Vodacom re-enters telecoms market, vows to reduce internet transmission costs

Ben Uzor Jr & Loveth Anazodo-Udeh

Following the successful acquisition of the carrier services and business network solutions subsidiaries of Gateway Telecommunications SA for $700 million, Vodacom Group, yesterday declared its re-entry into Nigeria’s highly competitive telecommunications market. The firm has also promised to significantly reduce the cost of moving bandwidth capacity emanating from the underwater cables specifically for corporates by virtue of its robust national terrestrial network covering 26 states in the country. Vodacom said it had discovered that the price of moving internet capacity from Lagos to Abuja is much higher than the cost of moving capacity from Lagos to London due to poor transmission backbone.

Speaking at a press briefing held in Lagos yesterday, Guy Clark, managing director, Vodacom Business Nigeria disclosed that the telecoms company was not operating as a GSM player but has aligned its infrastructure deployment strategy with that of the Nigerian Communications Commission (NCC) and the new ministry of communications technology’s broadband strategy. The strategy, according to Vodacom, under an open access model will strengthen investment in the area of deploying in-land distribution fibre networks needed to move available bandwidth capacity around the length and breadth of the country. “In 2009, we acquired a company called Gateway Business which was called GS telecom.

“We have spent the last 18 months investing in people, infrastructure and our partners. We have deployed MPLS (Multi Protocol Label Switching) network in Nigeria today which covers 26 states. By the end of our financial year, we will be in all 36 states of the federation. We are not in Nigeria as a GSM company but we anticipated the coming of the submarine cables. The ministry of communications technology and the NCC are earnestly looking for how to take the available bandwidth on the country’s shores to the consumer. We have invested significantly in our MPLS network across Nigeria. We have aligned our infrastructure with the broadband strategy of NCC and the ministry of ICT”, he stated.

Industry analysts told Business Day yesterday that the Vodacom Group still rues its decision to pull out of Nigeria which the company blamed on ‘inappropriate level of risk in the environment’ and other issues bordering on ‘corporate governance and trust’. According to them, Vodacom may be looking to play a fundamental role in NCC’s broadband strategy. However, Clark did not indicate Vodacom’s intention to acquire any licence under a new regime aimed at improving Nigeria’s internet penetration. Commenting on the re-brand, Clark said: “The introduction of Vodacom Business to the Nigerian market is far more than just a new name, logo and colour. We have shifted the way we do things in Nigeria.

“We have made significant investment in our staff together with facilities upgrades and the deployment of our national terrestrial MPLS network. This network roll-out is further supported by our carrier grade Broadband Wireless Access Network allowing Vodacom Business to deliver services end-to-end.” In the same vein, Louisa Van Beek, chief executive officer, Vodacom Business Africa noted, “The rebrand is expected to accelerate Vodacom Business’ operations with customers in the banking and finance, insurance, education and hospitality industries –key markets earmarked for expansion. Its widespread terrestrial MPLS network that spans over 40 African countries is key to delivering upon this objective.

“As new fibre cables arrive into Nigeria, communications models and Enterprise service availability is changing at a rapid pace. We are taking the lead to provide our customers with a diversified portfolio of services that they tailor for their respective businesses. It is an exciting prospect to have the privilege of a new brand at our disposal to arm our efforts going forward and we look forward to watching the growth and development of our business into the future”, she concluded.

FG targets new stream of telecom investment seen in broadband

Ben Uzor Jr

Nigeria’s internet access problem characterised by slow and exasperating access to the cyberspace even with the growing number of underwater cable systems on the country’s coast line, would soon become a thing of the past. The federal government has opened its doors to the global investment community through the adoption of an open access model, strategically designed to strengthen investment in the area of deploying in-land fibre networks needed to move available bandwidth capacity around the length and breadth of the country. Tony Ojobo, director, public affairs, Nigerian Communications Commission (NCC), made this known during a courtesy visit to BusinessDay’s head office in Lagos.

The adoption of the model, according to him, is to basically preclude existing challenges posed by some operational drawbacks arising from functions of different government agencies, including urban and regional administrative setups which impinge on the right-of-way of facility deployments. Analysts had earlier warned that Nigeria’s prospects of enjoying reasonably priced and efficient broadband services was been derailed by the indiscriminate and sometimes absurd levies charged by various agencies and state governments on right-of-way approvals for deployment of in-country fibre transmission links. He said significant capital investment was still required to distribute bandwidth capacity across the country.

