Telecoms Industry Remains Attractive After $25bn Investment — Report

Telecoms Industry Remains Attractive After $25bn Investment — Report

By Dayo Oketola

The telecoms industry remains very attractive to investors despite the $25bn Foreign Direct Investments pumped into the industry.

In spite of the $25bn investment in the Nigerian telecoms industry in the past decade, the country remains an attraction for telecoms investment in the African and Middle East region.

The Pyramid Research, in its latest study, said Nigeria remained attractive to telecoms investment as a result of the growth projections envisaged in the next few years.

Like other emerging telecoms markets, the study identified Nigeria as “the bright spot” in an uncertain and challenging global economic landscape.

The study titled, ‘Pyramid perspective 2013: Top trends in the global communications industry,’ provides information on top trends in in Africa and the Middle East, Asia Pacific, Europe and the Americas.

According to the study, economic growth in emerging markets is expected to nearly quadruple the economic growth in developed markets.

The study also predicted that telecoms service revenue in emerging markets would increase five times faster than in developed markets. It added that the trend would make mobile service revenue in emerging markets in 2015 larger than mobile service revenue in developed markets for the first time ever.

It further noted that nearly 90 per cent of the two billion subscribers to come online in the next five years would reside in emerging markets.

“Exposure to emerging markets has become a critical factor for success in an industry characterised by stagnation in developed markets, intense competition, consumer choice and disruptive business models,” the study said.

The study said that mobile subscribers in the AME region would surpass the one billion mark in the first quarter of 2013, making it the second region to reach this milestone after Asia-Pacific.

Of the anticipated one billion mobile subscription mark, Nigeria, Egypt, South Africa and Turkey for AME, will account for 35 per cent.

Commenting on the study, the Managing Director, Pyramid Research, Mr. Daniel Amparan, said the year 2013 would also accelerate the rate at which emerging market-based players take advantage of financially challenged developed market assets to bring the much-needed capital, as well as commercial innovation and expertise.

According to him, 2013 will also be a year of important milestones.

“By year’s end, mobile subscriptions will reach seven billion, on par with the global population. Mobile subscribers in the Africa and Middle East region will surpass the one billion mark in the first quarter, making it the second region to reach this milestone after Asia-Pacific,” he said.

Amaran explained that consolidation had progressed quickly in recent years in markets where subscriber growth had slowed, competitive pressures are squeezing margins and upcoming capital requirements are high.

“We believe that the same forces driving consolidation in developed markets will now force the hand of players in emerging markets. In Africa, we see potential for consolidation in markets such as Cote d’Ivoire, Ghana, Nigeria, Tanzania and Uganda, each of which is home to five operators or more,” he said.

The study noted that though emerging markets were lagging in broadband development, they would be better positioned to do it right in the years ahead.

It stated, “As governments rush to allocate 4G spectrum, the lure of being the first to offer 4G/LTE is strong, but the results are somewhat messy. In many countries across Asia-Pacific and in North America, spectrum is being allocated in multiple bands, with minimal planning around network efficiency and limited harmonisation at the national, regional and international levels. This situation is unsustainable and will force prices of devices and services to stay high, potentially limiting adoption of 4G services.

“However, countries where 4G demand is still low or not yet a reality, such as in most of  Africa and in several emerging economies, will be better positioned to properly plan for  4G spectrum, including taking advantage of the digital dividend spectrum in due time, and to  deploy efficient 4G networks that maximise the benefits of harmonisation. A key benefit of lagging in 4G deployment in the short term may be greater efficiencies from proper planning in the medium-to-long term for Africa.”

In Nigeria, growth in revenue will lead to consolidation in the mobile sector, which will see smaller players, especially in the Code Division Multiple Access segment being swallowed up in the name of mergers and acquisitions, according to the report.

Another highlight of the Pyramid study is the prediction that big players such as MTN and Etisalat, and investors like Vodafone and France Telecom will record quantum leaps and a guaranteed return on investments.

In view of this, Nigeria is particularly favoured in the area of investment because of the seemingly robust regulatory environment put in place by the Nigerian Communications Commission.

For 12 years, following the 2001 liberalisation of the telecoms sector, coupled with favourable regulatory regime, the industry in Nigeria continues to witness significant growth in both investments and mobile subscriptions.

While local and Foreign Direct Investment in the sector stood at $25bn in mid-2012, mobile subscriptions have surpassed over 150 million mark, 113.1 million of which were active at the end of December 2012, while teledensity has grown to 80.21.

Meanwhile, the Nigerian Communications Commission is also driving investments in the country with various policies bothering on broadband infrastructure deployment, review of interconnection rate among the operators, which is expected to lower the Average Revenue Per User currently standing at below N1,000, while engendering healthy competition among players.

The Executive Vice Chairman, NCC, Dr. Eugene Juwah, had reiterated the commitment of the regulator towards engendering favourable regulatory environment for investors as well as taking necessary measures to ensure telecoms services are accessible and affordable to consumers.

“We would continue to put in place policy frameworks that create a good regulatory and a level ground for all players and prospective investors in any segments of the Nigerian telecoms industry and we know by doing this, the industry will continue to grow for the benefit of all stakeholders in the industry,”  Juwah had said.

Commenting on areas where the country is lagging behind, the Minister of Communications Technology, Mrs. Omobola Johnson, identified broadband for data services, ‘broadband that facilitates fast and cost effective access to the Internet nationwide.”

She reiterated that the country was lagging behind in the area of broadband to leverage the Internet and Internet services to support development in healthcare, education, agriculture and of course financial inclusion.

Some of these areas, analysts said, were fertile grounds for prospective investors in the country.

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