Mergers, acquisition loom in ISPs space

There is strong indication that surviving Internet Service Providers (ISPs) are considering consolidation by way of mergers and acquisition as a fallout of the growing harsh operating environment in the country, Nigeria Communicationsweek has learnt.

Satis Kumar, chief operating officer, Direct On Data, said that traditional ISPs are presently facing unfavourable operating environment which has made the business unprofitable.He identified the key challenges that include Network Operating Centres (NOC) expansion and power issues, bandwidth cost and base transceiver stations (BTS)issues – where tower operators they rent towers from charge them as much as N400,000 per month without efficient management of the towers.

“We have had a situation where security men attached to a tower refused to power generator because he was owed salary and our service went down. Bandwidth cost is still a challenge as some wholesale bandwidth companies that bought bulk from undersea cable operators are selling for $15,000 per Mbps if you buy direct from undersea operators you get $8,000. What we are doing now is ‘hand to mouth’ system.

The business runs to pay salaries and cost of operation nothing like profit, I see consolidation in this space through mergers and acquisition into big ISPs to be able to weather the storm of this harsh operating condition. There are some 100 licensed ISPs, today less than 20 percent are operating just to say that something is wrong and needs intervention,” he said.

Ajay Awasthi, chief executive officer, Spectranet, lamented poor service delivery by tower operators which is seriously affecting their business and urged Nigerian Communications Commission (NCC) to intervene through guideline to tower operators on the level of service delivery which if not met will attract sanction or none payment by the customer.

“Presently, the costs of delivering services aren’t coming down. This situation is not sustainable. We would like to roll out services across cities in Nigeria, but the situation at the moment does not give you the support to embark on such investments. The costs of building infrastructure are growing by 10%; that is huge costs to us. Also, some ISPs are facing the heat. They have contracted tower companies that charge for fees in dollars. I think it is very difficult this time to decide whether to go ahead and expand or stay put,” he noted.

Reacting on the need for policies to encourage ISPs, Engr. Olusola Teniola, president, Association of Telecommunications Companies of Nigeria (ATCON), said that ISP business is still viable if their approach is to address the niche areas of the market that are not threatening to the Mobile Network Operators (MNOs).

“There isn’t a policy in place in the world that restricts MNOs from offering a diverse set of services, especially when they are licensed to provide such services to their consumer base. What is required by NCC is a clear stance on how ‘Net neutrality’, zero rating and retail data pricing and fair usage policy of internet access should be addressed alongside the fact that voice calls are now transported in data packets, whether they are supplementary services such as being offered by OTT apps (i.e. WhatsApp, Skype or Viber etc) or Universal Access Services utilizing Voice-Over-IP (VoIP).

“The convergence of services further complicates the ability to formulate policies to define ‘garden walls’ whereby NCC attempts to define and control what and how competitors in a market are allowed to do in offering services that their consumers demand,” he said.