Nigeria boasts of four undersea fibre optic cables: SAT-3 managed exclusively by ailing Nigerian Telecommunications Limited (NITEL), privately owned cable Main One cable, operator –run Glo-1 cable and WACS initiated by a consortium of firm including MTN. “Yes, the submarine cables have landed but we still require huge levels of investment in infrastructure for majority of the Nigerian populace to enjoy the benefits of broadband internet services. I hope that when the infrastructure providers are licensed in an open access model, we will have more investment in that area. There is a sense of urgency in the commission to catch up with the rest of the world in the area of broadband internet”, Ojobo said.

Kenneth Omeruo, a telecoms analyst agrees with Ojobo, saying the main hurdle has been the high cost of infrastructure investment required to extend the international capacity into the hinterland. According to him, “the price war in mobile calling rates disrupted the pricing structure and revenue expectations in the telecoms market. This, he further explained has resulted “in a re-evaluation by each operator ,of their capital expenditure costs.” The outcome, according to him, is that no operator is willing to stump up the extensive outlays necessary to make data work efficiently. On the other hand, several operators own in-land fibre networks but coverage is limited and there is too much duplication.

Kazeem Oladepo, head of legal, Main One Cable Company said telcos are unwilling to share infrastructure and in cases where they do agree to share, they charge very high prices, often for strategic reasons. Ojobo said a major appeal of the strategy is that the federal government will offer subsidies to enable broadband services to the under-served and un-served areas of the country where it may not be economically viable to deploy fibre. According to the NCC director, the strategy will also ensure that investors make decent profit, adding that the federal government is highly supportive of the commission’s drive to encourage capital investment in broadband infrastructure deployment.

Why Nokia, Samsung, LG can’t manufacture handsets in Nigeria

• Unfavourable business environment
Ben Uzor Jr


Nigeria’s poor business environment, manifest by absence of proper intellectual property (IP) protection controls and dearth of public infrastructure, remains the critical drawback discouraging foreign investments in the area of establishing mobile phone factories in the country, global handset makers have said. If Nigeria does not swiftly address these impediments to enterprise growth and development, phone makers such as Samsung, LG and Nokia have warned, investments in mobile phone factories will remain an illusion, inspite of the country’s enormous mobile device market.

This is coming on the heels of a recent proclamation by the minister of Communication Technology, Omobola Johnson, at a presidential retreat with the private sector recently, that Nigeria’s competitive telecommunications landscape and its attendant potentials were enough incentive for global phone manufacturers and SIM (Subscriber Information Module) card manufacturers, to set up factories in the country. Prospective financiers and investors, according the phone makers, are more often than not, apprehensive that their investments could be negated by these barriers.

The delicate process of making phones, especially smart phones, they say, requires a high degree of technological advancement, which Nigeria currently lacks. “Assembling of phones is a delicate industry and smart phone manufacturing is even more delicate. “In my opinion, countries that lack requisite labour laws, IP protection controls, basic infrastructure such electricity, and have a high operational costs, are least considered when decisions are being made, with regard to investments in local factories”, Fady Khatib, regional director, hand held phones; Samsung West Africa, told Business Day in an interview.

Lanre Ajayi, past president, Nigerian Internet Group (NIG) agrees with Khatib that poor business environment remains a fundamental challenge hindering investment, not just in the telecoms markets but in other sectors of the economy. “In countries like China, Thailand, governments of these countries build industrial and technology parks with requisite infrastructure such as power, broadband internet etc. All an investor needs to do, is come with a good idea and technology and start business. They have a one stop shop, where issues relating to land use, registering the business are all addressed.

“If an investor sees a country with this type of business environment, do you think that investor will want to come to Nigeria? Our government must strive to create a conducive business environment that would be attractive to investors. I support the minister’s call for these phone firms to invest in factories in Nigeria, going by the enormous profits they make here. They should be able to plough back some of their profits into the country. This market is huge and if they set up plants here, chances are that they will make more revenue. The government is working tirelessly to address these challenges.

“Our government needs to find ways of making the country attractive to foreign investors, such as granting tax rebates and so on”, Ajayi said in an interview with Business Day. Osagie Ogunbor, communications manager for Nokia West Africa told Business Day yesterday that such decisions (establishment of phone factories) are taken as a matter of business expediency. “I believe that phone makers can still grow the Nigerian economy without establishing a phone factory here. We are employing many Nigerians directly and indirectly. We have a platform that encourages indigenous applications developers.”