Airtel Nigeria set sights on data market as competition thickens

. . . Expect to be cash-flow positive in 18 months
Ben Uzor Jr

Airtel Nigeria is building a 3G network expected to cover 80 percent of Nigeria’s population by 2012 and required to offer reliable and affordable internet services to its customers, Rajan Swaroop, chief executive officer, Airtel Nigeria, disclosed in an interview. This is even as the data market has emerged as the new ‘competition war front’ for telecommunications firms in the country. An analyst told Business Day that the project was strategic for increasing market share as the bulk of telecom revenue in Nigeria was expected to come from mobile broadband and data services in the next five years.

Swaroop noted that Airtel was spurred on by the prospect of boosting revenue from internet data services as voice tariffs continue to fall. “We are building a 3G (Third Generation) infrastructure and by the time we’re finished, we will have covered 70 to 80 percent of the population and that’s maybe one year away. We currently have 100,000 to 150,000 subscribers but we strongly believe that the overall potential for this is something like 2 million subscribers out of an overall total of 16 million.

Commenting on the company’s financials, the Airtel boss revealed that over the last 12 years, the performance of the business has been declining but by virtue of the investments made in infrastructure deployment, he believes Airtel Nigeria would be self-funding and cash-flow positive in the next 18 months. “We also intend to encourage the Nigerian Communications Commission (NCC) to introduce Mobile Number Portability. Then the best provider will be successful.”

Giving vivid insight into the company’s position with regard to international fibre and acquisition of bandwidth capacity, Swaroop disclosed that the telecom firm had bought significant capacity from both MainOne and Glo-1 cables. “The price per MEG is down to US$300-350 per MEG per month at volume and this price is a substantial drop and what was available previously. We will probably double our capacity in the next 6-12 months and prices will come down again.

“They are currently pretty high compared to rates across the world. In India, it is sub US$10 per MEG. Bharti Airtel, who took over mobile operations in 15 African countries in a deal that makes it the world’s fifth-biggest mobile firm with 180 million customers in 18 countries, is known for its low-cost strategy but the firm has revealed that it will not adopt the same strategy which has made it India’s market leader. In India, Airtel’s call rate charges are as low as 1US cents as against the 20US cents charged in Nigeria currently. “We have not dropped prices significantly in Nigeria.

It’s no good having a too good N12 product that is actually a N14 product. But with our new tariffs, we’ve created excitement and pull. “There’s not been huge numbers but there has been some change. We wanted to see what kind of reaction there would be to this kind of offer and galvanise our sales distribution process. The question was: can we galvanise our own teams.

If the answer was positive, then I think we can stand and fight. We didn’t want to do disruptive price packages because we don’t believe the lead to customer stickiness or loyalty. I’m going to see how I can take some customers from others but we don’t want to destroy the value in the business”, he posited. In the area of customer care service which some telecoms operator often say differentiates them, he explained that the firm needs to provide higher levels of customer service as it was discovered that 90 percent of its customer care calls failed to get through to the call centre.

“We’ve added 1,400 people and bought this number down by 30 percent. By April this year, we should have cleared the backlog out and got that figure down to 5 percent or less. We’re also enabled customers to use self-help services. And for example on what’s the balance at the end of a call? We’re pumping up capacity on that. We’re setting a level of quality of service we should be able to sustain”, the CEO maintained.

Check out my blog: www.benedictspace.blogpot.com

Globacom to apply for new license from NCC

. . . Seek to dominate Nigeria’s internet access market
Ben Uzor Jr

There are burly indications that Globacom, Second National Carrier, will obtain a new spectrum license from the Nigerian Communications Commission (NCC) by third quarter of 2011, informed sources close to the network told Business Day at the weekend. This new frequency spectrum, our sources further maintained will enable the telecom firm offer more efficient and reasonably priced broadband internet services to its teeming subscribers on its Long Term Evolution (LTE) platform. Officials of the telecom operator however declined to comment on the development when contacted.

Only recently, Globacom announced that it had launched the LTE network in Nigeria but industry watchers had doubted the telecom firms claim because suitable spectrum was yet to be issued and also because compatible devices were yet to become available in the country. A prominent industry analyst, who spoke with Business Day at the weekend, said Nigeria had failed to effectively manage its national frequency resources, stressing that it might pose a serious challenge to Globacom’s aspirations.

