The present and future of Nigerian telecoms under Yar'Adua

THIS month, August, marks the sixth anniversary of the acclaimed revolution in the Nigerian telecoms sector, after some fifty years of pursuing the shadow. During those wasted telecoms years, an estimated $6 billion was lost in the management and mismanagement of the national career, NITEL.


August is significant to Nigeria's telecoms revolution. It was in August 2001 that mobile phone operators who won licenses under the novel frequency spectrum auction introduced by the Nigerian Communications Commission, NCC, began commercial services.
In six years, we are no longer talking about GSM alone but an addition of comprehensive array of telecoms and IT services, products and services that include CDMA fixed and wireless telephony, broadband services, VOIP, ubiquitous Internet services, mobile Internet, huge fibre optics and satellite transmission systems, online banking services like Asynchronous Transfer Mode, ATM, and a host of other value added services driven by telecommunications. Today, there is no type of high tech services in any part of the world that is not available in Nigeria.
How then do we locate the conductor and driver of this train that would take President Umar Musa Yar'Adua to the expectation of many Nigerians? This is where you must permit us to apply the Nigerian Communications Commission, NCC, as the institutional indices for measuring Nigeria's telecoms success of the present and the hope of the future.
Against this background, and a deliberate attempt to be fair to history, we must trace the origin of this revolution to January 2001, when today's telecoms reformist, Mr. Ernest Ndukwe, emerged at the leadership of the NCC. A business minded telecoms expert, Ndukwe's foray into his job, was to become the forerunner to the overall economic reforms agenda of the 4th Republic.
It was atop his desk that the revolution in the sector was articulated and executed, leading to the world's most acclaimed transparent frequency auction process

Leveraging FDI with transparency
The unpredictable yield of the transparent auction in 2001, when Nigeria had some 500,000 subscribers, is today's celebration of some 40 million phone subscribers, a record that puts Nigeria in the league of the fastest growing telecoms economy of the world. This super image is complemented by inflow of foreign direct investment, FDI, of estimated $10 billion, in the sector within the past seven years while total investment in the sector now stands at some $20 billion. Suddenly, telecoms have become the hidden diamond above the skies of Nigeria, which the NCC discovered within this short period.
In terms of international relations, it must be said that the transparency that accompanied the frequency auction in Nigeria, was the first item that gave the Obasanjo administration the most tangible, if not the most significant positive international image and also forced the attention of the global community to an emerging democracy with a focus for economic reforms. After that auction, Nigeria arrived on the international telecoms stage.

Advantage of due process and courage
From reckoning, the launch of GSM services in Nigeria by August 2001, was to become the launch pad upon which the Ndukwe-led NCC have implemented participatory and robust regulatory strategies, undertaken courageous actions and decisions, with unprecedented results that have encouraged investors within and outside Nigeria to show appreciation of the potentials of the sector.
Today, the NCC is rated alongside the Central Bank of Nigeria, CBN, and NAFDAC as agencies of government where the nation can go to sleep in full confidence that positive and courageous decisions are taken as appropriate, as and at when due, and with successful results predictable.
Some have attributed the success rating of Ndukwe and his team to his business mindedness and his stickler to due process dispositions, but we must add that the forward looking Telecommunications Act 2003 also contributed to this success.
This Act, jointly sponsored by the executive and the legislature, took a holistic review of previously existing industry laws and decrees and equipped the NCC with the independent-mindedness required of today's forward looking telecoms regulator. This is where a deserved mention needs to be made of the noble parliamentary roles of such individuals like Mr. Nduka Irabor, who, then as chairman of the House Committee on Communications, worked assiduously to ensure that the law was enacted.
The Board of Commissioners of NCC, led by Alhaji Ahmed Joda, must also take a credit for this success for remaining fearless and focused by giving absolute support to the management of the Commission in making these giant strides unscathed.
It is noteworthy that the implementation strategies and actions of NCC so far, have given due attention and respect to the laws. It is with this disposition that no party which has taken the regulator to court on any issue so far, have succeeded.
Flowing from these predictable regulatory actions, investors do not loose sleep to partake in the sector as entry processes are smoothened, with each licensing process publicly undertaken. Those who have attempted to flout due processes at the NCC in matters of license acquisition have not had good stories to tell. The case of NIGCOMSAT is exemplary, and President Yar'Adua, in his latest directive for immediate privatisation of NIGCOMSAT, with application of due process have amply demonstrated that he is on top of developments in the telecommunications sector and the due process have contributed immensely to its growth till date and hope for the future.

