Nigeria: Regulatory changes could enhance telecoms

A government decision to enact long-awaited mobile number portability (MNP) regulations, together with infrastructure sharing, should go some way towards improving the quality of service in the Nigerian telecommunications market.

The new MNP policy, which went into effect in late April, will allow subscribers of the big four mobile networks – MTN, Bharti Airtel, Globacom and Etisalat – to switch providers every 90 days while still retaining their phone numbers. These four firms account for about two-thirds of the market, with a handful of smaller operators vying for the remainder.

When the Nigeria Communications Commission (NCC) first announced plans for an MNP policy in 2006, operators objected, saying that infrastructure was not sufficiently developed to manage the challenges of number-portering. However, political pressure for the service remained strong, and the NCC reintroduced its MNP plans in 2009, and again in 2012.

The regulator expects that operators will now improve quality of service or risk losing subscribers. “Number portability will further foster competition on prices and quality of services,” NCC spokesman Reuben Muoka told Bloomberg.

However, the effect on the market may be muted, at least based on the experience in other African markets. When MNP was rolled out in Ghana and Kenya, for example, market shares only changed by a few percentage points.

According to Brett Goschen, CEO of MTN Nigeria, the risk of switching is limiting because consumers tend to hold SIM cards from multiple operators. “Even as service improves, customers might still hold onto additional SIM cards to take advantage of promotional campaigns offered by each company,” he told OBG.

But if the policy has the intended effect – and operators lower their prices and/or improve service in a bid to keep their customers – local consumers stand to benefit greatly. Telecoms services in Nigeria are among the most expensive both regionally and globally. In a report published in 2012 by the International Telecommunications Union, Nigeria ranked 135th out of 161 countries for affordability of ICT services, while placing 13th out of the 31 African nations measured.

Prices have started to come down even prior to the implementation of the MNP, with the big four players competing more aggressively in recent months. However, many consumers have chosen to purchase more minutes rather than outlay less cash. The increase in usage has, in turn, started to put pressure on operator capacity.

Indeed, the sector may now be running up the limitation of its infrastructure, which has so far failed to keep pace with the growing number of mobile subscribers. Building fibre-optic networks in Nigeria is an expensive and challenging proposition, one that involves navigating a complex bureaucracy. Maintenance can also be costly, and telecommunications installations can be subject to attacks in certain parts of the country

Infrastructure sharing – by which networks share base stations – is one solution. While this model is popular with the regulator, operators have been slower to embrace it, in part because they are hesitant to cooperate with their competitors. One Nigeria-based firm, IHS, is working to change that, however.

IHS builds and owns base stations that it then leases to service providers. This option can be attractive to operators, as it allows them to reduce both capital expenditures as well as operating costs, such as fuel and taxes. IHS, which owns 3100 towers and operates an additional 2000 across Africa, has announced plans to increase the number of stations it owns to 20,000 by 2017.

Infrastructure sharing received a major boost in April when France Telecom announced plans to outsource operations at 2000 cell towers used by its Orange subscribers in Côte d’Ivoire and Cameroon to IHS. The development came after a similar deal was sealed in 2012 between IHS and MTN to acquire and operate 1800 towers.

Reforms and new initiatives across Nigeria’s mobile phone industry may take time to have an effect. For now, both the government and private sector are working towards balancing the cost of doing business with meeting customer expectations in what is one of the region’s most dynamic and fast-growing mobile markets.