Market imbalance retarding broadband penetration’

Telecom InfrastructureUNTIL there are policies and regulatory interventions, targeted specifically at addressing the perceived imbalance in the telecommunications industry, Nigeria’s quest of attaining 30 per cent broadband penetration by 2018, may be a mirage.

This was the view of the Chief Executive Officer, Etisalat Nigeria, Matthew Willsher, in a paper presented at the 2015 Commonwealth Broadband Forum in Abuja, where he lamented that the current situation where most of the telecommunication sector revenues and profits go to one operator while others struggle to survive, would bring huge deficit to broadband investment in the country and as such slows down penetration.

Nigeria currently, according to the Executive Vice Chairman of the Nigerian Communications Commission (NCC) has 10 per cent penetration and hoped to have deepen it by 30 per cent in three and half years time.

Meanwhile, MainOne Cables has linked broadband penetration to job creation and improving GDP, stressing that right policies will bring out the potential.

Willsher, at the forum, which had its theme as ‘Broadband for All: From Access to Inclusion’, stated that, the presence of several struggling operators, many of whom are barely active, in an industry the size of Nigeria, is indicative of serious underlying issues with value distribution across the industry. ‘This’, he noted, ‘is highlighted by the concentration of 70 per cent industry EBITDA and probably all of the industry’s net profit in one operator to the detriment of the rest of the industry.’

Nigeria, he observed, has underperformed in the area of broadband development in comparison to its peers. “Nigeria’s mobile broadband penetration stands at 10.1 per cent while the average for peer countries in Africa is 30 per cent. Peer countries have an average Smartphone penetration of 26 per cent while Nigeria’s Smartphone penetration averages 12 per cent,’ he said.

He called for tailor-made regulations to enable unprofitable operators compete more favourably in order to attract a greater share of the currently lopsided value in the industry. According to him “it is perfectly normal to have asymmetric regulation in a market where one operator holds the sort of market share and significant market power – and pertinent to ask is whether Nigeria can learn from the success of other markets in restricting dominant players in the interests of the industry and the country at large.”

He opined that if struggling operators can extract a better share of industry value, they are more likely to increase their broadband investment, which will drive its development in Nigeria.

Willsher also identified inadequate spectrum to support broadband deployment as a key challenge in the provision of broadband services in Nigeria.

“Mobile broadband is clearly Nigeria’s best route towards achieving its broadband coverage objectives given the high cost associated with fixed broadband. The most valuable coverage spectrum is underutilized with the sub-optimal use of the 800MHz spectrum and the delays being experienced in the freeing up of the 700MHz spectrum. Clearly, Nigeria will be unable to meet the June 17th, 2015 deadline set by the ITU to migrate from analogue to digital broadcasting”, Willsher said.

He further identified the recent devaluation of the naira and difficulties with sourcing foreign exchange to fund equipment purchases as another key challenge affecting not just broadband development but the telecommunications industry as a whole.

According to him, ‘the recent closure, by the Central Bank of Nigeria (CBN), of the Wholesale and Retail Dutch Auction windows, where telecommunications operators would previously have sourced foreign exchange to fund equipment purchases at lower rates has forced operators to source foreign exchange at significantly higher rates through the interbank foreign exchange market which is mostly unable to meet demand. Moreover with very high cost of borrowing in Nigeria, funding capital investment from long term instruments adds as much as 30 per cent to the purchase price.’

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