Industry Analysis: Nigerian Mobile Telecommunications
Introduction
Nigerian Mobile Telco has been mentioned as the fastest growing market in Africa. Nigerian telecommunications went mainstream in 2001 when deregulation of the sub-sector of the economy gave way to private participation. The telecommunication system was inaugurated with the issuance of the unified Global System for Mobile Communications (GSM) license in 2001. The GSM license in Nigeria costs around US$285 million. Nigerian Telecommunication (NITEL) was the only operator in the market prior to 2001 with approximately 500,000 subscribers out of a population of 140 million.
Deregulation ushered in telecom players like MTN, Glo Mobile, Zain formerly Celtel, Etisalat, Visafone, Multilinks, Starcomm, and Zoom formerly Reltel. The telecommunications regulator in Nigeria is the Nigerian Telecommunications Commission (NCC), with reference to the NCC Act 2003; 3-(1) “A commission to be called the Nigerian Telecommunications Commission is hereby established with the responsibility of regulating the telecommunication sector in Nigeria.”
Product/market segmentation
The market is divided into urban and semi-urban, and rural market. Teledensity in urban areas is around 65%, while in semi-urban areas it is around 45% and in rural areas it is less than 15%. The product segmentation is GSM and CDMA.
Principal actors
MTN, Zain, Glo and Etisalat control the GSM market. While Visafone, Multilinks, Starcomm and Zoom, formerly Reltel, are a segment of CDMA products. The market share of these important mobile telecommunications is MTN-40.54%, Zain-30.20%, Glo Mobile-28.11 and Etisalat-0.7%, M-Tel Mobile phone business of NITEL-0.45 %. While Visafone leads the CDMA market, it is followed by Multilinks, Starcomms and Zoom.
Figure 1. Market shares (percentage of total subscriptions)
Factors affecting the industry.
o Infrastructure
or High demand
or frequency problem
o Regulatory Institution (NCC)
o Inadequate base station
or Great Market
o Economic sabotage
o Interconnectivity problem
o Quality of Service-Due to capacity limitation problem
product differentiation
Telecom operators offer similar products with slight differences, such as
– CDMA and GSM – Voice Service
– GO; SMS, mobile news, online banking, music, data card, etc.
– With diverse product differentiation, voice is the main source of revenue for Telco in Nigeria.
Industry Growth
Nigeria has maintained its lead as the largest telecom market in Africa with active subscribers of around 65 million, relegating South Africa to second place with around 45 million subscribers. From just over 500,000 NITEL mobile and fixed line subscribers in 2001. Industry grew to over 7 million subscribers in 2004; in December 2008 subscribers in the market grew to 62.99 million. An addition of 22.59 million subscribers in 2008 alone represented an annual growth rate of 56%. The recent figure for January 2009 puts the subscriber base at 64.16. While GSM subscribers are in the 57 million range, CDMA subscription in Nigeria grew from just 380,000 in 2007 to over 6 million by the end of 2008. The Country Smart Report on Nigeria by Pyramid Research indicated that the market grew 23% with total industry revenue of US$8.42 billion. With mobile penetration at 42%, revenue will grow to $11.14 billion in 2013, with an expected annual increase of 5.7%. The telecom market has been named the largest mobile market in Africa. The telephony density of 0.73% in 2001 has increased steadily during the year up to 33.72% in December 2006 and around 45% added in December 2008. The current installed capacity of the market is 117.892 million in December of 2008. The ARPU of the mobile industry in 2003 was around US$54 per month but as of December 2008 it was US$13.
Demand in the Industry
There is an increase in demand due to;
o Population explosion in urban cities and metropolises
o Corporate purpose- Growth in SMEs
o Improved banking operations
o Competition: the opening of the market to competition in all segments of the industry has resulted in a significant drop in the price of telecommunications services.
GO
o Business expansion by the operator- CAPEX and OPEX investment in the industry
o Infrastructure sharing
o Interconnectivity
o Drop in subscription cost: before 2001, the cost of mobile NITEL was over $60,000 per line, after the issuance of the GSM license in mid-2001, it cost $20,000 per line, and today, this figure has dropped to almost zero. The rate for calls on the GSM network used to be #50 per minute, today it is as low as #25 per minute (mobile to mobile). The fixed wireless and CDMA rate is still much lower.
Supply level in the Industry
o The offer in terms of product availability is encouraging compared to about 4 years ago, but in terms of service and customer satisfaction it is the complete opposite.
o The market is still dominated by the market leader MTN
o Scarce infrastructure
Mobile telecommunication operation profit in Nigeria
o Create competition in the telecommunications industry
o Privatization of government-owned telecommunications entities
o Telecommunications become affordable for ordinary Nigerians
o Greater accessibility to telecommunications services
o The rural telecommunications project is promoted
o Increase revenue generation for the government
o Creation of employment opportunities in Nigeria
Conclusion and recommendation
The telecommunication industry in Nigeria is a gold mine; telecommunication development in nigeria is very fast giving investors a quicker return on investment than they could imagine. The regulatory body (NCC) has a lot to do in the development of Nigerian telecommunication, such as the issue of frequency or spectrum allocation, also SIM registration is effective from July 2009, as well as portability. number that is scheduled to take effect on May 29. 2009. If this is done well and successfully, subscribers will have another story to tell compared to what is currently happening in the industry which is characterized by a large number of dropped calls and economic sabotage between major players in front of the Commission of Telecommunications of Nigeria. . The federal government should also look at the issue of social infrastructure, such as electricity, because it has increased the CAPEX and OPEX of telecom operators in Nigeria.
Telecom service providers should expand their coverage beyond urban areas to rural areas, as most of the country’s rural areas still do not have telecom network coverage.
Rapid deployment of network resources such as base station and switches, which should result in better quality of service; By upgrading its transmission infrastructure across the country, fiber optic and microwave transmission lines should be built.