Olabisi Olaleye

President of the Association of Telecoms Companies of Nigeria (ATCON), Mr. Olusola Teniola, has disclosed that telecoms investment has reduced drastically in the country. He stated this recently,  supporting his claims with reasons, ranging from foreign exchange scarcity to unfriendly policies.

In this interview, Teniola speaks on key developments that are changing the configuration of the industry and threatening the revenue of operators.

How would you assess the telecoms industry in terms of major issues that have dominated the space in 2017?

We have gone through some changes in the last three quarters of 2017 but let me take you a bit back. I remember that in the first quarter of 2017, ATCON emhasised certain themes. One was the data floor plan, second was OTT players and issues around how they are evolving in the Nigerian market, which need to be addressed, thirdly was quality of service and some of the factors that are impinging on that and more importantly was the forex issue. On the forex issue, we have been advocating to have our members’ equipment removed from the 41 (prohibited) items, we have seen that government has not responded to remove the items from the list. So, it has meant that investments have reduced.

Capital expenditure that was planned to continue the growth of this industry has stalled or been put on hold; in the case of one or two of our members capex has been reduced by 25 per cent year-on-year. Until the forex mechanism is corrected to remove the multiple forex windows, it is very hard for investors in the telecoms sector to bring in much-needed equipment to fund network expansion, which correlates unto the quality of service.

We are talking about a capacity issues; capacity cannot be increased unless we increase the equipment installed and provisioned, and usually it is in form of hardware and software. If there is a mechanism by which we can actually access funds, in dollars, to purchase equipment, then we won’t have a delay in the expansion of capacity.

The second thing is that we have always stated that we need a lot more base stations deployed. I think the latest data suggests that we may need 80,000 base stations with regard to the speed that we require for 4G or 5G networks. Currently, we have about 22,000 towers covering around 30,000 base stations maximum. No more. There is a shortfall of 50,000 base stations and on top of that, we need fibre behind these base stations to be able to carry the magnitude of capacity that we have. Remember that our telecoms service is now the primary network, the mobile telephony network is the primary network that carries all data, mobile payments, transactions whether security, financials, health, voice, SMS, your traditional communications as well as the fact that it has a huge growth in the youth population that is now using social media where over the top (OTT) players are now holding sway.

So, you find that the stress on networks is quite significant and, really, if we do not have a revisit of the forex issue, we can’t  actually grow the industry. We said this in the past, we are saying it again to the government’s ears.

The number of telecoms subscribers crashed from 155 million in January to 139 million as at July 2017; are telecoms operators not concerned about this trend?

First of all, let me state clearly that those specifics I have earlier discussed are some of challenges that have bedevilled the telecoms industry in the last three quarters, which make it not surprising that subscriber numbers are falling, just as you have observed, active subscriptions significantly dropped  by about 16 million in the first seven months of the year. Could it be that some subscribers did not see the quality of service that NCC has promised them that they would get through its Year of Telecoms Consumer initiative? And also, there is now a problem of the use of WhatsApp, Skype and others. These kinds of OTT platforms or tools use data and data is actually provided by the telcos. You have a situation where the telcos are no longer investing and you have an increase in the usage of these tools to communicate. The telcos are not seeing the revenue and also the consumers are frustrated because the data consumed does not readily equate or correspond to the heavy usage of WhatsApp or Skype, because, obviously, there is an issue whereby the quality on these applications are also being challenged. You have a situation where, really, if there is no investment, it is very difficult to know when and how the total industry, not only the telecoms industry but the government and the other sectors, can make money.

Now, let us look at the challenges operators are facing in the area of multiple taxation. How does this affect the industry at large?

Federal and other levels of government in Nigeria now focus on taxes. We still need a situation where taxes are harmonised. We currently have 26 taxes, fees and levies applied to the telecoms industry, which is unprecedented and does not allow for the industry to be as attractive as it was before. This is because, if you are seeing less revenue coming into the industry, though there are statistics that say we contributed N1.5 trillion to the GDP in the last quarter, we have to remember that this is on a GDP size that has reduced, a GDP that has reduced because oil prices have gone down, oil numbers per barrel are less and also the fact that there is a lot of fluctuation in the forex market. So, the N1.5 trillion contributions in the second quarter is a misnomer because the naira has weakened against the dollar. And also the size of the GDP has reduced and so N1.5 trillion contribution in the last quarter was significant but it was not where the telco industry should be. We should be producing double that per quarter in the range of N3 trillion and that is what we are looking for, to have a growth from N1.5 trillion to N3 trillion, and we need an enabling environment to ensure that the N3 trillion contribution, which is ideal for the industry, persists. We need also for NCC, though they are actually working on a data floor price and we expect the study being conducted on this to come out soon. We are pleading with them and praying that the outcome of this study is released in a timely manner and subject it to a stakeholder engagement, that NCC is known for, with industry players, civil society organisations and the media, so that we are all educated as to why an appropriate intervention is required.

