With just a few weeks to go until
Nigeria Com 2018
, Connecting Africa is speaking to some of the key figures shaping Nigeria's telecoms and technology sectors.
We spoke exclusively with Godfrey Efeurhobo, managing director of Smile Communications Nigeria, about navigating the Nigerian operator market and addressing current connectivity challenges.
Connecting Africa: The operator market in Nigeria and across Africa is becoming increasingly saturated. How can operators diversify to provide new services and new revenue streams?
Godfrey Efeurhobo: The telecommunications operator market across most regions is highly competitive. The level of competition differs from market to market particularly with reference to the number of players in the market. Africa and particularly the Nigerian operator market can be categorized into two tiers of operators. The Tier 1 operators comprise the big MNOs such as MTN, Glo, Airtel and 9mobile, while the Tier 2 operators are Smile, ntel, Spectranet, Swift and other smaller ISPs.
The level of competition in the Nigerian operator market has heightened in the last three years considering the number of operators and the mobile penetration level. GSMA Intelligence 2018 puts Nigeria SIM penetration at 76% as of Q4 2017.
Voice revenue is still the major contributor for the Tier 1 operators, contributing over 70% of total revenues, although the voice revenue bucket is being threatened by the increasing activities of OTT players. Most operators in Nigeria are exploring different strategies to ring-fence their voice revenues notwithstanding the OTT threat and grow their data revenue contribution to make up for the pressure on voice. Operators are shifting from basic voice and data offers (2G/3G) to mobile broadband services.
Broadband penetration is currently at 21% as reported by the NCC. Operators are investing in the expansion of broadband services in key cities to grow their revenues and market share. The shift from mobile 2G/3G voice/data to mobile 4G broadband services puts the operators in a better position to tap into the revenue potentials in mobile broadband services. New services driven by the shift to mobile broadband services includes content play, mobile combo services, data packs, Social Networking Packs (SNPs), partnerships with VoD players for VOD packs, VAS content etc.
Other possible areas of new revenue are spectrum trading and active infrastructure sharing. The NCC recently published the framework and guidelines on spectrum leasing and trading. These are potential new revenue streams for operators willing to explore these opportunities. The finalized guidelines on active infrastructure sharing, are also being expected from the NCC. The recent agreement between the CBN/NCC that allows operators to own mobile money licenses through a SPV, also presents another opportunity for a new revenue streams as the operators play an active role in financial inclusion in Nigeria.
CA: How do you think operators should turn the threat from OTT players into an opportunity?
GE: The increasing activity of OTT players has been a major threat to operators' revenue, particularly the voice revenue that contributes over 70% of total revenues. Operators continue to clamour for some level of regulations on the activities of the OTT players considering the free services they offer, riding on the operator infrastructure. The Association of Licensed Telecoms Companies of Nigeria (ALTON) recently put its weight behind the clamour of the operators. Independent analyst reports have also alluded to the impact of the growing adoption of OTT services by customers in place of the paid voice and SMS services by operators.
Notwithstanding the visible threat on operator voice revenues by OTT activities, OTT services have also contributed to the exponential growth in data consumption and traffic by customers. Operators have witnessed a significant increase in data consumption albeit not commensurate with the growth in data revenues. The increased appetite for data consumption, fuelled by the activities of OTT players, also presents an opportunity for operators to explore strategies for data monetization.
In different markets, operators have developed different strategies to turn the heat from OTT into an opportunity. Some of these strategies include collaborating with OTT players to enhance product offerings and differentiate in the market in the form of the introduction of music streaming data packs and video-on-demand (VoD) packs.
Operators can employ the customer appeal of OTT features, for effective customer acquisition and retention to remain competitive. Operators in 21 African countries have partnered with Facebook to offer zero-rated Free Basics on their platforms.
Operators have also introduced Social Network Parks (SNPs). These are data packs to improve data monetization.
CA:What do you consider to be the most pervasive challenge to connectivity across Nigeria and where do you think the solutions to this challenge could lie?
GE: The most pervasive challenge to connectivity across Nigeria lies in the deficit of telecommunications infrastructure required for the transmission of broadband services. The lack of telecommunications infrastructure means that operators are individually responsible for their infrastructure rollout which comes at a significant cost, in addition to other ancillary factors such as multiple taxation, vandalism, insecurity, disruptions, unrest in communities associated with such a rollout.
The lack of telecommunications infrastructure also means that operators are subject to differing taxes, levies and fees imposed by federal, state and local government agencies, in the course of rollout, thereby impacting the attainment of the broadband objectives enshrined in the National Broadband Plan.
A number of actions have been taken and others are still being worked on to address these challenges.
On infrastructure deficit, the NCC had licensed two additional Infracos making the number of Infracos licensed to begin rollout of nationwide broadband infrastructure to four across the country.
On multiple taxation and Right of Way Charges, the government had proposed a harmonized ROW rate. However, the adoption and implementation across different states is still a challenge.
On security and vandalization of telecoms infrastructure, the bill to establish telecoms infrastructure as critical national asset is currently with the National Assembly. If this bill becomes law, telecoms infrastructure will enjoy increased protection from vandalization.
CA:What is your key message at Nigeria Com this year?
GE: Technological developments and recent trends in the telecommunications industry indicate that the implementation of an effective spectrum policy, is critical to the attainment of pervasive broadband services, diversification and innovation, in the face of the OTT threat.
The NCC is to be commended in this regard with the recent introduction of spectrum trading and the planned introduction of National Roaming and Active Infrastructure Sharing which provide the regulatory frameworks that will facilitate the efficient utilization of spectrum, particularly by operators who have the capacity to do so. More work is however required towards ensuring that there is a clear spectrum policy which ensures availability and accessibility of spectrum to parties who require it the most.
The implementation of a harmonized tax structure for the payment of relevant taxes, fees and levies to government and MDAs is also instrumental to the growth and sustainability of the telecommunications industry. An effective tax regime introduces certainty in terms of tax obligations to government, less disruption to telecoms services, while ensuring that the industry remains attractive to investment.
Lastly, the operator environment is showing positive signs with respect to economic indicators. We are seeing positive growth in GDP, reduction in inflation rate, improvement in Forex liquidity and pragmatic actions from the regulator to facilitate collaboration and new revenue streams. As a result, operators should focus more on improvement of quality of service and compete on value proposition and differentiation rather than eroding value through price wars and cross subsidization with predatory data offers to protect voice revenues, which results in value erosion and unfavorable market conditions.
Join Godfrey Efeurhobo at Nigeria Com 2018, where he will be joining our panel discussion on "Diversifying the operator model in an increasingly saturated market." Learn more about the event.
— The staff, Connecting Africa