GSM Clocks 17years, More Emphasis on Data

Omolola Lipede
20% Complete
 26-Aug-2018

Seventeen years on, Nigeria’s mobile telephony (GSM) sector has put up an impressive performance, raising telephone subscriber base from just over 400,000 in August 2001 to 162 million in June 2018, generating thousands of direct jobs and several thousands of indirect ones, raising internet penetration, giving verve to online and electronic transactions, making significant contribution to GDP, improving the way we live and lifting investor confidence in the country, despite hiccups here and there.

The Nigerian Communications Commission (NCC) which is the telecommunications industry regulator, remitted N1333.4 billion to the consolidated revenue fund of the Federal Government in 2017.

The National Bureau of Statistics report confirmed that the Nigerian telecommunications sector, during the second quarter of 2017, contributed 9.5 percent to the GDP in contrast to 9.1 per cent contribution in the first quarter of the year.

“Sub-Saharan Africa’s mobile industry is showing strong progress in achieving the targets of the SDGs, predominantly through increased connectivity and access to information, but also through the delivery of services, such as mobile money, that increase productivity, improve well-being and reduce poverty,” says John Giusti.

GSM  debuted in 1982 as a pan-European communication technology and had since spread beyond the frontiers of Europe to other jurisdictions including Africa. Nigeria, therefore, came late to the party. The good news, however, is that though a late entrant into the GSM market, Nigeria has outpaced many countries across the globe in terms of market size and telephone penetration.

The first GSM service rolled out in August 2001 following a successful Digital Mobile Licence, DML, auction conducted in January of the same year by the nation’s telecom regulator, the Nigerian Communications Commission, NCC. That auction, the first in Africa, was adjudged transparent and world-class by both the World Bank and the International Telecommunications Union (ITU). The NCC had placed the asking price for each licence at a conservative $100 million. But at the end of the auction, each licensee paid as high as $285 million.

As revenues from voice services dwindle over the years, Nigeria’s four mobile networks, MTN, Glo, Airtel and 9mobile are paying more attention to data services. The emphasis is on LTE technology.

LTE (Long-Term Evolution) is a standard for high-speed wireless communication for mobile phones and data terminals, based on the GSM/EDGE and UMTS/HSPA technologies. It increases the capacity and speed using a different radio interface together with core network improvements.

In a major push for data revenues, MTN which is the market leader signed a N200 billion seven- year Medium term loan agreement with a consortium of local banks, with FBN Quest acting as a facility agent.

The largest operating telecommunications company in Nigeria, declared that the loan raised from 12 Nigerian banks will be used for expansion and improvement of data services where it sees a major part of its revenue growth coming from in the future.

Speaking at the signing, Chief Executive Officer, MTN Nigeria, Ferdi Moolman, expressed enthusiasm at the completion of the agreement, saying it signposts MTN’s commitment to and confidence in Nigeria, and the strength of the strategic collaboration between MTN Nigeria and local financial institutions, that will help deepen and broaden the provision of ICT services in Nigeria.

“The signing of this loan facility is a major landmark in our expansion programme in which we are making significant investments. The facility will enable us evolve the network to deliver convergent and superior quality, drive voice capacity expansion and data service penetration, maintain optimal capital structure and funding level that support growth and expansion,” Moolman said.

“Making it possible for people to connect to each other and the world, find and share information and ideas, create and access new digital services and reimagine old services. This partnership puts in place infrastructure that empowers commerce, industry and the provision of public services,” Moolman said.

MTN’s debt increased to 69.8 billion rand as of the end of June, compared with 57.1 billion rand six months earlier.

Kunle Awobodu, MTN Nigeria’s Chief Financial Officer, told BusinessDay that; “although MTN has the most expansive fibre network in the country, there is an issue with fibre cuts and attack. Therefore, we need to protect our network in a way that even when we get attacks, our network doesn’t go down. We are going to invest in ring-fencing our coverage all over Nigeria and also invest in fibre infrastructure so that high speed data can reach the rural parts of the country.”

Industry watchers say that MTN’s continuous investment in growth and expansion of services shows extreme confidence in the Nigerian market. They also say that the N200 billion loan syndication is a marker as to the strength of Nigerian banks to service telecommunication businesses which are capital intensive investment areas.

“Our revenue base is still largely dominated by voice which contributes about two third of our total revenue, but what we are beginning to see is that people are not making calls as much as they used to, and are more interested in data based applications, so, as we transition into this movement, we need to invest in our network. Our view is that we must prepare for the future. If a big portion of our revenue is going to come from data and from digital services in the future, we have to start that investment now, and that is why we have taken the medium term loan,” Awobodu said.

The loan facility is structured with a two-year moratorium and a repayment plan of five years and is denominated in Naira.

MTN had in 2013, raised a total of N239 billion in loans for expansion which is said to wind down in 2019.

“We raised the loan locally and that loan is winding down next year. We have kept to the loan servicing agreement and all the repayments have been made as at when due. Final payment will be done in 2019,” Ishmael Nwokocha, MTN’s General Manager, Corporate Treasury Finance.

According to Awobodu, MTN already has Long Term Evolution (LTE) frequency in some parts of the country.

“We actually have LTE frequency, but the more frequency you have, the better services you can provide and it also helps us in terms of the coverage that we can give to the populace. So we keep looking for opportunities in the market to give us services to the outer part of Nigeria with better network quality.

“What we are doing with our LTE services is that we plan to expand. We started with three cities; Lagos, Abuja, Port-Harcourt and we expanded to reach about nine or 10 cities in total, but we have cities that are still not on 4G and we would like to expand into those cities, and this is part of why we are doing this CAPEX expansion,” he said.

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