Our sources disclosed that Globacom was testing LTE in 30-40 locations in Lagos, with preliminary results showing that internet speeds are ten times faster than available 3G services. Investigation revealed that Globacom was currently using a combination of its existing GSM and 3G spectrums to conduct LTE testing, but intends to obtain either 2.1 or 2.6 GHz licenses from the NCC. Besides, Equipment providers have emphasised the need for effective management of the spectrum resources.

According to them, the frequency bands most suitable for deploying LTE are 700MHz and 2.6GHz.The 700MHz band is recommended for wide and rural areas, whilst 2.6GHz is said to deliver better internet speed and more effective in urban areas. But ironically, such spectrum bands are hardly in use by telecoms companies in Nigeria. According to the analyst, there is an urgent need to free up these frequency spectrum because LTE deployment will further deepen competition in the data segment of Nigeria’s highly competitive telecoms market, thus, giving Nigerians more value for their money.

This, the further analyst explained was because LTE promises to open up new revenue generating streams for telcos by enabling new capabilities well beyond traditional voice and data services. According to the analyst, the price of data and other broadband internet services, including BlackBerry (BB) subscriptions, will come down remarkably as the recent take-off of two submarine cable initiatives (Glo-One and Main One ) have continued to drive data and Internet subscription charges down.

Until recently, monthly BlackBerry charges were about N5, 000 across networks, today however, it is as low as N2, 500 and promises to go lower still. With regard to the timeline for implementation, our source confirmed that Globacom will commence roll-out of LTE services in the beginning of 2012, pointing out that modems will however be available in Q3 of 2011. 3G customers will ultimately become LTE customers, one industry analyst told BusinessDay, but warned that unless handsets are available at a cheaper rate uptake will be limited.

LTE is a revolutionary Fourth Generation Mobile Technology which enhances data transfer rates, providing unmatched mobile broadband experience. This new wireless technology will provide telecoms consumers in the country with widespread all-IP based services such as superfast broadband access, video blogging, high quality multimedia streaming, enhanced gaming services etc. Business Day checks reveal that 24 networks worldwide have successfully adopted and launched LTE networks.

check out my blog: www.benedictspace.blogspot.com

Poor policy formulation, high equipment cost hinders PC Penetration

• Country has 3.3 million functional computers
• Telcos, OEMs seek to perk up penetration rate

Ben Uzor Jr

The computer hardware market has remained underdeveloped due to poor policy formulation and implementation on the part of government as well as the attendant high cost of equipment acquisition in Nigeria, analysts told Business Day at the weekend. According to the analysts, inspite of the growing number of Original Equipment Manufacturers (OEMs) and resellers, along with the significant growth recorded in the telecommunications industry after the sector was successfully deregulated in 2001; there are only 3.5 million functional Personal Computer (PC) systems in the country.

In the estimations of the analysts, there are a total of 10.5 million PCs in offices, hospitals, homes and schools across the country. Business Day further gathered that only 34 percent of the total is in functioning condition, which leads to the conclusion that PCs are still uncommon in a country of 140 million people. Besides, it is imperative to stress that dependable statistics of PCs in Nigeria are difficult to get hold of because a good number organisation do not have proper documented inventories and also because of the apparent unwillingness of many to release information they consider vital.

Moreover, reliable statistics from the International Telecommunications Union (ITU) reveal that PC penetration remains very low at 7 per 1, 000 Nigerians. Analysts are optimistic that the PC market has the prospects of growing exponentially in no distant time. According to them, it will be sustained by increasing awareness levels in the population, especially the youth, spurred by education, the internet and deliberate initiatives from stakeholders. Johnson Obioma, a telecom analyst told Business Day, that the fundamental barrier to increased PC penetration was the high cost of buying equipment.

According to him, most indigenous OEMs offer affordable computing equipments, but are hindered by the prevailing high cost of doing business in Nigeria which to a large extent impacts on the quality of their equipments when compared to other foreign brands. He called on government to as a matter of exigency introduce zero tax policies for local computers manufacturers as well as an exemption on duties on the import of computers parts and accessories. With regards to price reduction, some telcos and PC manufacturers have entered into strategic alliances to offer affordable laptops to Nigerians.