Harvesting gains of regulatory efficiency
In contributing to national economic growth, researchers and economists would have an uphill task in making accurate assessment of how direct and indirect employment that has been generated in the sector since 2001, have impacted on the Nigerian macro economy within the past six years.
Nonetheless, it really needs no economic wizardry to see how this has benefited the Nigerian skilled and unskilled labour force.
With these, one would rightly say that all that is needed by government is the consolidation of the immediate past and present gains, as the regulator has already bequeathed a solid telecommunications base for growth.
It also needs to be added that with the present NCC, government can boast of being atop all aspects of telecommunications development.
In that direction, even this government has become an immediate beneficiary and witness of the stability and efficiency that has attended the management of the nation's telecoms resource with the recent successful frequency sale for 3G licenses awarded in June 2007 to four operators, MTN, Celtel, Globacom and Alhieri Engineering with each paying $150 million for a slice of the national spectrum. The total amount of $600 million realised from this sale is only $150 million less than the amount realised on the combined sale of 51per cent of NITEL and Mtel.
Shortly before then, in January 2007, Mubadala, a United Arab Emirate company, has paid $400 million for a slot of a GSM license which other operators paid $285 million in 2001. This payment is very significant as it points to the increasing investor value of the Nigerian telecoms market where operators paid $285 million in 2001 for the same license that the nation realised $400 million in 2007. Ordinarily, many would expect that that license would come under $200 million given that some other operators are already more than six years old in the same market.
Before 2001, Nigerian banks had nothing to do with telecommunications and telecoms investment portfolios, but since the regulatory environment opened a new vista of business where transparency and stability are assured, none of the banks can do without a telecoms desk with some partaking in huge funding of many private telecoms projects. Revenues from telecoms business have become one of the major sources of survival for banks as they also compete to introduce telecoms driven products and services in Nigeria.
In a way, Nigerians can now take telephone services for granted and can leave one service provider for another within a space of minutes.
Today, 40 million people can communicate with each other and many more can enjoy the simplicity of getting connected in matter of minutes. Naturally this simplified experience has wiped away the ugly memories of our past when with under 500,000 lines for 140 million population, it takes years to own a phone and many hours to get a call through to some locations across the country.
Happily, the creativity and efficiency that led us to this experience, is now being exported to other African countries and it would be commendable that Nigeria is bequeathing this to Africa at this time.

Critical quality of service issues
The issue of quality of service of GSM services has become critical that the regulator has accepted it is unacceptable. The operator understands this and the subscriber is angry, but everyone understands that this matter is temporal and has only one key solution: encouraging operators to spend more money to expand their networks.
While we need not dwell on the overstretched issues, or join issues with those who genuinely attest to the failing quality of services by appreciating its inevitability in the complex network, we nonetheless, appreciate the fact that this solvable issue must not be allowed to downplay or overshadow the overall gains in a multi/network in which GSM is a part.
If we take a peep into the general telecoms regulatory management which involves management of multiple operators, deploying multiple networks, delivering different types of services in a vast geographical spread like Nigeria, then we can understand why many commentators believe that the Nigerian regulator has matured beyond expectations. This may be the reason why several African countries are dispatching their personnel to Nigeria to learn some few lessons.
Winning investor's confidence
Another side to this which has been the bane of many telecoms regulation is the ability to win the confidence of telecoms investors by share dexterity in managing regulations that determine their success or failure.
Usually, operators and investors, with huge stakes, are always at daggers drawn with the regulator, whose commission or omission in handling industry issues may either lead to wanton loss or good returns on capital intensive investments. This is why the regulator must gain the confidence of the operators and investors if it is forward looking and has the objective of attracting more investment. The NCC has so far exhibited appreciable dexterity in handling this balancing act without compromising its status. This is how we can explain the latest acquisition of 75 per cent of a local fixed wireless operator, Multilinks Telecoms Ltd, by a global player, Telkom South Africa, for some staggering $280 million.
With the mobile phone handset marketing valued at some $10 billion, Nigeria has become a target market by many phone makers. None of the global equipment vendors can ignore the Nigerian market any longer as the market continues to grow in leaps and bounds. The long distance transmission market is already beginning to generate another business with the emphasis being given to the sector to improve quality of service that is confronting the industry. It is, therefore, not surprising that the gauge of the average investor, whether within or outside Nigeria, is that Nigeria is the next investment destination as far as telecoms is concerned.

