Amid the monetary policy and dwindling oil revenue, things may be tough for the telecommunications sector in 2015, reports LUCAS AJANAKU.
These are certainly not the best of times for the country. The prices of crude oil in the international market, Nigeria’s economic mainstay, have witnessed an unprecedented dip of more than 40 per cent in so short a time. There appears to be no end in sight to the woes of the economy as the oil cartel to which the country belongs, the Organisation of Petroleum Exporting Countries (OPEC), has refused to bow to pressure to cut supply to ease the pressure on demand.
Nigeria’s national currency, the naira, has been on a free fall after the Central Bank of Nigeria (CBN) had frittered away the national foreign exchange (forex) reserves in a most unsustainable attempt at defending it. At his wit’s end, the CBN Governor, Godwin Emefiele announced the devaluation of the naira by eight per cent.
The apex bank also directed that all importations involving electronics, finished products, information technology (IT), generators, telecommunication equipment, and invisible transactions would henceforth be funded from the interbank foreign exchange market only, a development telcos say will hurt efforts at expanding capacity by unwittingly increasing cost.
Its Director, Trade & Exchange Department, O.I. Gbadamosi, via a circular to all authorised dealers, said the policy was to maintain the existing stability in foreign exchange market and strengthen the various policy measures, already initiated by the CBN.
He said: “The importation of electronics, finished products, information technology, generators, telecommunication equipment, and invisible transactions importations shall henceforth be limited to the interbank market only.”
The telecoms industry thrives on importation of most of its inputs. The naira devaluation will inevitably put more pressure on the ability of the operators to expand capacity and upgrade existing infrastructure.
Executive Vice Chairman, Nigerian Communications Commission (NCC), Dr. Eugene Juwah, said to get a seamless, hitch-free service delivery in the country, between 70,000 and 80,000 base transmission stations (BTS) would be required. Currently, there are about 29,000 BTS serving both the licencees of the four global system for mobile communication (GSM) and one code division multiple access (CDMA) operator.
With this scenario, quality of service (QoS) is expected to dominate the telecoms space once again this year. This is because the operators will not be able to grow their network while the quest for subscriber acquisition will continue.
Country Manager, Ericsson Nigeria, Kamar Abass said it will be a dangerous precedent for any regulator to attempt to bar any operator from taking more customers onto its network. NCC agrees no less as it has insisted that at the core of its mandate is telecoms access provision to all.
Customers Service Executive at MTN Nigeria, Akinwale Goodluck said the directive of the CBN will only worsen the woes of the industry. For one, about 80 per cent of the cell sites across the country run on generators as major source of power while power from the national grid is stand by. Generators, IT equipment and telecoms equipment are among the list of items the CBN has prohibited from direct importation except via interbank foreign exchange market only. Goodluck argues that going through the interbank forex market will add between six and seven per cent to cost. The government’s policies are bound to impact negatively on service delivery and put the regulator once again on the spotlight as it will be helpless.
Chief Executive Officer, MainOne Cable Company Nigeria Limited, Ms. Funke Opeke said both the telcos and the consumers are unwittingly under pressure arising from the currency devaluation.
Opeke who was former Chief Technical Officer (CTO) of MTN Nigeria spoke on the sideline at a telecoms forum in Lagos, said: “Well the declining value of the naira is definitely putting pressure on margins for telecoms operators. As you know, a lot of the technology inputs into the sector are imported, so they are dollar-denominated and most operators have long term supply service contracts.”
According to her, with these supply service contracts entered into on a long term basis and the “value of your naira receivables against the dollar not at par puts a lot of pressure”.
She said consumers will also feel the pinch of the inflationary trends as they would not have so much disposable income to spend on telecoms.
“So, it is a two-sided equation. I think we are all hoping that there will be additional stimuli instituted by the government to try to advance the economy a little bit faster to stimulate spending in all the sectors aside from oil so that the economy can quickly recover,” she said.
On whether a sustained unease on the economy could ultimately dovetail to an increase in telephone end user tariff, she said it was too early for any operator to contemplate that as all the telcos would strive to avoid that.
She said: “I think its early days. Given where the industry is, everyone will like to avoid that (tariff increase) because in an environment where consumers are also under pressure, they can least afford those increases. But perhaps for us as Nigerians, it is also an opportunity to look at other areas where we can grow our economy and add value and provide services out of Nigeria on a global basis and to earn revenue andforeign exchange. There are other economies in the world that have done that successfully and we really need to be more aggressive in trying to push for new frontiers in our economy.”
One other issue that may take front burner this year is the propriety or otherwise of compelling the four major carriers-MTN, Airtel, Globacom and Etisalat, to list on the Nigeria Stock Exchange (NSE) to allow for their broader ownership by the citizens and share in their annual huge profits, most of which are repatriated to South Africa. Nigeria remains the cash-cow of MTN while the country contributes immensely to the African operations of Bharti Airtel.
