Friday, 2 September 2011


Since the year 2002 when the telecommunications segment of the Nigerian economy was liberalized, a major revolution has indubitably been taking place in that sector. According to information available at the Nigerian Communications Commission (NCC) website, from paltry combined connected lines of 2,271,050 in 2002, the number of connected lines increased to 57,687,544 in December 2007, while the active lines stood at 41,975,275. Also, from 0.73 in 2002 teledensity increased to 29.98 in December 2007.

Expectedly, the liberalization has also created conducive investment climate in the sector which has boosted investors' confidence while also plummeting it to the enviable position of a major contributor to the national Gross Domestic Product (GDP). However, the real revolution that the investing public has been waiting for is the telecommunication firm that will provide them the opportunity of investing in it through the capital market

The impressive performance in terms of subscriber base is no longer limited to the GSM operators; the CDMA operators have also been playing a major role in the revolution in the telecommunication sector. Just recently, Starcomms, a CDMA operator became the first non GSM firm to record one million subscribers while it’s Chief Executive Officer, Mr. Maher Qubain also revealed that Starcomms’ target is to double the number by the end of the year. This, he hopes to achieve through quality service, hard work and more investments in equipment.

On the continent, both fixed and mobile line subscribers' base in Africa is about 100 million when combined. About 68% of the lines, as in December last year, were mobile lines. It is therefore projected that by 2009, African subscribers' base will climb to 140 million. Nigeria, followed by South Africa, is expected to lead African countries that will benefit from the telecoms infrastructure investments.

Comparatively also, West Africa is ahead of Northern and Southern regions in the investment forecast. Fresh investments would focus basically on infrastructure development in the fixed and mobile networks.  Most new investments are expected to go into transmission and access components of the networks. Also, a significant shift of investment would go towards the operating systems, base stations and network servers' element of the network, as it matures and operators begin to roll out more sophisticated services to their subscribers.

Foreign Direct Investment into the sector in Nigeria since 2002 is in excess of 12 billion US dollars. The foreign direct investments have resulted in massive expansion programmes by the telecom service providers and more jobs for the Nigerian populace. The explosion in that segment of the economy has also created huge opportunities in the country waiting to be fully tapped by Nigerians and foreign investors.

It is however pertinent to state that unlike other sectors of the Nigerian economy  where the Nigerian populace has been given the opportunity to be investors through the capital market, ownership of telecommunications firms have been exclusively preserved for a few. The Capital Market is the long-term end for financial market. It is made up of market and institutions, which facilitate the issuance and secondary trading of long-term financial instruments. Unlike the Money Market, which functions basically to provide short term funds, the Capital Market provides funds to industries and governments to meet their long-term capital requirements, such as financing for fixed investments - buildings, plants, bridges, etc

The Nigerian capital market is, possibly, in one of its most vigorous periods ever. The consolidation and recapitalisation drives of several companies particularly in the banking sector has created tremendous awareness, the consciousness so created has led to greater participation of the public in share purchase. Thus, the Nigerian Stock Exchange (NSE) is now among the country's dynamic institutions. Nigerians who are increasingly becoming more knowledgeable about the workings of the capital market are waiting for the first telecommunications firm that will go public so that they can join the exclusive club of investors who are making money “per second”.

For many Nigerians, the telecommunications sector is an investment haven that they want to be in. In South Africa, MTN Group is quoted on the Johannesburg Stock Exchange (JSE) and so the ordinary South African on the street can buy shares in the Group (MTN Group owns 82% shares in MTN Nigeria), the reverse is the case in Nigeria, because it is a private limited liability company with very few Nigerian investors. Our own Globacom is also a limited liability company with very few shareholders. Celtel is a wholly owned subsidiary of MTC.MTC Group is quoted in the Kuwait Stock Exchange. The ownership structure of CELTEL in Nigeria is not different from that of MTN.

To paraphrase Opeyemi Agbaje in one of his articles in Businessday the Nigerian telecommunications industry is now engaged in a race for market share. Of course this is the only time when 100 percent of the market will not have been taken. After this era, to gain market share, you will have to take it from other players. The industry space has been spiced up by two significant developments-the end of the exclusivity period that the initial GSM licensees of 2001 enjoyed-which led directly to the grant of a new GSM license to Mubadala (EMC) which has now selected Etisalat as its operator. The other is the advent of unified licensing and the award of unified licenses to several operators, including new ones like Dangote Group’s Alheri Engineering and existing (so-called) Private Telecommunication Operators (PTOs) such as Starcomms, and Reltel Wireless. Some operators have also begun to upgrade their networks to be able to provide third generation (3G) or 3.5G services. What, this means is that in the next few years, the operators need tremendous funds to finance their expansion programmes.

 How are  they going to source these funds. I believe that the capital market should be  strongly considered. It is time that telecoms firms should broaden their shareholding structure by going public. The ordinary Nigerian on the street should be given the opportunity to be part owners of major telecommunication firms. We are no longer just content with paying telephone bills per seconds; we also want to earn money per seconds.

In addition to the investment opportunities that will be made available to us if they go public, it could also be a means of retaining the loyalty of their subscribers in the face of the intense competition that is going on in the sector. An investor in a particular service provider would be emotionally attached to it thereby finding it very difficult to switch to another network except when it becomes extremely unavoidable.

1 comment:

  1. Telecommunication is undergoing an historic sea change. Even though that change is driven by the consumer side of the industry.

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