The Future of the Telecoms market in Nigeria
Let me take a critical look at the market trends with a view of looking into the future going forward.
The Nigerian Telecoms market has performed excellently well since the introduction of mobile telephony into the space especial the GSM operators. From a Paltry 400,000 installed capacity in 1997 to a whooping 85M lines today, the market has done well beyond expectation.
What were the major drivers of the Market?
1 Available total hungry Market of over 100M subscribers yearning for Telco services which were unavailable
2 Government liberalization of the space
3 A transparent frequency licensing regime by NCC
4 A growing young and vibrant population, highly literate and highly mobile
5 A reasonable economic leverage within the population, that enabled them afford the services
6 Vibrant operators , offering mouth watering incentives in the form of mobile lottery in most instances
What are the inhibiting factors to Growth and affordability?
1 Lack of basic Infrastructure
Every dick and harry already knows the Power situation in Nigeria. The industry is a power guzzler and without stable power supply, the OPEX for this companies continue to escalate. As at today, we still can boast of 5hr steady power supply in Nigeria. What this means is that operators will have to source for the remaining 19hrs of power supply, which for now remains diesel power and the attendant pollution and environmental degradation associated with this kind of power system.
Another worrisome development is the high cost of bandwidth for both backhaul services and international connection, which still persist. One would have thought that the government through some regulatory policies or by direct investment created enough backbone facilities that will drive down the cost of telephone usage. That hasn’t happened for now.
2 Improper Network Planning
In some cases there are instances of under dimensioning of network infrastructure in other to drive down OPEX. These cases of course has impacted negatively on services leading to consumer frustration. In some cases you can clearly see Over dimensioning of resources which results in major wastes on capital. All 0f these eventually translates to cost to the subscriber.
3 Security Problems
Vandals are on the rampage everywhere. There are cases of entire generators of a site being lifted and taken away by thieves or some of the installed facilities being vandalized by unknown persons. This poses a great towards providing cheap and affordable telecommunication services today. No doubt, government needs to do a lot in general ,for a more secure environment for businesses to thrive.
Have we come to the end of the domino ride?
The current growth data from 2009 to 2010 shows that growth in terms of subscriber addition has considerably slowed down. What this means is that we will not see such leaps in subscriber numbers again. To put it straight, we have come to the end of the road for bumper harvest based on subscription of voice and basic services being offered by the operators.
Currently , the industry is beset with a number of problems, namely;
· Continues decrease in ARPU on the voice services
· High Interconnect Cost
· NCC inability to provide a carrier for long distance backhaul Carrier till date
What Next will be the clincher in driving profitability?
Well, as easy as this question sounds, many operators in Nigeria has not brazed up to what is coming next.
Globally VAS is taking front seat in driving operators services to the next level. In Africa, the story is not different. Take a look at this news from SA.
“Mobile communications markets in Southern Africa are experiencing high growth, particularly in Zambia. However, operators face challenges such as rising operational costs, declining interconnection charges and capital-intensive infrastructure investments.
The deployment of cost-effective mobile technologies such as HSxPA, EDGE, HSPA+ as well as WiMAX in the near future will help operators to overcome such challenges and achieve economies of scale. South Africa is the leading market in the region in terms of subscribers and revenues, and the market growth is expected to be driven by data services, as well as enterprise solutions.
New analysis from Frost & Sullivan finds that the Southern African mobile communications market (covering South Africa, Zambia and other countries) earned revenues of $18.58 billion in 2010 and estimates this to reach $25.43 billion in 2017.
Mobile broadband internet services paralleled by WiMAX technology will boost market prospects.
"Mobile broadband is an effective means to improve the connectivity of Internet services in the rural area due to the lack of fixed-line (copper and fibre) infrastructure," explains Frost & Sullivan's ICT Research Analyst Jiaqi Sun. "The maturing standards of WiMAX technology may help operators achieve a cost-efficient deployment of next generation mobile technologies since it allows an increasing coverage for the limited amount of spectrum available for each operator and supports high-speed mobile data services."