Managing the tariff war
Sometimes, the major challenge to the regulator is how to balance the interests of the investors and that of the public whose only wish is continuous reduction of tariffs, no matter how it is achieved. It is the regulator's burden to ensure investments are sustained, to win the confidence of the investors and at the same time protect the subscribers from operator exploitation. This is another delicate balancing act where NCC also deserves kudos. This assertion may not go down well with the uninitiated, some of whom have charged NCC to decree prices to the operators. But to those who understand, it is a complex business decision, where many variables come into play, at the end of which there may be no winners except the future sustainability of the industry. This was simply demonstrated when one of the operators, Celtel offered free calls at weekends, which led to massive congestion leading to some subscribers begging the company to stop the free calls as they are ready to pay if only their calls can go through. It was one accident, but a lesson that in telecoms, pricing decisions may not be as simple.
Let's take a close look at the price management mechanism. In the past six years, interconnect rates between the operators have become the valve with which the NCC have approached the issue of tariffs while allowing market forces to locate the final price.
The operators have at each point resisted NCC actions, but have apparently bowed to the firm's regulation. Many subscribers do not know how these actions actually force the operators to reduce tariffs. For instance, the regulator had adjusted interconnection rates twice in the mobile telephony sector. This has led to the current rates of N11.32K per minute uniform rates, down from about N18.50K. Consequently, interconnection, being the rates at which operators exchange traffic, has forced operators into a competition of sorts with subscriber rates coming down from some N50 per minute at launch of GSM in 2001 to about N19 per minute in some service category in GSM networks and N15 per minute in CDMA networks. In line with predictable regulations, another round of adjustment is expected in 2008.
Surely, if the retail rates are not yet satisfactory until it hits the N10 per minute rate, then the cost of SMS, which has hit N5 per minute in many networks, down from N15 about 2001, with many freely coming as bonuses has confirmed the telecoms industry as the only one with only a downward trend in tariffs as a result of more competition and more choices.
The situation is manifest for international call charges which hovered at average N150 per minute in 2001 but have come as cheap as N12 per minute in some CDMA networks. Some GSM operators offer international calls to some countries at about 58k per second.
A win for rural telecoms?

Perhaps, the greatest tool in the hands of government, which needs more encouragement, is the ongoing development-oriented citizen's empowerment initiatives by the Commission, like the Universal Service Provision Fund, USPF, and Wire Nigeria (WIN) project. Both projects are complementary, while partnering the private sector in taking telephony and IT-based services to rural and underserved communities. The WIN project has additional value in providing backbone telecommunications infrastructure to the Nigerian rural communities, to address the tasking quality of service issues and ensure adequate communications between the rural and urban communities. The current models applied in the implementation of these two programmes appear to be watertight with investors, who logically shy away from investing in rural areas because of its slow and low return on investments, accepting the carrots being dangled by the NCC.
This is one area that would need a full focus because it has unquantifiable multiplier effect, and it would do this government a lot of good to lay a claim to the profound turnaround of rural communications, which these projects would bring.

Conclusion
Applying a holistic view, it would be concluded that a regulatory stability that provides robust backbone for growth, an efficient management of the national scarce resource called frequency spectrum and a regulatory process that have won the heart and confidence of investors, are some of the crucial gifts that the current NCC is bringing to the table of Yar'Adua's government. How the government manages and sustains these gains would be subject of history in the future.


-Dis na Naija!

-doregos.



Tributes:
The Guardian - http://www.guardiannewsngr.com