35% drop in investment hobbles rural telephony — Business — The Guardian Nigeria Newspaper – Nigeria and World News

Olusola Teniola, president of ATCON

Expansion of telecommunications services by network operators to rural areas has slowed down drastically.

Investments have gone down by as much as 35 per cent and many operators are shutting down their sites due to the high cost of deploying services.

In fact, although the telecommunications revolution is 18 years this month, about 205 Nigerian communities still do not have access to the technology.

The country is estimated to have about 198 million people.

With the mobile phone usage explosion in the last decade, some 162 million active users and 93 million unique subscribers have emerged.

Notwithstanding, about one third of the population, some 40 million Nigerians, remains unreached.

The Nigerian Communications Commission (NCC) insists the number of those without services has reduced to 33 million.   
Services are largely concentrated in urban areas. Beyond towns, reception is either poor or non-existent.

Also, the cost of providing service to impoverished and sparsely populated areas is prohibitive and Return on Investment (ROI) is very low.
Telecoms penetration against the population figure is put at about 48.8 per cent in Nigeria.

In South Africa, however, 94 per cent of the people can access WiMAX/LTE services. Also, 89.4 per cent of Kenyans have access to the Internet.

A recent visit to Rwanda showed that the number of subscribers on LTE infrastructure increased by 200 per cent in 2016, year-on-year.
Market watchers have attributed the dip in the expansion drive of operators to the slow economy owing to recession, lack of Foreign Direct Investments (FDIs), insecurity in parts of the country, lack of infrastructure and vandalism.

Others include multiple regulation and taxation, non-viability of investment especially on the short-run, scarcity of quality manpower and inadequate government support.
The chairman, Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbenga Adebayo, echoed these facts when he told The Guardian that the industry currently requires consistent investment.

“Not many investors are able and willing to invest in Nigeria at this time, given the social economic situation and recession.

Foreign Direct Investment into the sector has been slow, since the beginning of the year.

This has impacted on expansion. Our view is that anybody who is willing to invest in this economy should be encouraged, allowed and protected,” he said.  
The challenge of poor rural expansion also came to the fore at the NCC public inquiry on the transfer of licence and resources, including 800MHz spectrum from Visafone Communications Limited to MTN Communications Limited, in Abuja on June 25.
Operators at the meeting including MTN, Airtel and 9Mobile noted that service providers have cut down investments into rural areas due to challenges such as cost, viability, insecurity and spectrum shortages.
Africa is said to have close to 200,000 mobile towers.
Reports say it needs another 80,000. At an average of $200,000 each, the towers would cost $12 billion. Nigeria currently has about 30,000 BTS, with a shortfall of nearly 50,000 telecoms masts.

“If you are an operator asked to spend $200,000 to build a site and another $2,000 a month to run it in an area with 500 people herding cows, it doesn’t make sense,” telecoms expert, Kehinde  Aluko, explained.
He noted that Average Revenue per User (ARPU) is also low.

This could vary between $1 and $10 per month, much lower than in developed markets such as the United States, which delivered ARPU of $80 in 2016 or Britain, $85.

Olusola Teniola, President, Association of Telecommunications Companies of Nigeria (ATCON), disclosed that capital expenditure planned to continue growth of the industry has stalled. He cited the case of some ATCON members whose capex has been reduced by 25 per cent year-on-year.
He traced this to the challenge the industry witnessed during the recession, a situation aggravated by lack of foreign exchange (forex).
“We are talking about capacity issues. Capacity cannot be increased unless we increase the equipment installed and provisioned, and usually it is in the form of hardware and software.

If there is a mechanism by which we can actually access funds, in dollars, to purchase equipment, then we won’t have delay in the expansion of capacity.”
Enthroning a broadband regime requires some critical infrastructure, including base stations, fibre optic cables, stable power supply, enabling environment and security, the ATCON president said.
He said it appears that both the current industry players and OTT players are more comfortable seeking revenue opportunities in geographical locations that provide their business models sustainable ROIs.
Stressing that the recent announcement by Google of its WIFI deployment emphasises this point, he said: “Lack of infrastructure in the hinterland, relative to Lagos or other cities with a highly educated and sophisticated demographics, is very compelling to even the over the top (OTT) players and the reasons are plain to see.”

Without partnerships and collaboration, it may be difficult to have full coverage of Nigeria, as the country might need 80,000 base stations, with regard to the speed required for 4G or 5G networks, Teniola explained.
“Currently, we have about 22,000 towers covering around 30,000 base stations maximum.

There is a shortfall of 50,000 base stations. And on top of that, we need fibre behind these base stations to be able to carry the magnitude of capacity that we have.

Remember that our telecoms service is the primary network.

The mobile telephony network is the primary network that carries all data, mobile payment transactions whether security, financial, health, voice or SMS.

It has a huge growth in the youth population that is now using social media where the OTT players are holding sway,” Teniola added.
In an interview with The Guardian, MTN’s Executive, Corporate Relations, Tobechukwu Okigbo, said the firm has not and will not stop its expansion drive in the country.

He claimed that unlike other operators, the company is exploring new communities because of its commitment to the nation.
One of the measures that would allow MTN expand to other yet-to-be served areas would be the release of Visafone spectrum in the 800MHz frequency and its license, he said.
The MTN chief stressed the need for operators to encourage more investments to boost the Nigerian economy. 

According to him, the desire to ensure consumers access affordable broadband services, irrespective of their location, explains the request for the 800MHz spectrum, which can be used to deploy LTE services, even to rural areas at lower costs.        
Market watchers believe that operators can save money by sharing towers.

But even at that, some sites will never make sense without government subsidies.
Reports show that African expansion has not come cheap for telecommunications operators.

Over the past five years, mobile operators have spent a combined $16.5 billion on capital expenditure in the key markets of South Africa, Nigeria, Kenya, Senegal and Ghana, according to Wireless Intelligence.  
At the just concluded Mobile 360 Africa in Rwanda, Akinwale Goodluck, Head of sub-Saharan Africa, GSMA, told The Guardian that operators in the region are expected to invest about $8 billion between now and 2020 in network expansion drive.

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