrade route to LTE in the future. Mission The innovative use of broadband to improve African socio-economic life.
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Bracing Telecoms Infrastructure - A Strategy for Cutting Operating Costs

Telecommunication operators in Nigeria have realized the fact that strategy for success in the industry is hinged on the ability to cut operating costs which industry experts believed can be best achieved in collocation or sharing of facilities. Operators in the telecoms infrastructure subsector are expected to carry out third party facilities management, monitoring and maintenance for wireless operators. This will allow mobile operators to focus only on their core operations and therefore ensure better performance. An expert in collocation business stipulated that managed services will ensure reduction of operating costs by 20 to 30 per cent immediately and ultimately reducing to zero while guaranteeing round the clock uptime and significant improvement in quality of service. A study revealed that the country will require about N1.29 trillion to address tower and base station shortage. The same survey pegged the total base stations in Nigeria at 17,000 to over 80 million active mobile phone connected lines compared to 66,000 based stations serving 62 million population in Britain. Table 20: Infrastructure Providers in Nigerian Telecoms Date of Incorporation S/N Infrastructure Providers
1.
2. SWAP Technologies 1996 2006 2001 N/A 2005 N/A 2008
Helios Towers
IHS Main One Nitel Sat 3 Glo 1 System Integrators
3. 4. 5. 6. 7.
Source: Industry Sources Nigeria has about seven infrastructure providers in the telecoms sector that have been playing significant roles in the provision of infrastructures to mobile companies. Profiles of some of the companies are highlighted below.
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PanAfrican Capital Plc SWAP Technologies & Telecoms Plc.

SWAP Technologies was incorporated in June 1996 and incorporated as a liability company in 2003 to carry on the business of trading and commercial activities in various sector of the economy. SWAP has played a significant role in the telecoms sector in view of opening up of the sector in 2001 by Government. The company has a mission to create and maintain its selected clientele for life through quality product efficient services using the competent people, strategy and technology at the best possible price and to be a dominant player in our selected business field through global alliances. SWAP is diversifying into other sector of the economy in view of the recent economic reforms and privatization of public companies. It presently has four divisional subsidiaries. They are Engineering and Projects, Network sharing & Managed services, International Operations. The company has various partnership and licenses agreement with various organizations locally and offshore as partners or agents for different products. They are MTN, V Mobile, Globacom, Huawei, Starcomm, African Cellular Group, Interswitch, Mast Project (SA), Andrews Pty, RFS, SAAB Grintek, etc.

Godwin Adokpaye
Titilayo Olatunde
Status
Chairman MD/CEO
Director Director Director Director Chief Operating Officer (COO)
Ade Ogunlesi Henry Semenitary Doreen Abegunde Funso Soyoye Kesavan Madhavarao Source: Industry Sources
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PanAfrican Capital Plc System Integrators

The Company is a privately owned corporation with office in Lagos, Nigeria. Systems Integrators is ran by experienced and dedicated professionals and who have been extensively involved in the deployment of multivariate projects. As systems support specialists and trainers, prior to the formation of Systems Integrators, they have successfully deployed IT solutions and technical systems management emphasizing all aspects of IT policy formulation, organizational needs assessment to determine the most appropriate and efficient budget friendly IT infrastructure. Outside providing technical assistance, Systems Integrators offers management and logistics coordination for clients requiring assistance for projects in Nigeria and/or other countries. A2Z Systems Integrators have developed powerful and easy-to-use software with specialization in the following areas Stock control / Inventory system, Payroll and Human resources Management, Bank customers transaction Management System, Student Database Management System.
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PanAfrican Capital Plc IHS Nigeria Plc.

