Telecoms operators compete to offer 4G to Nigerian market

 

Given the drive towards high-speed mobile broadband, access to spectrum has become one of the leading issues in the Nigerian telecoms market. This problem is not only likely to determine the government’s ability to meet its goals for broadband accessibility, but also define the parameters of the market and its competitiveness moving forward. In 2016 there was a concerted drive to roll out 4G LTE services. Three of the four mobile GSM operators launched services and began building a customer base for the new technology.

However, ensuring competitive fair play for smaller firms and late market entrants is of key concern as next-generation technology is embraced by the market. “The inhibitor in this strategic move is the availability of spectrum,” Olusola Teniola, president of the Association of Telecommunications Companies of Nigeria (ATCON), told OBG. “Going forward, I see a situation where the more dominant operators are able to acquire spectrum because they have economies of scale.”

4G Spectrum

Ensuring the ability of smaller players to compete in high-speed mobile data has been a focal point for the Nigerian Communications Commission (NCC). Nigeria’s 4G LTE coverage really took off in 2014, after the NCC licensed South African firm Smile Communications to provide mobile broadband services via 800-MHz 4G networks in select urban areas. This was followed in April 2016 when ntel – a domestic private operator that acquired the assets of the defunct stateowned Nigerian Telecommunications – began providing 4G in Lagos and Abuja using the 900/1800-MHz band. Local providers Spectranet and Swift were the first to launch 4G LTE service in 2013; however, their services have remained limited to certain cities.

MTN Nigeria, a subsidiary of the South African provider, became the first large GSM operator in the segment following the acquisition of a 10-year licence for the 2.6-GHz spectrum in June 2016. Although the higher-frequency spectrum has a shorter range and propagation ability, it has greater throughput. The operator also gained access to the lower-frequency 800-MHz spectrum by acquiring Visafone, a CDMA radio system operator. In the first half of 2016 MTN began migrating Visafone customers to its network so it could vacate the 800-MHz frequency for LTE services. This gives MTN much flexibility in the deployment of LTE services in both urban and rural areas.

An Equal Field

Despite the advantages of the 2. 6-GHz frequency, MTN was the only bidder for the spectrum allocation. The two other GSM operators that have entered the 4G market, Globacom and 9Mobile, instead repurposed exiting spectrum allocations for their new services. This has led to questions about the structure and pricing of the auction. “There was only one respondent on the 2.6-GHz auction because the price of $16m per slot was seen as quite expensive for that spectrum,” Teniola told OBG. “When operators looked at the cost-benefit analysis of acquiring the spectrum, they saw that it was not set at the right price point.”

The auction has raised concerns about the competitive landscape in the country as well. Smaller operators, such as Spectranet – which offers 4G LTE services in Lagos, Abuja, Ibadan and Port Harcourt, and has space on the 2.3-GHz band – have questioned the process of spectrum allocation. The company’s CEO, David Venn, told local media in October 2016 that although the auction appeared transparent, the format favoured larger operators with strong reserves of capital. Instead, Venn has called for a revenue-sharing model under which larger operators share radio resources with smaller players to help them achieve their full revenue potential.

Similarly, Lanre Ajayi, former president of ATCON, has called for a spectrum market under which the regulator would allow an operator or licensee to resell some of its spectrum allocation. These issues and proposed solutions are central to the sector’s functioning as it migrates to new technologies and services. As such, spectrum allocation will continue to play a key role in the competitiveness and progression of the industry.

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The Report: Nigeria 2017

ICT chapter from The Report: Nigeria 2017