At an inflationary rate of 16 per cent, with prices going down on voice to about $2.75 per subscriber per month and with data too replacing the loss of revenue prior to data being used as the only vehicle to make money, there certainly is a need for a revision in the way and manner pricing of data is given to the consumers. Otherwise, there would be a serious ripple effect not only on the broadband service providers or the Internet service providers (ISPs) but also on major mobile network operators (MNOs) like we have with one (9Mobile) that is currently going through transition. So, we are looking for not only expedient fixes but also immediate and lasting solutions to ensure that the foundation of the data-centric phase in the evolution of the telecommunications industry is sustainable and that it does not collapse.

What are the thorny issues around the concerns being raised by a section of the industry, including the regulator, that ISPs, as against MNOs, are facing a bleak future?

Well, the issues here are multi-faceted.  With hindsight, the way and manner licences were given out by the regulator in the early part of 2010, which meant that any operator could acquire a licence covering a bouquet of services, has meant that those that were given specific licences to run as ISPs in the early phase of the liberalisation of this industry were impacted by these universal access service licences (UASL). That is the first basis of the problem. That single policy meant that those that originally focused on their digital mobile licences, the MNOs, are now also able to operate as ISPs, if they were given a universal service licence that contained the ISP service as part of the bouquet. There were other areas that they could go into, which were metro and all other services, including value-added services (VAS). So, the UASL opened up the market to allow those operators that wanted to diversify from their core licensing obligation into other areas. That was done deliberately, aimed to create the impetus of competition in those areas that were deemed not so vibrant like the ISP segment and also to allow the larger operators to now bring in additional investments to support the convergence of the telecoms industry. The convergence is fixed, mobile communications (FMC), where the major part, which wasn’t really known about at that time that universal access service licenses were given ubiquitously, it was purely an attempt to address the issues of access, availability and accessibility, and a connection problem for the consumer to the Internet. FMC has now become a full major technology and telecommunications issue. This is because now with the OTT players that now own content, they can access infrastructure that they have not paid for. So, if you have somebody with an ISP licence only which is the case of the majority of ISPs, you have to pay for the equipment then at some stage, you have to now acquire spectrum, which in the past they were able to use unlicensed spectra, which was typically ISM Bands 2.4, or 5.8 and are no longer are able to do so and also, have to now invest in obtaining and purchasing capacity from backbone fibre networks. When they also now have to compete against with those that actually own the backbone network, have wireless cellular network that have invested in mobile base stations and are now plugging in the Internet using their Gateway GPRS Support Node (GGSN), which are Internet gateways to the Internet, what you have is a collision of not only the traditional ISP that is now having to address competition from the new players like the OTT players like the MNOs, that were given the universal access service licence. So, it is only natural that this intense war would be fought on price. The second thing that ISPs are facing is that everything is about scale and I noted earlier that everything is about price. So, if you were only serving 50,000 or less subscribers and you were able to get equivalent of N100,000 per subscriber per month. But now with intense competition, from those 50,000 subscribers, you can only get between N10,000 and N50,000 per subscriber. You can see that your business model has been changed overnight. It is sustainable at N10,000 to N20,000 for an operator to have one million subscribers and above than for you at 100,000 subscribers to get to one million subscribers. And that is the tension that ISPs are facing. They have not got enough time to turn around their business model, in order to adapt and to transform it towards other areas that major mobile network operators are now (or not) addressing to provide Internet services to their consumer base. If they (the MNOs) don’t do that, those consumers will now churn because they would be looking for products that not only give them voice services but also Internet services. So, a lot of our members that are ISPs have had to become niche players, either addressing the enterprise segment in a manner that the MNOs cannot address or having to fight with MNOs on purely a price basis. So, with the price war, which is very intense, we feel it is not a fair-playing field because there have been some instances where some of our members have complained that the bulk of their wholesale capacity on optic fibre is now being gotten from players that are now competing with them in the same space at a lower price. You could deem that as anti-competitive because, I know from a consumer choice perspective, if you are now giving the consumers a price level that is more sustainable, then, it not only good for the consumers, it is also good for the operators. It is not sustainable, however, if in the long run the price to consumers is almost nil (zero) because, essentially, an operator that is providing a service that is below the cost will go out of business. Also, if all of them have chased the price that is below cost, then, there is no industry. I think most of the issues that we need to address as an industry now are how do we re-calibrate so that we have a situation in which not only the larger operators are profitable but also the survival and existence of the smaller operators are also guaranteed in the face of the largest operators?

What is ATCON’s position regarding the plan by the NCC to begin a regime of compulsory compliance to the Code of Corporate Governance for telcos?

Corporate governance is something that is long overdue in any important industrial sector like telecoms. It exists in the financial sector. NCC had a voluntary paper that was presented to all stakeholders about two years ago. That paper has now become mandatory and our position, as ATCON, is that the growth of this industry was built even during the period the code was voluntary. I believe investments of $68 billion to date, right from inception is no easy feat; these investments were made when there was no mandatory corporate governance, and also you have to note that the tenure of those, great CEOs that have run their respective companies for more than 15 years during this period of investment and growth of the industry, that are still as vibrant and passionate about their companies, as they were 15 years ago and they are still vibrant now.