IHS Nigeria PLC is a company incorporated under the laws of the Federal Republic of Nigeria in the year of 2001. IHS Nigeria PLC is an ISO 9001:2000 certified company. IHS is managed by a dynamic and highly skilled team of telecom specialists under the leadership of an experienced and professional board of directors, managers and associates. IHS Plc. is a leading telecommunications infrastructure provider with headquarters in Nigeria and operations throughout the African continent particularly in Ghana, Sudan, and Tanzania. IHS currently employs more than 800 staff all over Africa and is listed on the Nigerian Stock Exchange (ticker: IHS) and regulated by the Nigerian Securities and Exchange Commission. The company became ISO 9001:2000 certified in 2006. The Company is also fully licensed by the Nigerian Communications Commission (NCC) to provide various services including Telecommunications Site Leasing and Sharing to the public.
Table 22: Company Information Figure 11: Share price of IHS vs NSE Index
HIS NSE Index 1.20 1.00 0.80 0.60 0.40 0.20 0.00
Company Information
Chairman
MD/CEO
Mallam Bashir El-Rufai William Saad Victoria Island, Lagos. Price Waterhouse Coopers Intercontinental Registrars April, 30 2,200,000
Head Office Location Auditor Registrar Accounting Year End Outstanding Shares Source: Industry Sources
Source: NSE
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PanAfrican Capital Plc Main One Cable Company Limited

The Company was the first submarine cable company to offer open access, wholesale broadband capacity in West Africa. It is a wholly African-owned company that is executing on its vision to expand the much needed capacity on the African continent and reduce the cost of broadband communication across the Continent. The cable system was declared ready for service in July 2010 with initial landing stations in Nigeria, Ghana and Portugal linking West Africa to the rest of the world via Portugal and the United Kingdom. Main Ones goal is to be the most scalable and professionally managed international telecommunications service provider on the African continent. Main Ones continued focus is to provide innovative, reliable and affordable high capacity fiber that ensures first class service delivery of the much needed broadband capacity within West Africa. Table 23: Board and Management Board and Management Status
Fola Adeola Funke Opeke Dr. Dapo Oshinusi Solomon Asamoah Timothy oguntayo Taiwo Okeowo Dr. Ini Urua Chairman CEO
Director Director Director Director Director
Source: Industry Source
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PanAfrican Capital Plc Helios Towers Nigeria

Helios Towers Nigeria (HTN) started operations in January 2006, and the companys first site went live in June 2006. Currently, its site portfolio includes over 1,000 four-operator sites across Nigerias 6 geopolitical zones with a strong presence in key markets including Abuja, Lagos, Port Harcourt, Warri, Kaduna, Onitsha and Ibadan. Helios Towers is well financed by a range of international investors including Helios Investment Partners (HIP); a $400m pan-African private equity fund. Helios offers a range of product packages specifically tailored to fit the particular needs of the following different categories of customers: GSM Operators, CDMA Operators, and WIMAX Operators. Vision Statement Helios vision is to be the leading Site Solutions Experts in Nigeria/Africa, and the partner of choice for collocation in the eyes of its employees, customers and communities. Table 24: Management Staff Management Status
Inder Bajaj Thomas Sule Lanre Tunji-Sanusi Collins Onumajuru Azuka Ndulewe Chandrakant Modi CEO COO
Chief Financial Officer Chief Legal Officer Chief Marketing Officer Chief Technical Officer
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Impediment to Investment in Telecommunication Sector

Investment in telecoms in Nigeria has faced series of barriers which are crippling existing investment in the sector and scaring the prospective ones. Power is a major factor described as an encumbrance making it impossible for operators to perform optimally and this situation has impacted negatively on the operation of the sector. Over 70 per cent of the base stations in Nigeria are said to be powered by diesel due to inadequate electricity supply. Due to this ugly scenario, telecommunications companies have resulted to powering base stations and other operations that requires power. Mobile operators have revealed that insufficient power supply is responsible for about 60 per cent of network failures. In a bid to ensure continuous service, operators have installed at least two standby generators to power the stations so as to ensure continuous services. They also ascertained that generation of alternative power accounts for a greater percentage of their operating expenses and impact negatively on their operations. Industry sources revealed that other challenges in the sector includes vandalism of telecoms infrastructure, theft and issues with hosting communities. Further challenges include closure of base stations by unauthorized government officials and agents in order to collect illegal levies from operators.
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SWOT Analysis of the Nigerian Telecommunications Industry

