Nigerian telecoms operators account for 35% of $45bn FDI -Airtel CEO [Sun, The (Nigeria)]
(Sun, The (Nigeria) Via Acquire Media NewsEdge) BY OLABISI OLALEYE
The Managing Director/Chief Executive Officer, Airtel Nigeria Ltd, Mr. Segun Ogunsanya, has denied an impending mass sack in the telecommunications industry that may be caused by the sell-off of towers by operators.
Ogunsanya, in an interview with Daily Sun rather disclosed that the sell off would allow operators to concentrate on their core competences and allow those who are better equipped professionally to manage the towers to do so.
"Telcos had already outsourced their network operations to experts like Ericsson and Huawei, who in turn outsourced maintenance services like fueling, cleaning and security to local companies known in industry parlance as ISMs". He noted that the Nigerian operators have created close to 10,000 direct jobs and will continue to do more.
However, on broadband penetration, he says, "It is expedient to state that in other jurisdictions, such as Finland and Costa Rica, broadband access is regarded as a fundamental human right. And to ensure that Nigeria is not left behind in this race, it is necessary for government to take steps toward providing conducive and friendly operating environment to drive broadband deployment."
The direct contribution of Nigerian telecoms operators to the country's GDP is estimated at around N400 billion in 2012. Taxes and regulatory levies are the most important source of direct contribution from network operators in Nigeria, accounting for about 55 percent of the direct contribution. By our estimates, network operators pay close to N160 billion in taxes annually, with another N55 billion paid in various forms of regulatory levies.
In addition, Nigerian operators have paid close to $4 billion (N640bn) in license and spectrum fees since 2001. Further, 3 to 5 percent of Nigerian telecoms services revenues are paid out in wages and benefits for some of the highest skilled jobs in the economy. Other contributions to the economy include payments to contractors, corporate social responsibility (CSR) programmes and dividends to shareholders. CSR programmes have been of particular significance, with many operators investing a material portion of their revenue on such programmes despite not breaking even on their investments.
Telecoms operators also contribute to the economy through their wider ecosystem; the ecosystem includes the entire industry's value chain, from contractors for base station deployments and system integrators to resellers of devices. The third channel of contribution comes through multiplier effects and productivity gains from the society at large using telecoms services.
We can also say that the telecoms sector is a major contributor to foreign direct investment in Nigeria, along with the banking and oil and gas sectors. Cumulative FDI in Nigeria over the 2001-2011 period has been around US$45 billion and the telecoms sector has accounted for around 35 percent of that amount, with operators using capital to acquire licenses, acquire or prop up local operations, and expanding their networks. During some individual years (e.g. 2009), the telecoms sector has risen to provide more than half of the country's FDI.
The contribution to employment has been visible in the volume of new job opportunities created and in the variety of required skill. So far, Nigerian operators have created close to 10,000 direct jobs since liberalisation, a pace of nearly 1,000 direct, full time equivalent (FTE) positions created each year. On an indirect basis, the total number of jobs created by the telecoms operators hovers between 1m and 3m depending on the estimates.
Tower sites sale
Yes, indeed there are plans by operators to sell off, not necessarily outsource, the towers. It is the trend globally, and as the Association of Licensed Telecomunications Operators of Nigeria (ALTON) Chairman, Engineer Gbenga Adebayo stated, recently that it is meant to allow operators concentrate on their core competences and allow those who are better equipped professionally to manage the towers to do so.
Indeed, the telcos had already outsourced their network operations to experts like Ericsson and Huawei, who in turn outsourced maintenance services like fueling, cleaning and security to local companies known in industry parlance as ISMs.
From the above narrative, it is evident that the eco-system of telecommunications business is growing a wide value-chain, which has Nigerians (locals) at the epicentre. So, more jobs would be created rather than lost, given that the new owners will definitely like to grow their businesses. Regarding the Call Centres, which were outsourced to BPOs, it is an inexactitude to say jobs were lost! On the contrary, the number of people employed in the Call Centre business has grown exponentially by over 300 percent.