However, the market continues to confront a range of challenges. These include slow regulatory reform and low network coverage in the rural mass market. At the same time, low literacy levels are restraining the demand for data services.
"Regulations in the Southern African region have not yet kept pace with technological advancements such as the WiMAX spectrum allocation," remarks Sun. "For instance, a new regulatory framework covering unified/converged licensing has not yet been set up in many countries in the region."
Another potential threat to market momentum is that the mobile network coverage remains very limited in the rural area, where over 60.0 per cent of the mass market resides.
"Literacy levels in the Southern African region are low," adds Sun. "This constrains the uptake of data services as most data services are not yet offered in a user-friendly mode on mobile devices."
Promisingly, efforts are being made to address these challenges. Before WiMAX regulations are finalised, operators have developed the strategy to deploy similar technologies such as HSxPA and HSPA+, which will be compatible with the other 4G technologies, such as long term evolution (LTE), for migration in the future when the converged licensing framework is in place.
"Fixed-wireless and fibre-optic technologies are alternatives to improve the access to telecommunications in the rural area," advises Sun. "Leading operators in the region have engaged in offering community phones which are seen as a substitute for mobile handsets at present."
Strategies to improve literacy levels include training offered by operators to educate mobile subscribers on how to use handsets to access data services, such as mobile money transfer services”
Internet Penetration
With the present internet penetration in Nigeria at 28% with less than satisfactory performance in terms of services, there is great room for investors to put in their money to drive this sector .
Even at this 28% doubtful penetration figure over 70% of these internet users rely on mobile handset based services whether 3G or just the usual EDGE/GPRS based devices. Operators Qos is abysmal and less than satisfactory.
For a typical user on the GSM networks using this services, he is not getting more than 28kbps bandwidth and therefore can do very little with this.
The CDMA operators offer by far better services in this area .
The entrance of MOBITEL an advertised 4G operator may change the configuration, but this is yet to be seen in reality.
Youthful Population
The Nigerian youthful population is a major plus that guarantees the growth of this sector. With over 70% youthful population in a national democraphy of 150M, and a literacy level of over 80%, the country is ripe for massive data hungry users. The problem is that right now,the services are nonexistent.
E-Commerce
The Google Initiatives
Goggle says internet penetration in Nigeria is still very low at 12 percent and wants to double this within the next three years, according to a top official of Google in Nigeria. He also announced the launch of Google Trader in Ghana and Google online phone in Kenya which would also be extended to Nigeria.He disclosed that Nigerians are already making millions from the new Google Trader, an initiative which puts a trader online thereby enabling consumers globally to have a contact with the traders without hitches or meddlesome middle men/women. He said that a Nigerian trader Mrs. Funke, sold one year inventory in a month by taking advantage of the Internet. Her business moved from N150,000 to N15 million in four months. She has been using a website to promote and sell her baby products to numerous customers in the global village. And another Nigerian is also presently make millions of naira yearly by selling Nollywood videos online.
Online businesses will be one of the main drivers that Telecom companies should be working on for greater revenue and profitability, by providing platforms that make it easy for Nigerians to integrate financially with the global community.
Mobile Adds
Worldwide mobile advertising revenue is forecast to reach $3.3 billion in 2011, more than double the $1.6 billion generated in 2010, according to Gartner. Worldwide revenue will reach $20.6 billion by 2015, but not all types of mobile advertising will generate the same opportunity.
Search and maps are expected to deliver the highest revenue, while video/audio ads will see the fastest growth through 2015.
"Mobile advertising is now recognized as an opportunity for brands, advertisers and publishers to engage consumers in a targeted and contextual manner, improving returns," said Stephanie Baghdassarian, research director at Gartner. "For that reason, mobile advertising budgets are set to increase tremendously across the various categories and regions, growing from 0.5 percent of the total advertising budget in 2010 to over 4 percent in 2015."
