Telecommunications and the essence of competition

“Competition is not only the basis of protection to the consumer, but is the incentive to progress.”
–President Herbert Hoover

Competition is a state of centrifugal market forces that produces gains for the overall economy, thereby encouraging consumer sovereignty and stability of the market. Nigerian telecommunications sector has been one of fastest growing in sub-Saharan Africa. Successes recorded so far in the Nigerian telecom sector can be assertively attributed to the regulatory prowess of the telecom industry watchdog—Nigerian Communications Commission (NCC), which has been able to stamp out monopoly through healthy competition and protection of interests of both service providers cum investors and subscribers simultaneously.

At the advent of GSM revolution in Nigeria, many (then) prospective foreign investors, consultant firms, bankers and their Nigerian partners underestimated opportunities cum potentials in the sector. The Chairman of Etisalat Nigeria, Keem Belo-Osagie enumerated it all in his recent inspiring speech at University of Cambridge, United Kingdom. He said one of his biggest mistakes in business was when he was part of a losing bid for the first mobile network licences in Nigeria. At the time some of the world’s most reputable consultancy firms advised that the Nigerian mobile phone market could not exceed 20 million subscribers. Based on this figure, Belo-Osagie’s partners decided not to bid more than US$265 million. Today, Nigeria has more than 100 million mobile phone subscribers, and in hindsight, Belo-Osagie said that the actual value of the licence was probably closer to $800 million.

Juxtapose Belo-Osagie’s confessional statement with an introspective one made by one of the retired CEOs of Vodafone, who said that his worst business decision as CEO of Vodafone was not investing in Nigeria’s telecom market. He wrongly assumed that Nigerians were too poor to afford mobile phones. The million-dollar questions are: what changed the story? What magic wand turned Nigeria’s telecom market from a less attractive to a lucrative industry? It is called competition!

NCC’s regulatory regime ensured that the first set of licenced service providers did not become complacent or monopolistic both in expanding their telecom infrastructure, Quality of Service (QoS), which ensured protection of consumers’ interests. Competitive forces in the sector being propelled by sound polices of the regulatory commission, forced down price of telephone lines across the market from hitherto N30, 000 per SIM card in the year 2000 to N50 in 2015. The drastic fall of price of GSM lines made mobile phone services—which were exclusively reserved for the rich, affordable to the downtrodden in the society.

Affordability of GSM lines vis-à-vis massive deployment of telecommunication network infrastructure across the length and breadth of Nigeria, together with eagle-eyed regulatory checks and balances saw the astronomical rise of the Nigerian telecom sector from 400,000 active lines in 2001 to over 100 million functional lines in 2016. These landmark achievements in the telecom industry, contributed a lot in the growth of the nation’s economy. It made Nigeria investment haven for foreign telecommunication operators. This would not have been possible if normalcy was allowed to degenerate into complacency in the market—thereby destroying the spirit of competition.

I can vividly recall that one company held Nigerian subscribers by the jugular via its per-minute billing system, until Globacom came to our rescue. To the chagrin of that company, Globacom introduced the per-second billing template. This singular act of competition from Globacom altered the business game in the market. The other companies were then persuaded by exigencies of market forces to adopt per-second billing system just to remain in the business. Nigerians became winners; our telecom industry prospered and created wealth for millions of the citizens. Those foreign investors and their partners in Nigeria like Hakeem Belo-Osagie, who hitherto underrated potential of Nigerian telecom sector at advent of the GSM revolution, were compelled to invest massively in the industry, thereby creating job and wealth for millions of our youths.

In furtherance of its quest to keep providing options for subscribers and sustains competition in the industry, the Nigerian Communications Commission (NCC), conceptualized and launched Mobile Number Portability (MNP). It was aimed at enabling a subscriber to change his Mobile Network without losing his identity—phone number. Since its debut, it has recorded myriads of gains in the sector. It has also encouraged many subscribers—who were not satisfied with poor quality of service being provided by their previous network providers, to migrate to other platforms with better alternatives of services. Similarly, it has motivated new entrants to offer better services to the subscribers, which made them magnets of attraction to unsatisfied telecom consumers. The MNP scheme has reduced anti-competitive practices by the Mobile Network Operators (MNOs) and created a level playing field, that can be defined as true essence of competition.

The recent hullaballoo created by the botched data tariff hike, otherwise known as price floor and price cap, is one of the regulatory policies of the NCC used in maintaining effective competition and protection of smaller operators in the sector, with the sole mandate of stabilising the industry via effective competition. Those who vehemently rejected the policy failed to understand the nitty-gritty of market forces dynamics in the telecoms sector. Some critics even erroneously went to the extreme point of labelling the initiative and its promoters as anti-people, while reverse is the case.

The new Price Floor and Price Cap were not introduced to impoverish Nigerians through exorbitant data tariffs as the general public were made to believe, but was initiated to prevent Predatory Pricing. As much as Nigerians yearn for lower cost of telecom services, protecting the market against monopolist Mobile Network Operators (MNOs) should also be at the back of our minds. And the only avenue for achieving such a feat is to ensure healthy competition in the industry.

Chidiebere wrote from Abuja.

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1 Comment
  • Darlington

    Nice piece. Well said. No sector can thrive without healthy competition.