N61.65bn market awaits Nigeria virtual mobile operators

Ben Uzor Jr

An idle capacity valued at over N61.65 billion in Nigeria’s mobile telecoms market is waiting to be tapped by virtual mobile operators, Benuxorreports has gathered. With 56 percent utilisation of total installed capacity of GSM operations, according to TNSRMS in its latest research report, mobile virtual network operators (MVNOs) have a huge prospect in the Nigerian telecoms market. The MVNOs are expected to take up the 44 percent which is not utilised, says the report. A mobile virtual network operator is a mobile operator that does not have its own spectrum and also does not have its own network infrastructure but usually has business arrangements with traditional mobile operators to buy minutes of use for sale to its own customers.

Though the average mobile phone user in Nigeria owns 2.39 SIM cards, according to a 2012 study by research firm, Informa, telephone penetration is still only 61 percent. As at November last year, Nigeria had 150.7 million connected lines. The total installed capacity on all networks was calculated at 211.7 million. This means only about 56 percent capacity is utilised.  The value of the remaining is arrived at by multiplying 60.98mn by monthly ARPU of N1.011 to give N61.65 billion. The TNS research which looked at how the telecom market would change in 2013 said that despite current quality of service problems experienced in the country, the MVNO is a possibility. When this happens, it would disrupt the competitive landscape of the Nigerian Telecom market, the research said.

Seyi Adeoye, a director at the TNSRMS, said there is huge opportunity for MVNOs in the Nigerian market. “It is a fantastic way to effectively utilise the idle capacity,” he said, adding that in other markets, there are MVNOs because of the profitable nature of the business. Wale Goodluck, corporate services executive, MTN Nigeria, told Benuzorreports in a phone interview, “I think it is a natural growth direction in the industry. But the reason why we have not seen MVNOs in a country like Nigeria is that there is not enough capacity in the system. Perhaps when there is sufficient capacity, we will be willing to sell wholesale capacity to any company who wants to sell retail telecoms services under another brand name”.

Speaking in the same vein, Guy Zubi of Pyramid Research pointed out that the main challenge prospective emerging market MVNOs will face is not necessarily low Average Revenue Per User (ARPU), but network capacity and the extension of the addressable market. He advised, “A MVNO business model established in an emerging market will rely on the same basic principles that apply to a developed market MVNO. “However, emerging Market MVNOs must be more cost-efficient than their developed market counterparts. They must also be more cost-efficient than emerging market operators, most of whom are already fairly creative in keeping costs down”, he said.

According to the research, mobile number portability (MNP) which is currently being experimented would further increase the level of competitiveness among the current operators, with direct impact on products and service pricing. The NCC commenced testing of proposed MNP initiative last December, with eyes on April 2013 for likely roll out and further engagement with the Nigerian Mobile Operators.

Competition within the Nigerian Telecom market is aggressive: Penetration of Telecom services in Nigeria is well over 70 percent, the market is still growing but at a significantly reduced tempo and prices are declining. The research therefore said the immediate priority for network operators is the need to accelerate diversification of revenue streams. This would also help reduce churn rates and increase Average Revenue Per User (ARPU).

With about 80 percent of the Nigerian Telecom market revenue within the middle and high value telecom segments, the research advised that there is a need to develop a unique engagement model for this class of Nigerians, especially enhancing personalisation of mobile products/services and context based marketing. The Nigerian middle class is expanding and fuelling growth in Africa’s most populous nation. For the middle class it is all about lifestyle and the growing sophistication of the class is coming with new services such as fertility treatments, online retail stores, auto workshops and funeral homes…to them; it’s all about lifestyle.