"As the adoption of smartphones and media tablets extends to more consumers, the audience for mobile advertising will increase and become easier to segment and target, driving the growth of mobile advertising spend for brands and advertisers," said Andrew Frank, research vice president at Gartner. "Brand marketers who want to include mobile in their advertising initiatives should not delay their trials, and should have their budgets in place now to take advantage of mass consumer adoption of smartphones and media tablets."
North America and Western Europe are the regions where mobile advertising budgets will grow most, representing 28 percent and 25 percent of the global market by 2015. However, Asia/Pacific and Japan will remain the leading market throughout the forecast period. Asia/Pacific and Japan is forecast to account for 49.2 percent of mobile advertising in 2011, and 33.6 percent of the global market in 2015.
Mobile Advertising , Worldwide , 2010-2015
(billions of Dollars)
Year 2010 1.6B
Year 2011 3.3B
Year 2015 20.6B
Gartner analysts said various types of mobile advertising will behave differently.
"Mobile search, which includes paid positioning on maps and various forms of augmented reality, all of which can be informed by location, will spearhead mobile ad spending," Ms. Baghdassarian said. "Mobile display, which includes both standard Mobile Marketing Association (MMA) banner formats and nonstandard rich media and interactive formats, will continue to be closely divided between in-app and mobile Web (in-browser) placements, reflecting consumer usage."
For several years, mobile advertising has been scrutinized, and it is expected to take off, thanks to various players in the market, from communication service providers (CSPs) to ad networks.
"In 2011, we are finally seeing some important drivers fall into place, so that we can expect the market to more than double year-over-year in the coming two years," said Mr. Frank. "This doesn't mean, by any stretch, that the experience delivered by mobile advertising will reach its optimum point in that time frame. We expect that targeting and contextualization, especially in social sites and applications, will carry on improving throughout the forecast period and beyond."
Mobile ads will be at its boom level in the next two years in Nigeria going by the high level of Mobility within the youthful workforce. It will not only be a major revenue earner but a key employment generating subsector within the industry.
Thanks for reading again. In my next blog, I will be taking a critical look at lawful interception of calls in Nigeria.
Bye for now
The Nigerian Telecoms market has performed excellently well since the introduction of mobile telephony into the space especial the GSM operators. From a Paltry 400,000 installed capacity in 1997 to a whooping 85M lines today, the market has done well beyond expectation.
What were the major drivers of the Market?
1 Available total hungry Market of over 100M subscribers yearning for Telco services which were unavailable
2 Government liberalization of the space
3 A transparent frequency licensing regime by NCC
4 A growing young and vibrant population, highly literate and highly mobile
5 A reasonable economic leverage within the population, that enabled them afford the services
6 Vibrant operators , offering mouth watering incentives in the form of mobile lottery in most instances
What are the inhibiting factors to Growth and affordability?
1 Lack of basic Infrastructure
Every dick and harry already knows the Power situation in Nigeria. The industry is a power guzzler and without stable power supply, the OPEX for this companies continue to escalate. As at today, we still can boast of 5hr steady power supply in Nigeria. What this means is that operators will have to source for the remaining 19hrs of power supply, which for now remains diesel power and the attendant pollution and environmental degradation associated with this kind of power system.
Another worrisome development is the high cost of bandwidth for both backhaul services and international connection, which still persist. One would have thought that the government through some regulatory policies or by direct investment created enough backbone facilities that will drive down the cost of telephone usage. That hasn’t happened for now.
2 Improper Network Planning
In some cases there are instances of under dimensioning of network infrastructure in other to drive down OPEX. These cases of course has impacted negatively on services leading to consumer frustration. In some cases you can clearly see Over dimensioning of resources which results in major wastes on capital. All 0f these eventually translates to cost to the subscriber.
3 Security Problems
Vandals are on the rampage everywhere. There are cases of entire generators of a site being lifted and taken away by thieves or some of the installed facilities being vandalized by unknown persons. This poses a great towards providing cheap and affordable telecommunication services today. No doubt, government needs to do a lot in general ,for a more secure environment for businesses to thrive.