So, rather than create fears in the minds of our engineers, who will be moving to these Tower Management companies, and disaffection in the hearts of Nigerians, who have been unapologetic beneficiaries of the GSM revolution started in 2001, we should highlight the immense advantages inherent in this strategic business move by the telcos.
There is a lot of cheering stories coming from the telecommunications sector. The sector has attracted over $20 billion FDI in the past 12 and a half years of the launch of GSM in Nigeria. On another note, the industry is perhaps the only one which has continued to creatively take advantage of a combination of economic factors including technology, competition, outsourcing, and other economies of scale, to drive costs down hence price of telecommunications services and related products like phones and other devices. Telcos have remained consistent in cost reduction and price reduction. Cost of calls, SMS and devices have, conversely, dropped many times over.
The telecommunications industry has demonstrably employed more people directly and indirectly since 2001. The marketing communications industry, construction, security, petroleum marketing and several others have experienced a boom with the activities of the telcos. Indeed, telecommunications can be described as the goose that lays the golden egg in the Nigerian economy.
According to the Pyramid Research Report, Nigeria is Africa's largest mobile market, a unique combination of large subscription volumes and fast growth only matched by the so-called BRIC countries.
Mobile penetration stood at 66 percent at the end of 2012, from less than one percent in 2001. Annual average subscriber growth over the past five years was about 20 percent, one of the world's fastest growth rates over that period. Nigeria is the largest mobile market in sub-Saharan Africa in subscriber terms and the region's second largest in revenue terms.
Nigeria's patchy power infrastructure has long been an obstacle for the country's telecoms operators. In a country with about 25,000 BTS and a need for around twice that number over the next ten years, the power infrastructure challenge is especially nagging.
The power costs of a site connected to the power grid are only about 1/6th those of a fuel-powered site, but only about 10 percent to 15 percent of BTS are connected to the electric power grid. The implications of such absence of reliable power infrastructure are far-reaching. Nigerian operators spend around N8 billion to N10 billion a year in diesel costs to power up their base stations. Such costs account for about 60 percent of operators' network costs. Primarily because of such fuel costs, average network costs in Nigeria are 2x to 3x higher than in a number of other African markets.
There is no doubt that multiple taxation of telecoms operators ,represents another challenge that is facing the industry, which is merely a side effect of Nigeria's federal structure and the inherent risk of overlapping. And there are other issues bordering on multiple regulation, frequent fibre-cut, community issues and other problems that are making it difficult for the common man to experience the desired quality of service.
In many respects, the Nigerian telecoms market still seems to operate below potential. While strong, mobile penetration is still lower than in a number of other African markets. Broadband penetration remains low at less than 10 percent, with the government setting a target of 20 percent by 2017.
There are adjacent, yet fundamental, systemic challenges, related to the need to build up a broadband infrastructure reliable enough to provide the platform for a vibrant Internet economy and attract data centres, providers of content and other technology companies.
According to the Pyramid Research Report, the impact of telecommunications on the consumer market has been undeniable. Over 60 percent of Nigerian consumers agree that using mobile services had improved their lives; over 35 percent stated that mobile phones had "dramatically improved all aspects of their lives". Around 80 percent of respondents had seen financial gains from using mobile services, through a combination of savings in communications spend, a reduction in transaction "friction" and the ability to generate additional income by staying connected.
The impact on the business sector is similarly notable. Nearly 100 percent of medium and large formal sector corporations in Nigeria have some form of Internet connectivity. About 60 percent provide mobile phones to staff for business purposes; about 70 percent are using the Internet to access public tender documents, with roughly the same proportion routinely receiving orders for their services via a website. The impact of Internet connectivity has been even more perceptible, further highlighting the positive ripple effects of telecommunications on business productivity and the economy at large. 72 percent of enterprises stated that Internet access had a substantially positive impact on their businesses and operations, with another 27 percent recognising a moderately positive impact.