Nigerian telecommunications sector is among the fastest growing markets in Africa due its largest population in the continent which has provided huge market support for telecommunications business. SWOT analysis of the sector will allow us to understand the strength of the sector, various weaknesses, what the problems are so that stakeholders can fix them and activities in the sector can be enhanced.
::: Strengths :::

Teaming population of Nigeria is an uncommon strength among countries for telecommunication business in Africa High literacy level of Nigerians compared to other African countries allow increased acceptance of telecoms products Presence of able telecoms investors within the country Availability of liberal regulatory body Total deregulation of the telecoms sector favors local and foreign direct investment Very long period/years of telecoms license renewal depending on the mode of operations or subsector Large percentage of the population is not yet connected. (Low teledencity) Huge profit has been made in the industry by first set of telecoms firms e.g. MTN, Glo Mobile Favorable landscape in larger parts of Nigeria for installation of masts and base stations Broadband subscriber base grew over a short period of time The sector allows Foreign Direct Investment (FDI) equity inflow Easy to create economies of scale among operators thereby enhance return on investment Share of private sector nearing 100 percent with the planned sale of NITEL
::: Weaknesses :::

Undeveloped Value Added Services (VAS) unlike what we have in India and China Non acceptance of CDMA technology by the populace as it is predominantly being used in many advanced countries Poor telecommunication infrastructure: Network of most players cannot accommodate the ensuing traffic Telecoms infrastructure supply gap leading to poor Quality of Service (QOS) Large number of call drop due to poor and inadequate infrastructure
::: Opportunities :::

Broadband is increasingly being used for economic activities and entertainment Increased desire by large youth population for the use of broadband in schools Increased desire by young and old for the use of mobile phones More room for investment on telecoms infrastructure due to inadequacy of the existing ones Room for investment in rural telephony Operators may be allowed to embrace horizontal integration i.e. doing more than one business Availability of stable power supply will reduce operating cost and increase profit margin Continuous decrease in prices of handsets and personal computers
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PanAfrican Capital Plc ::: Threats :::

Stringent and change in regulatory policies on telecoms firms by Government Fourth Generation (4G) broadband may render 3G technologies useless Price war and crashing of call tariff is thinning operators revenue and also total profit. This is unparalleled with any other sector in Nigerian economy Market is tending towards intense competition since new entrants are always welcome Huge expenses on alternative power generation Decline in purchasing power of citizens due to poor economic conditions may prevent people from buying new phones or recharge their phones. Poor maintenance of good quality of service (QoS) Poor telecoms infrastructure and network development
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Benchmarking Nigerian Telecoms with India an Imminent Face of Growth

Indias 44.76 per cent population enjoyed a worlds lowest call tariff but they dont know how it is possible and what happens in the future. Due to price-war impact, analysts have stated that most of the companies revenue will continue to reduce in the next few years and because of financial loss small telecoms companies will not be able to run their business and this may lead to liquidation or the companies are sold out to big players. After thinning out of the industry players, the remaining few big players will enjoy the subscribers base left by those that have lost out in the market. The resultant effect of this is that the remaining few players in the subsector may come together and increase call tariff in the future. This is not a forecast but investigations revealed that this scenario has happened in the telecoms sectors of other emerging economies. It has been termed as the last stage of growth in emerging telecoms sector. The circumstances may be replicated in Nigerian telecoms sector with about 9 mobile operators and the existing friendly policy which always welcome new entrants. Industry source told us that some telecoms firms have already started experiencing decline in revenue and profit. There are 13 players in India telecoms sector and they have been faced with high competition which is seriously affecting their revenue after arbitrary reduction of call tariffs.
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Investment Opportunities in Nigerian Telecommunications Sector