All the four except Globacom are listed in Johannesburg Stock Exchange, The Stock Exchange, Mumbai (BSE), Delhi Stock Exchange (DSE) and the National Stock Exchange (NSE) all in India and Abu Dhabi Securities Exchange in the United Arab Emirates (UAE) respectively. In spite of these, there is no law barring them from cross-listing their shares in Nigeria.
Coordinating Minister for the Economy and Minister of Finance, Dr. (Mrs.) Ngozi Okonjo-Iweala, last year said government, the Securities and Exchange Commission (SEC) and the NSE had set-up a working group that is in discussion with big firms such as telecommunications, consumer goods, as well as oil and gas to list on the bourse.
She said: “We are already talking with the Minister of Communication Technology, with the DG SEC and the CEO of NSE. We actually have a working group that is talking to big companies-MTN, and other telecommunications, consumer goods, industry and others. Even the power sector, oil and gas, we are trying to persuade them to list because this is the way we can deepen our capital market.”
She said although the government was exploring the option of incentivising the telcos to encourage them to list on the local bourse, the government would resort to other measures to get the companies listed if the persuasive measures failed to take them to the floor of the NSE.
The Chief Executive Officer, NSE, Oscar Onyema said the bourse is making progress in its bid to get the carriers listed in the country.
Onyema told Bloomberg that discussions “have moved from them (the telcos) not wanting to list, to them looking at how to deal with the issues that would make it unattractive to list.”
He said the NSE is “gaining traction,” in trying to entice more firms to place initial public offerings (IPOs) to reflect the health of the economy. He spoke on the sidelines of the World Federation of Exchanges (WFE) in Seoul, Korea.
Minister of Communications Technology, Dr. (Mrs) Omobola Johnson said the telecoms sector now contributes about 9.5 per cent to the nation’s gross domestic product (GDP). According to the rebasing of Nigeria’s economy, the telecoms sector is a major contributor to the GDP.
Onyema said though none of the operators have come with proposal to list its stock, the carriers did raise “structural issues” topping them from IPOs, adding that the bourse is working with the Federal Government to address any shortcomings.
“Some don’t need to raise capital, but some do. If any one of the four carriers wanted to raise capital on the NSE, I don’t see that not being successful,” the SEC CEO said.
Stakeholders in the industry have urged the National Assembly to enact a law that would make blue chip firms such as the telcos and oil majors to cross-list on the Nigerian bourse.
CEO, Teledon Group, Dr. Emmanuel Ekuwem said if the telcos list on the local bourse, it will be in their best interest. According to him, opening up the space for individual and corporate Nigerians to be part-owners of the companies will not only engender liquidity, it will also give Nigerians a sense of belonging.
He said the spate of wilful vandalism of telecoms equipment would be a thing of the past as the would-be-vandals would start to see themselves as co-owners of the assets.
The embrace of Business Process Outsourcing (BPO) by the telcos too has raised fears about job security in the sector. At the twilight of last year, some of the telcos offloaded the yoke of tower management by selling them off. All the four carriers, except Globacom, have sold their towers in the country.
Regional tower management specialist IHS Holding, bought 2,136 towers from Etisalat, it also bought more than 9,000 from MTN.
Mobile operators are exploring ways to reduce the heavy investment needed in maintaining and improving their networks at a time when customers are expecting faster speeds over 3G and 4G services. The deal is part of a plan by Etisalat to improve the quality of its network performance and accelerate roll out of 2G and 3G coverage across the country.
Its CEO, Mathew Wilsher said the partnership with IHS is designed to promote network sharing, ensure higher quality, sustain reliable mobile services, lower overall costs and also promote a cleaner environment through reduced diesel usage and increased investments in alternative energy solutions.
IHS has installed a large number of alternative energy sites across the country in addition to the construction of a state-of-the-art Network Operations Centre (NOC) with 99 per cent on its own sites.
IHS has further committed to investing $100m in the towers acquired, on advanced generators, efficient batteries and alternative energy solutions to reduce diesel consumption and improve efficiency of grid use.
IHS will also own and manage over 6,540 towers in the country and market services on the towers promoting tower sharing and co-location to help drive network improvements, better service to subscribers and economic growth.
For Airtel, it will sell 4,800 towers and then lease them back from American Tower for 10 years, the two companies said in a joint statement.
American Tower in a filing to the Securities and Exchange Commission in the U.S. had said the total consideration for the deal is expected to be $1.05 billion.
“The agreement will allow Airtel to focus on its core business and customers, enable it to deleverage through debt reduction and will significantly reduce its on going capital expenditures on passive infrastructure in Nigeria,” Bharti said in a statement released to a stock exchange in Mumbai.
American Tower Cor is an independent telecommunications and broadcast real-estate company which owns, operates and develops about 70,000 towers for cellphone companies and television stations. This deal will mark American Tower’s first foray into Nigeria. It already has operations in Ghana, South Africa and Uganda. Bharti and American Tower expect to close the deal during the first half of this year, subject to regulatory approvals, the company’s joint statement said.