Only recently, Globacom and HP introduced an innovative offering that enables Nigerians to own top-end internet-equipped netbooks. Under the special bundling offer, customers can get Glo 3G powered HP netbook for N34, 000. MTN followed suite by introducing its Internet Netbook Bundle which offers 20 percent of the purchase price of the Netbook back after 12 consecutive months of subscription to internet service from MTN. Though operators believe that the trend is very positive for the market, analysts do not think that PC penetration will suddenly shoot up on account of Telco’s resourcefulness.

Over the years, the federal government has introduced numerous PC acquisition schemes with little or no impact on PC penetration in the country. One of such initiatives was the Computer for All Nigeria Initiative (CANi), a government-private sector collaboration designed to increase computer penetration in Nigeria. The CANi scheme suffered numerous setbacks, one of which came from government agencies which still prefer to patronise foreign brands like HP, Toshiba, and Dell even when local brands like Zinox, Omatek, and Brian computers have proven just as good.

Leo Stan Ekeh, chairman, Zinox Technologies, strongly believes that governments at all levels must support indigenous computer manufacturers through policy and preferential patronage. This, he added, was if government intends to make significant headway regarding increasing the number of Nigerians who have access to PCs. “The endorsement of Zinox Computers in 2002 by the Federal Executive Council of Nigeria under President Olusegun Obasanjo…may not have created patronage but it achieved fascination for the Zinox brand. “Governments must do more than pronouncements, they must buy into the numerous marketing schemes designed to move the products to end users.

The indigenous manufacturers/assemblers must carry the governments along on these schemes. In the same vein, Tunji Balogun, chief executive officer, Brian Computers, urged to the federal government to improve their participation in the computer hardware market by making requisite funds available for indigenous OEMs. “If OEMs are empowered, it will do two things. It will reduce the cost of ownership of systems and make things easier for people to buy because we can do installmental payment over a period of time. But we cannot do that without government empowerment by talking to the banks on our behalf or empowering the banks for them to empower we local OEMs”, he added.

Check out my blog: www.benedictspace.blogspot.com

New fibre initiatives pose no threat to satellite business, operators say

Ben Uzor Jr

Satellite operators and resellers in Nigeria have declared that the new fibre initiatives (Main One and Glo-1) pose no threat to their existence due to the variation of services both technologies offer. This comes on the heels of heated debates amongst industry analysts that the revenue of satellite operators will dip following the growing number of submarine cable systems on the country’s shores. Fibre optics is quicker and has higher bandwidth but for long distances requires more infrastructures.

On the other hand, satellite is slower with lower bandwidth and noticeable delays. The long range capability is greater but parts of the infrastructure are expensive to replace and repair. Satellite operators told Business Day yesterday that because most of the national fibre backbones and fibre rings only run through large cities and towns, majority of Nigeria’s unserved and underserved population will get internet access through satellite communications and other wireless technologies.

Analysts who are familiar with the evolution of internet in Nigeria say that that the internet connectivity business has been dominated by satellite. This, the analysts maintained was because satellite and subsequently other wireless technologies for a long time were the only viable option in the past owing to non-availability of fibre across the country. With the boom in the telecoms industry, they noted, it became essential for operators to lay fibre to attain the high capacity required for a good voice network.

A senior executive in one of the new cable firms’ who pleaded anonymity told Business Day that satellite business will experience a severe downturn on the African continent owing to the proliferation of submarine cables initiatives. He further revealed that satellite operators in Africa have already invested huge amounts in new and replacement satellites at a time when there was already growing apathy to satellite/VSAT use. In his estimation, $4.395 billion will be invested in new and replacement satellites against $2.15 billion in seven international submarine cable systems.

“By the end of 2010, the internet submarine fibre capacity had increased by 1, 683 percent by the end of 2010. It is expected that by the end of 2011, the capacity would have increased by a whooping 3, 967 percent, which is a clear indication of the growth of fibre deployment”, he stated. For Johnson Obioma, a telecom analyst, the big transition from satellite to fibre would force satellite operators to dig deep and come up with new strategies to enable them retain market share.

More importantly, he noted that, if they are to survive, they would need to find new ways to reduce cost of access. As at today, MainOne, Glo-1 and SAT-3 sell bandwidth capacity to their customers within the range of $300 - $400 per megabyte. Lanre Ajayi, past president, Nigerian Internet Group (NIG) who spoke with BusinessDay in a telephone interview, pointed out that the emergence of these new fibre initiatives would only mean expanded business for satellite operators. According to him, satellite was extremely effective in reaching places where the volume of traffic would not justify a fibre connection.