Have we come to the end of the domino ride?
The current growth data from 2009 to 2010 shows that growth in terms of subscriber addition has considerably slowed down. What this means is that we will not see such leaps in subscriber numbers again. To put it straight, we have come to the end of the road for bumper harvest based on subscription of voice and basic services being offered by the operators.
Currently , the industry is beset with a number of problems, namely;
· Continues decrease in ARPU on the voice services
· High Interconnect Cost
· NCC inability to provide a carrier for long distance backhaul Carrier till date
What Next will be the clincher in driving profitability?
Well, as easy as this question sounds, many operators in Nigeria has not brazed up to what is coming next.
Globally VAS is taking front seat in driving operators services to the next level. In Africa, the story is not different. Take a look at this news from SA.
“Mobile communications markets in Southern Africa are experiencing high growth, particularly in Zambia. However, operators face challenges such as rising operational costs, declining interconnection charges and capital-intensive infrastructure investments.
The deployment of cost-effective mobile technologies such as HSxPA, EDGE, HSPA+ as well as WiMAX in the near future will help operators to overcome such challenges and achieve economies of scale. South Africa is the leading market in the region in terms of subscribers and revenues, and the market growth is expected to be driven by data services, as well as enterprise solutions.
New analysis from Frost & Sullivan finds that the Southern African mobile communications market (covering South Africa, Zambia and other countries) earned revenues of $18.58 billion in 2010 and estimates this to reach $25.43 billion in 2017.
Mobile broadband internet services paralleled by WiMAX technology will boost market prospects.
"Mobile broadband is an effective means to improve the connectivity of Internet services in the rural area due to the lack of fixed-line (copper and fibre) infrastructure," explains Frost & Sullivan's ICT Research Analyst Jiaqi Sun. "The maturing standards of WiMAX technology may help operators achieve a cost-efficient deployment of next generation mobile technologies since it allows an increasing coverage for the limited amount of spectrum available for each operator and supports high-speed mobile data services."
However, the market continues to confront a range of challenges. These include slow regulatory reform and low network coverage in the rural mass market. At the same time, low literacy levels are restraining the demand for data services.
"Regulations in the Southern African region have not yet kept pace with technological advancements such as the WiMAX spectrum allocation," remarks Sun. "For instance, a new regulatory framework covering unified/converged licensing has not yet been set up in many countries in the region."
Another potential threat to market momentum is that the mobile network coverage remains very limited in the rural area, where over 60.0 per cent of the mass market resides.
"Literacy levels in the Southern African region are low," adds Sun. "This constrains the uptake of data services as most data services are not yet offered in a user-friendly mode on mobile devices."
Promisingly, efforts are being made to address these challenges. Before WiMAX regulations are finalised, operators have developed the strategy to deploy similar technologies such as HSxPA and HSPA+, which will be compatible with the other 4G technologies, such as long term evolution (LTE), for migration in the future when the converged licensing framework is in place.
"Fixed-wireless and fibre-optic technologies are alternatives to improve the access to telecommunications in the rural area," advises Sun. "Leading operators in the region have engaged in offering community phones which are seen as a substitute for mobile handsets at present."
Strategies to improve literacy levels include training offered by operators to educate mobile subscribers on how to use handsets to access data services, such as mobile money transfer services”
Internet Penetration
With the present internet penetration in Nigeria at 28% with less than satisfactory performance in terms of services, there is great room for investors to put in their money to drive this sector .
Even at this 28% doubtful penetration figure over 70% of these internet users rely on mobile handset based services whether 3G or just the usual EDGE/GPRS based devices. Operators Qos is abysmal and less than satisfactory.
For a typical user on the GSM networks using this services, he is not getting more than 28kbps bandwidth and therefore can do very little with this.
The CDMA operators offer by far better services in this area .
The entrance of MOBITEL an advertised 4G operator may change the configuration, but this is yet to be seen in reality.