Telecommunications sector is an integral element to the economic and social development of any country in the emerging economies of the world. Nigerian telecommunications sector has been deregulated long time ago and investment are still welcome by the government to further strengthen the sector and the nations economy. The following opportunities have been identified for investment in the sector: There is large enough room for investment opportunity in telecoms infrastructure so as to overcome the quality of service conundrum. According to International Telecoms Union (ITU), there are 2 billion people on the internet out of 6 billion world population and there are too few on internet in Africa. This means there is still room for investment in the broad band subsector of the industry in Africa. Investment in the establishment of telecommunication cable company, especially the fiber optic cables, will be a worthwhile venture in the sector for data transmission and storage Nigerian telecommunications sector is relatively a virgin land for investment in fixed land lines which have not experience significant growth in Nigeria. Over 90 per cent of telecommunication growth in Africa is from the mobile subsector. Provision and operation of community telephony otherwise known as rural telephony. Purchasing of stake (Equity) in any Nigerian telecoms company Provision of consultancy and technical services to the existing and new companies Agency services: Where a foreign investor may appoint a Nigerian company as its agent in Nigeria
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Summary of Findings
The following are the findings discovered during the course of this work on telecommunication sector in Nigeria: Broadband has most impact on economic development in telecommunications than other aspects such as mobile telephony, pay-television, etc Survey has shown that minimum of 31 million Nigerians have access to internet services where many consumers use internet for socializing, research, entertainment, education and others. Statistics has shown that Nigeria has the highest internet penetration per population in the African continent which accounts for one-third of those that use internet in the entire Africa Existing GSM operators lost parts of their market share to new entrants in 2010 due to innovation and Value Added Services (VAS). CDMA operators are losing marketing shares to GSM operators Population has helped telecoms penetration in Nigeria among African countries Power is a major factor described as an encumbrance making it impossible for operators to perform optimally and this situation has impacted negatively on the operation of the telecoms sector An industry source revealed that some mobile operators such as Globacom and Airtel have begun outsourcing parts of their operations such as customer care etc. in order to cut cost.
Conclusions and Recommendations

Stakeholders in telecommunications sector have recently celebrated 10 years of revolution and paradigm shift in the sector when federal government made its intention known about the liberalization of the sector and privatization of Government owned telecoms companies. Statistics has shown that the insurgence of telecommunications in Nigeria has boosted economic development in terms of direct and indirect employment. Privatization of the nations telecoms giant, NITEL, posed a lot of issues due to failure of government agency (BPE) to hand over the moribund company to a preferred private investor bidder. Price war ensued among mobile telecommunication operators due to intense competition as more international operators are willing to play in the huge Nigerian market. It is a very good phenomenon for healthy competition in the telecoms sector but there will always be a trade-off between quality and lower tariffs until the pace of growth of relevant telecoms infrastructure nationwide catches up. Infrastructure challenges such as poor power supply, logistics problems, vandalism, theft and community issues were also responsible for poor quality of service in Nigeria. Closure of base stations by government agencies and confiscation by area boys (aka Omo Onile) in order to collect levies, taxes and unlawful money from telecoms operators were also responsible for poor quality of service. The following recommendations have been suggested to government and stake holders for Nigeria and the rest of Africa to have robust telecommunications services that will enhance economic development and improved welfare of the citizens: Judging from the country users of CDMA technology in Africa and the rest of the World, it has been clearly shown that the CDMA technology is wonderful with the entire inherent features from 2G to the present 4G. Therefore, government (NCC) should do all things possible to promote and uplift CDMA technology among mobile subscribers to avoid total collapse of the subsector and the aftermath consequences.

