Nuts and bolts: Expanding and upgrading the networks

Telecoms equipment and infrastructure suppliers are in high demand across the country. Having attracted international firms from India, the UAE and South Africa to invest in GSM licences, the state is encouraging Chinese and other international firms to invest in Nigeria in an attempt to address the current shortfall in terrestrial telecoms infrastructure.

BUILDING INFRASTRUCTURE: At the Mobile World Congress in Barcelona in March 2012 Eugene Juwah, the executive vice-chairman of the Nigerian Communications Commission (NCC), appealed to foreign firms to invest in the Nigerian market. Specifically, he focused on direct private sector investment in building broadband infrastructure across the country as part of his talks with ZTE Corporation, one of China’s largest providers of telecoms equipment. Increasingly operators are being asked to meet stringent quality of service standards by the NCC, and to meet these obligations at least 50,000 new base transceiver stations will need to be built, according to the Association of Licensed Telecommunications Operators of Nigeria (ALTON). At present there are around 20,000 base stations in the country serving 150m people. “Base stations are certainly a big area of investment at the moment,” Bekele Tadesse, the managing director and Nigeria country manager for Ceragon, an Israelbased wireless backhaul specialist, told OBG. “Airtel Globacom and MTN are all investing in these, as well as looking at renewable technologies to reduce the current reliance on diesel-powered generators for base stations. Backhaul infrastructure is where most investment is focused on and in the near future data services will be another area operators will look at.”

INVESTMENTS: While the government has expressed its desire to attract foreign direct investment into the sector, so far most of the infrastructure suppliers have instead entered into contracts with existing GSM or CDMA operators. MTN, the biggest operator by market share, operates the largest fibre-optic network in the country and plans to invest $1.4bn in its network in 2012. In late March 2012 it signed a contract with ZTE to expand its GSM network in Lagos, Abuja and eight other states. Etisalat is investing $194m in expanding its network, aiming to build up to 1000 base stations by December 2012, in addition to the 3000 stations it currently operates. China’s Huawei Technologies is already at work expanding Etisalat’s 2G and 3G networks under a $118m contract signed in August 2011.

Another operator, Airtel, has invested $600m in its networks since taking over the GSM licence originally held by Zain. In November 2011 the firm signed a contract with Sweden’s Ericsson to convert 250 base stations from diesel power to renewable energies such as wind and solar panels. Local operator Globacom has also invested in upgrading its network, signing a $6m contract with Ceragon in March 2012. And finally CDMA operator Visafone signed a $20m agreement with Huawei in 2012 to expand its network across 26 states and build up its broadband infrastructure in Lagos.

BASE STATION OWNERSHIP: While firms such as Huawei have focused on winning network infrastructure contracts from operators, an alternative business model exists: to build and own base stations that are leased to service providers. This option is attractive to operators, as it allows them to reduce costs in terms of state and federal taxes and fuel. IHS, a Nigeria-based provider of telecoms infrastructure, has adopted this model and plans to increase its base station site ownership to more than 1300 sites by the end of 2012, with this figure rising to 1800 by mid-2014. The firm operates 2000 sites in the country, 800 of which it owns outright. “In the past we have built close to 1500 sites in Nigeria for telecoms operators, but now our ongoing business is mainly site ownership and site management,” Rob Gelderloos, the chief commercial officer of IHS, told local Business Day in early May 2012. With the NCC pushing operators to upgrade and expand their networks, infrastructure providers are expected to benefit. As the infrastructure improves, data services may be the next growth area for suppliers and investors.