“The tendency is to think that the submarine cables will eliminate satellite communication but it might actually expand the business of satellite in Nigeria. The truth is that fibre cannot get to everywhere. “Most of the national fibre backbones and fibre rings would run through large cities and towns. But for the rural populace, the way for them to get internet connectivity would be through satellite technology.

“This means that the emergence of these cables would only mean expanded business for satellite operators”, Ajayi posited. In the same vein, Oladapo Raji, general manager, DCC Networks, a subsidiary of Computer Warehouse Group (CWG), observed that Nigeria cannot boast of as much fibre as any of the countries in Europe and America, adding that despite the extensive use of fibre in these countries, they have very large installations on satellite and it’s growing quickly.

“If in these economies fibre does not compete with VSAT but both co-exist as compliments why should we expect the contrary in Nigeria? “Even though fibre is faster and has high capacity, its availability is very low especially in our environment where there are no proper cable ducts and infrastructure development is still massively ongoing. So in this light, the VSAT comes in as a compliment to the fibre.”

Check out my blog: www.benedictspace.blogspot.com

‘Nigeria needs nationwide broadband strategy’, says Main One

Ben Uzor Jr

If Nigeria intends to fully attain its economic target of been one of the top 20 economies in the world by 2020, then there is an urgent need to develop a robust broadband strategy at national level that would assist in speeding up the deployment of broadband infrastructure in order to give optimum connectivity within the country as well as transform facets of the economy that could take advantage of the internet for wealth creation, Adebayo Oyewole, head of marketing and strategy, Main One Cable, revealed.

Available data from the GSMA show that wherever there is a 10 percent growth in broadband, it translates to 2 percent growth in Gross Domestic Product (GDP) for any country. Oyewole, who spoke at a broadband forum organised by e-Business Life held in Lagos told industry stakeholders that Ghana had commenced work on its broadband strategy in 2009 which earnestly seeks to achieve 50 percent broadband penetration rate by 2015 and an 80 percent reduction in broadband cost by 2015.

According to him, affordability remains one of the fundamental reasons why so many Nigerian do not have access to broadband, further adding that Nigeria will require additional underwater cables to ensure that the vast majority of the Nigerian populace has reliable access to affordable broadband internet services. “Today, some people are basically saying well, Glo-1 cable has come in, West Africa Cable System (WACS) is coming in, some people are still on SAT-3, and MainOne cable is in town.

“Is there too much broadband capacity in Nigeria? Our response to this is no. If you look at data from the World Bank, our market penetration for every 100 inhabitant is still at about 1.9 percent for sub-Saharan Africa. When you compare 1.9 percent to 62.5 percent for every 100 inhabitants who have broadband accessibility in the United States or 60.5 percent on the average for the EU, we still have a very long way to go in terms of making broadband available and affordable for people”, he added.

In his paper presentation entitled: ‘Transforming Nigeria with Broadband Access and Connectivity’, Oyewole, pointed out that the company was the first submarine cable firm offering open access, wholesale broadband capacity in West Africa with the vision to expand the much need capacity and reduce the cost of broadband communications in Nigeria. According to him, Main One cable had transformed the wholesale bandwidth pricing structure to provide more value to customers.

Giving lucid insights into some of the trends to expect in the broadband market over the next 12 to 18 months, Oyewole said pricing will become better with the introduction of plans from Glo-1 and WACS. “Content creation from younger Nigerians will increase tremendously and it is expected that Nigeria will sustain its position with the highest number of Internet users. There would be an astronomical increase in the number of Nigerian on Facebook, Twitter, LinkedIn, etc. Nigerians will be able to download and access digital content such as music, research, training, film on You Tube at higher speeds.

“Corporates will be able to deploy more innovative solutions for their customers and see a channel shift, for example, banks will continue to see a migration to the utilization of online banking services”, the Main One executive posited. The company has developed a well-managed connectivity platform towards the realization of effective Internet telecommunications access across the continent. In addition, Main One intends to stimulate growth of key economies along the West Coast of Africa through reliable and affordable access to global information, data, resources and markets.

Check out my blog: www.benedictspace.blogspot.com