Nonetheless, the challenge of building up a reliable e-government infrastructure remains substantial. Connectivity in Nigeria's 55,000+ primary, secondary and university remains low or inadequate; many of Nigeria's 1500 or so MDAs and other public institutions like the post offices and hospitals remain undeserved by broadband. How further government is to leverage technology to improve public service provision that will hinge in no small part on how aggressively telecoms market challenges are addressed.
It is expedient to state that in other jurisdictions, such as Finland and Costa Rica, broadband access is regarded as a fundamental human right. To ensure that Nigeria is not left behind in this direction, it is necessary for government to take steps toward providing conducive and friendly operating environment to drive expedite broadband deployment.
Ogunsanya as CEO of Airtel
It is great coming over from selling Cocacola to recharge cards. I sold cocacola for 17 years. I was the first Black MD for Cocacola in Ghana, also the first Black MD in Kenya as well as the first in Nigeria. Previous MDs have always been whites and I must say that Cocacola offered several things but what I have done in the last one year is quite interesting because everyone communicates.
I am glad to have been able to make connections between different people.I must say that it gives me additional joy. I must say the journey has been very interesting and we have recorded several milestones as a company.
Aside the many awards and accolades we have received from our customers, independent assessors and other stakeholders, we have remained committed to our vision and passionate about creating real value for our customers and other stakeholders.
We have seen growth in terms of numbers and other relevant indices but what is more important is the way we are connecting with our customers and internal stakeholders.
We have succeeded in building a great organisation where employees are not just passionate but very proud of their company. We have employees who are passionate about the business and committed to delighting our customers. No wonder, the Chartered Institute of Personnel Management (CIPM) for the second year running has adjudged us the best company within the telecoms sector.
Today, Airtel Nigeria is not just a great place to work but an employer of choice.
From a network and IT perspective, we have reorganised our operations so that we can serve Nigerians better.
We recognise the demand for quality data services, exceptional customer service and excellent network coverage. And that is why we have made some big changes as well as revamped our operations and from now on, Nigerians will begin to notice and experience these improvements.
Indeed, Airtel has repositioned as Nigeria's leading Internet Company.
Since acquisition of Zain in 2010, Airtel has invested well over $1.5 billion (USD) and we are still investing.
Essentially, we are driven by the vision of becoming the most loved brand in the daily lives of Nigerians.
We currently have the largest 3.75G in the country. We are in the 36 states and the Federal Capital Territory in terms of 3.75G coverage. We were the first to launch HD voice service in Nigeria. We were also the first to complete LTE Trial in the field in Nigeria.
Essentially, we are leaders in innovation, 3.75G Technology and we shall continue to blaze the trail in the Internet domain in demonstration of our vision to become Nigeria's leading Internet company
Voice-based Company or a Data-centric, Internet-based Organisation
As a leader in new technology and innovation, Airtel has repositioned to become Nigeria's leading Internet Company. While we are still very much active in the voice market as one of the dominant leaders, we are now defined as a data centric organisation.
It is no surprise that a report by the regulator adjudged us the fastest growing data operator.
It is because we have since realized that data is the way to go and that's why we currently have the largest 3.75G Network in the country. Right now, our focus is to continue to deepen our network quality and coverage and also offer Nigerians the very best bouquet of data value offerings.
Airtel is an innovative company and we always stay ahead of our competitors. Aside offering innovative products and services, we also place a very high value on our customers.
This singular focus inspired our brand promise of becoming the most loved brand in the daily lives of Nigerians. As you may know, Airtel is not just perceived as the most customer-centric network but we are passionate about giving our customers the very best.
We are not just interested in winning awards, but we are committed to ensuring that our customers always have the best service and network experience. This has influenced the upgrade of our network, making us the largest 3.75G provider in the country.
It is also on record that Airtel revolutionised the tariff landscape in Nigeria. We will continue to excite and delight telecoms consumers with innovative value offerings.
We also place a lot of premium on our people. Airtel is an employer of choice in Nigeria. And while we take good care of our employees, we are committed to impacting positively on our society and that is why our CSR programme focuses on providing educational opportunities for Nigerian children.
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