Mobile operators should redevelop and improve on value added service (VAS) such as ringing tone music, movie, person to person SMS, Mobile-banking, ATM-recharge, Ticket booking, bill paying, Mobile commerce, e-mail check, news item etc. In India in 2009, revenue from call charge was 56 per cent while revenue from VAS was 17 per cent. Studies have shown that VAS is the only tool for promotion in branding. Government should endeavor to tackle power problem in order to have improved quality of telecommunication services. From our interaction with some telecoms firms during the course of this study, they revealed that operating expenses on diesel and alternative power generation has continued to erode their profitability since telecoms systems must be up and running at all times whether there is power outage or not. Mobile operator should focus on aggressive penetration of the core Northern states and the underserved rural areas for expansion and increased subscribers base.
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Appendix 1: All Mobile Operators in India as at June 2011 Rank Operator Technology
GSM, EDGE, High Speed Packet Access CdmaOne, EVDO GSM, HSPA WiMAX GSM, EDGE, HSPA GSM, EDGE, HSDPA GSM, EDGE, HSDPA CdmaOne, EVDO WiMAX, WiFi CDMA, EVDO GSM, EDGE, HSPA+
Subscribers (Millions)
169.10
Ownership
Bharti (64.76%) Singapore Telecoms(32%) Vodafone (4.4%) Reliance ADAG (67%) Public (26%) Vodafone (67%) Essar Group (33%) Aditya Birla Group Axiata Group Berhad (19.1%) State-owned
1 Airtel
2 Reliance Communications 3 Vodafone 4 Idea 5 BSNL
143.26
141.51 95.10 93.72
6 Tata Indicom (CDMA) Tata DoCoMo (GSM) Virgin Mobile (CDMA) Virgin Mobile (GSM) 7 Aircel 8 Uninor
90.99
Tata Teleservices
GSM, EDGE, HSDPA GSM, EDGE
57.98 26.33
9 MTS 10 Videocon 11 MTNL 12 Loop Mobile 13 S Tel 14 Ping Mobile 15 Cheers Mobile
CDMA, EVDO GSM, GPRS, EDGE GSM, HSDPA EVDO GSM, GPRS GSM, GPRS GSM CDMA GSM, GPRS
11.72 7.12 5.49 3.15 3.31 1.40 1.35
Maxis Communications (74%) Apollo Hospital (26%) Unitech Wireless Telenor (67.25%) Unitech Group (32.75%) Sistema (73.71%) Shyam Group (23.79%) Videocon State-owned Essar Group (8.0%) Santa Trading Pvt Ltd (85.75%) Siva Group (51%) Batelco (49%) HFCL Infotel Limited Etisalat Dynamix Balwas Group
This report is produced by PanAfrican Capital Plc as a guide for clients mainly for information purposes about happenings in Nigerian economy and beyond. No responsibility or liability is accepted for error of fact or any opinion expressed herein.
INVESTMENT BANKING | SECURITIES TRADING | ASSET MGT.| VENTURE CAPITAL | REGISTRAR SERVICES l STRUCTURED FINANCE
For further enquiries, please call Lanre Bakare on +234 702 939 0488 or Wale Alabi on +234 702 939 0490
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Adeol www.panafricancapitalplc.

9th September, 2011

Telecommunications Industry in Nigeria

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Opportunities for Capital Market Operators from the Field Survey

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Nigerian Telecommunications - Radical Revolution from Grass to Grace

2.9 2.39 1.91 1.53 1.27

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Current Development in Telecommunications Sector

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Industry Performance a Display of Key Statistics

Figure 5: Annual Subscribers Teledensity

GSM CDMA Fixed Wired/Wireless GSM, 92%

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Analysis of Industry Leaders and Laggards

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Change 0.60% -1.84% -3.05% 4.35% -0.07% -

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Origin and Constitution of the Nigerian Communications Commission (NCC)

Some of the Functions of NCC

A few Objectives of NCC

Registration of Subscriber Identification Module (SIM) Card

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Nigerian Telecommunications Limited (Nitel) - Origin and Present Status

Successive Ownership of NITEL and the Controversies

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Nigerian Telecommunications Regulatory Framework

Nigerian Communications Act, 2003

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Telecommunications as a Transformational Tool for Economic Growth

Mobile Lines High Income Economies

Internet Low and Middle Income Economies

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CDMA Subsector - Opportunities Hang on Regulation

Congo Ghana Kenya

Motorola n/a n/a

Kinshasa Accra, Tema etc Entire Country

Telcom Kenya, Commerical Flashcom & Em Communications Mauritius Telecom Commerical

Mauritius Nigeria Nigeria Nigeria Nigeria Zambia

Ericsson Motorola Motorola Ericsson, Nokia Nokia, Motorola Motorola

Nationwide Abuja, Lagos, Port Harcourt 17 states 19 States 24 States Lusaka

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Starcomms Nigeria Plc

Table 9: Quarterly results of Starcomms Nigeria Plc

Figure 9: Starcomms Share Price Vs NSE Price Index

Source: Starcomms Q1 Interim Results

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