Telephones
The increase in the number of phone subscribers over the past five years in Nigeria has been above 40% on a year-on-year average. However most of that increase has been in the mobile phone services and the level of penetration is just about 30%, as compared to a more mature market like South Africa where it is 70%.
It is however a different with fixed lines where there were under 1.5 million active subscribers in Nigeria up from 900,000 in 2003. It is unlikely that the fixed number lines numbers are going to be anywhere what is being seen with the mobile phone subscribers.
Nigeria does however have the most competitive fixed line market in Africa, featuring a second national operator and over 50 other companies licensed to provide fixed telephony services. The alternative carriers, besides the national carrier NITEL, combined now provide over 95% of all active fixed lines. Majority of the new lines were implemented using wireless technologies and that gave network operators the opportunity to enter the lucrative mobile market under a new unified licensing regime. This has also helped them to secure hundreds of millions of dollars in investments from local and foreign investors.
Several microwave and fibre-based national backbone infrastructures are being rolled out by various companies, and three new international submarine fibre optic cables are scheduled to reach Nigeria’s shores in 2009, 2010 and 2011, which will deliver a major boost to the country’s underdeveloped Internet and broadband sector.
Fixed wired phone systems are expensive are construct even more so when fibre optics rather than copper wires are used. It is a lot cheaper to set up a mobile phone system than a modern day fixed line system. There is also a growing trend from around the world where consumers are beginning to ditch their fixed lines in favour of the more versatile mobile phones lines.
While fixed phone lines have their advantages including that of security and price, for now it seems the drive with phone operators in African countries is to focus more on providing mobile phone services.
Shortly after taking over the reins of the Ministry of Information and Communications, the new minister, Professor Dora Akunyili laid out her 10 point agenda for improving services in the communications sector of the economy. The agenda is primarily aimed at improving phone services in Nigeria and is listed below:
1. Dropped Calls: Telecom operators will be held accountable for providing uninterrupted connections to their phone calls made on their network as a basic prerequisite.
2. Poor Voice Signal Quality and Poor Reception: Operators will be held accountable for poor voice signals and reception of service anywhere in the country.
3. Lack of Adequate Interconnectivity or Its Partial Blocking: Operators will be tasked to work more on providing adequate connectivity to their rivals’ networks.
4. Tariffs: Policies will be implemented to reduce the current tariff and billing within the market to more competitive prices, passing savings to the Nigerian consumers.
5. Infrastructure Sharing: Efforts will be made to get operators to jointly own and share various telecommunications facilities, wherever it is practical and prudent to do so. This is aimed at reducing capacity building costs for the operators and invariably passing those savings to the consumers.
6. National Roaming: Operators will be encouraged to sign local roaming agreements to enable subscribers roam from one network to another whenever there is no service fro their primary network.
7. Number Portability: A number portability framework will be implemented to enable subscribers keep their numbers when moving from one network to another. This will ensure that a subscriber is not penalised for leaving an uncompetitive network.
8. Convergence of Technology and Services: The possibilities and potential benefits of convergence between information technology, telecommunications and broadcasting will be explored.
9. Deployment of Fixed Lines: More fixed lines would be deployed for their full benefit of fixed, more stable, cleaner, safer and cheaper calls.
10. Adequate Rules Enforcement: NCC will fully enforce adopted international regulations and guidelines for all operators in deployment of facilities. It will also collate existing and proposed optic fibre network plans of various operators into a national transmission plan to achieve a harmonised transmission network. Finally the NCC will facilitate the establishment of the unified national emergency communication system and work with all authorities to facilitate the eradication of multiple taxes.
If properly implemented, the Minister’s agenda should bring about an improvement in the quality of telephone services as well as a reduction in the mobile phone tariffs. The Minister has a reputation for getting the job done and only time will tell if her efforts will make a difference. We would however like to make a recommendation of our own, which would be urgent reversal in the fortunes of the current National Operator, NITEL.
Reprivatisation of NITEL
NITEL which enjoyed a monopoly for decades in the telecommunications industry was sole provider of fixed phone lines from its inception in 1985 till 1999 when where the market was deregulated and other operators were licensed.
Unfortunately, being run as an extension of the government department, NITEL failed to capitalise on its position and only managed to provide 450,000 subscriber lines for a population of 120 million. In a bid to increase its reach and efficiency, the Federal Government decided to privatise the outfit and has followed a long arduous route to have it done.
The process of privatisation started in 2000 but was stopped two years later, when Investor International London Limited (IILL), the then investor failed to pay the $1.317 billion it offered. In 2003, Pentascope was appointed by government to run a three year contract to prepare the sleeping giant for sale but this failed following alleged embezzlement and incompetence.
In 2006, Orascom of Egypt offered $260 million but this was rejected by the federal government on the ground that it was ridiculously low. Transnational Corporation of Nigeria
(Transcorp) came in with a better offer of $500 million in November, 2006.
However, following the failure of Transcorp to revive NITEL’s fortunes, the government revoked the sale agreement and now in the process of revaluating the worth of the company and seeking new partners to provide much needed investment in the nation’s National Operator.
However the sale reversal has also been plagued with legal problems and it is unclear whether the government will be able to meet the February, 2009 deadline it has set for completing the sale reversal process.
NITEL’s fall from a dominant position in the market has been nothing short of surprising. According to NITEL, as of June 2004 it had 720,000 lines installed, although only around 500,000 were activated. This figure represented around 85% of the total fixed lines in the country. As of September, 2008, NITEL only had 60, 000 active subscribers, representing 5% of the total number of subscribers.
NITEL and its mobile phone subsidiary Nigeria Mobile Telecommunication (Mtel), have an advantage of their rivals in terms of already existing, though decaying infrastructure and a considerably larger phone line capacity. However it organisation suffers from a poor reputation resulting from the poor delivery of services and the reputation of its staff. It still however represents an exciting opportunity for potential investors, more especially in the fixed line market, which still has considerable room for growth.
With the right amount of investment and management in place, NITEL can become competitive in an already vibrant sector. However the longer this is left, the more ground NITEL loses to its competitors, and the more likely it is to become a failed corporation.
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