Youthful Population
The Nigerian youthful population is a major plus that guarantees the growth of this sector. With over 70% youthful population in a national democraphy of 150M, and a literacy level of over 80%, the country is ripe for massive data hungry users. The problem is that right now,the services are nonexistent.
E-Commerce
The Google Initiatives
Goggle says internet penetration in Nigeria is still very low at 12 percent and wants to double this within the next three years, according to a top official of Google in Nigeria. He also announced the launch of Google Trader in Ghana and Google online phone in Kenya which would also be extended to Nigeria.He disclosed that Nigerians are already making millions from the new Google Trader, an initiative which puts a trader online thereby enabling consumers globally to have a contact with the traders without hitches or meddlesome middle men/women. He said that a Nigerian trader Mrs. Funke, sold one year inventory in a month by taking advantage of the Internet. Her business moved from N150,000 to N15 million in four months. She has been using a website to promote and sell her baby products to numerous customers in the global village. And another Nigerian is also presently make millions of naira yearly by selling Nollywood videos online.
Online businesses will be one of the main drivers that Telecom companies should be working on for greater revenue and profitability, by providing platforms that make it easy for Nigerians to integrate financially with the global community.
Mobile Adds
Worldwide mobile advertising revenue is forecast to reach $3.3 billion in 2011, more than double the $1.6 billion generated in 2010, according to Gartner. Worldwide revenue will reach $20.6 billion by 2015, but not all types of mobile advertising will generate the same opportunity.
Search and maps are expected to deliver the highest revenue, while video/audio ads will see the fastest growth through 2015.
"Mobile advertising is now recognized as an opportunity for brands, advertisers and publishers to engage consumers in a targeted and contextual manner, improving returns," said Stephanie Baghdassarian, research director at Gartner. "For that reason, mobile advertising budgets are set to increase tremendously across the various categories and regions, growing from 0.5 percent of the total advertising budget in 2010 to over 4 percent in 2015."
"As the adoption of smartphones and media tablets extends to more consumers, the audience for mobile advertising will increase and become easier to segment and target, driving the growth of mobile advertising spend for brands and advertisers," said Andrew Frank, research vice president at Gartner. "Brand marketers who want to include mobile in their advertising initiatives should not delay their trials, and should have their budgets in place now to take advantage of mass consumer adoption of smartphones and media tablets."
North America and Western Europe are the regions where mobile advertising budgets will grow most, representing 28 percent and 25 percent of the global market by 2015. However, Asia/Pacific and Japan will remain the leading market throughout the forecast period. Asia/Pacific and Japan is forecast to account for 49.2 percent of mobile advertising in 2011, and 33.6 percent of the global market in 2015.
Mobile Advertising , Worldwide , 2010-2015
(billions of Dollars)
Year 2010 1.6B
Year 2011 3.3B
Year 2015 20.6B
Gartner analysts said various types of mobile advertising will behave differently.
"Mobile search, which includes paid positioning on maps and various forms of augmented reality, all of which can be informed by location, will spearhead mobile ad spending," Ms. Baghdassarian said. "Mobile display, which includes both standard Mobile Marketing Association (MMA) banner formats and nonstandard rich media and interactive formats, will continue to be closely divided between in-app and mobile Web (in-browser) placements, reflecting consumer usage."
For several years, mobile advertising has been scrutinized, and it is expected to take off, thanks to various players in the market, from communication service providers (CSPs) to ad networks.
"In 2011, we are finally seeing some important drivers fall into place, so that we can expect the market to more than double year-over-year in the coming two years," said Mr. Frank. "This doesn't mean, by any stretch, that the experience delivered by mobile advertising will reach its optimum point in that time frame. We expect that targeting and contextualization, especially in social sites and applications, will carry on improving throughout the forecast period and beyond."
Mobile ads will be at its boom level in the next two years in Nigeria going by the high level of Mobility within the youthful workforce. It will not only be a major revenue earner but a key employment generating subsector within the industry.
Thanks for reading again. In my next blog, I will be taking a critical look at lawful interception of calls in Nigeria.
Bye for now
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