The Chief Executive Officer (CEO), Airtel Nigeria, Mr. Segun Ogunsanya met with selected ICT Media at Airtel Headquarters, Banana Island in Lagos. He spoke on a number of issues including allaying fears on tower management outsourcing, and quality of service. Our Group Executive Editor, REMMY NWEKE was there for DigitalSENSE Business News.
Excerpts:
Congratulations on your recent marking of one year in office as the CEO of Airtel Nigeria.
Thank you very much.
Assess the Nigeria’s telecoms market and benchmark the industry with other climes?
The Pyramid Research Reports had described Nigeria as the 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 66per cent at the end of 2012, from less than 1per cent in 2001. Annual average subscriber growth over the past five years was about 20per cent, 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.
Has this growth impacted on the economy?
The direct contribution of Nigerian telecoms operators to the country’s GDP – Gross Domestic Product - is estimated at around N400bn in 2012. Taxes and regulatory levies are the most important source of direct contribution from network operators in Nigeria, accounting for about 55 per cent of the direct contribution. By our estimates, network operators pay close to N160bn in taxes annually, with another N55bn paid in various forms of regulatory levies.
In addition, Nigerian operators have paid close to $4bn (N640bn) in license and spectrum fees since 2001. Further, 3 per cent to 5 per cent 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 programs despite not breaking even on their investments.
Telecoms operators also contribute to the economy through their wider ecosystem; the ecosystem includes the entire industry 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.
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 periods have been around US$45bn; the telecoms sector has accounted for around 35per cent of that amount, with operators using capital to acquire licenses, acquire or prop up local operations, and expanding their networks. During some individual years, for example in 2009; the telecoms sector has risen to provide more than half of the country’s FDI.
What are telecoms contributions to employment generation?
The contribution to employment has been visible in the volume of new job opportunities created and in the variety of required skillset. Nigerian operators have created close to 10,000 direct jobs since liberalization, 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.
Recently, telecoms operators have come under fire from some public quarters over issues of Quality of Service. What is your take this?
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 per cent to 15 per cent 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 N8bn to N10bn a year in diesel costs to power up their base stations. Such costs account for about 60 per cent 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.
The multiple taxation of telecoms operators represents another challenge facing the industry; once merely a side effect of Nigeria’s federal structure and the inherent risk of overlapping. And there are other issues bordering on multiple regulations, frequent fibre-cut, community issues and other problems that are making it difficult for the common man to experience the desired Quality of Service.
Not long ago, we saw cases of flooding and activities of terrorist groups that adversely affected Quality of Service? There were fears that the move by telecoms operators to sell off tower sites will result in loss of jobs of thousands of telecoms engineers. Is this assertions correct?
Yes, indeed there are plans by operators to sell off, not necessarily outsource, the towers. It is the trend globally, and as the ALTON – Association of Licensed Telecom Operators of Nigeria - Chairman, Engineer Gbenga Adebayo stated, recently, 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 at the epicenter. 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 – Business Process Outsourcing; 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 per cent.
So, rather than create fears in the minds of our engineers and other staff, 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 since 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 $20b 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 are coming down. 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.
What are your thoughts on broadband development, especially as it concerns government drive towards deepening Internet access?
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 per cent, with the government setting a target of 20 per cent 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 per cent of Nigerian consumers agree that using mobile services had improved their lives; over 35 per cent stated that mobile phones had “dramatically improved all aspects of their lives”. Around 80 per cent 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 per cent of medium and large formal sector corporations in Nigeria have some form of Internet connectivity. About 60 per cent provide mobile phones to staff for business purposes; about 70 per cent 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 per cent of enterprises stated that Internet access had had a substantially positive impact on their businesses and operations, with another 27per cent recognizing 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 (e.g. post offices, hospitals) remain underserved by broadband. How further government is to leverage technology to improve public service provision 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 expedited broadband deployment.
It is just over one year when your assumption of office as Airtel CEO, how has the journey been?
Terrific. 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 organization 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 reorganized our operations so that we can serve Nigerians better.
We recognize 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.
What is your assessment of Airtel’s investment, especially as it concerns expanding your 3.75G footprint?
Since acquisition of Zain in 2010, Airtel has invested well over $1.5bn (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 High Definition (HD) voice service in Nigeria. We were also the first to complete Long Term Evolution (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.
With all the investments and assertions so far made, it seems Airtel is shifting from voice-based company or a data-centric Internet-based company?
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 organization.
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.
Are you satisfied with the level of competition today, looking at the operating environment?
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 revolutionized 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.
What is the potential significance of 700MHz allocation and what does this portend for telecoms consumers in Nigeria?
With 700MHz allocation, the possibilities are endless. With the spectrum allocation, GSM operators can significantly increase their capacity, improve quality, and also reduce capital expenditure, and the savings from operating costs will translate to affordable telecommunications services.
Without a doubt, the release of more spectrums can potentially impact positively on Nigeria’s GDP and may lead to the creation of more jobs,
The 700MHz Spectrum allocation can lead to duplex arrangement of 45MHz uplink (going leg) and 45MHz downlink (return leg) with a minimal duplex spacing of 10MHz. The 45MHz can provide 15MHz assignments into three times. Conversely, GSM operators have only 15MHz assignment in 1800MHz band (which is paired with 5MHz on the 900MHz).
We commend government for the role they have been playing in developing the telecommunications sector and we urge them to urgently finalize and conclude the 700Mhz allocations. There should be effective coordination between the Nigerian Communications Commission, National Broadcasting Commission and National Frequency Management Council to ensure that the 700Mhz spectrum band is cleared and released for telecoms services as recommended by the International Telecommunications Union.
It is instructive for government to apply Administrative Charge Regime in setting Reserve Price for future Spectrum Auction. Spectrum Auction should not be seen as a revenue generation activity, but rather an avenue to drive the socio-economic development of the country. It is vital therefore for Reserve Price of future Spectrum Auction to be kept low, so that the initial financial outflow in respect of the spectrum fee does not adversely impact the capacity of the successfully bidders to satisfy immediate roll out obligations.
What are the missing links in the demand and supply chain of broadband growth?
On the demand side, application development is key and government patronage for the development of e-Government services such as e-agriculture, e-health, e-education. On the supply side, there is a need for roll-out obligations and financial incentives to support same as well as reasonable terms for access to infrastructure.
There is also a need to address issues relating to multiple regulation, taxation and destruction of infrastructure. There is also a critical need for timely availability of spectrum for 4G services. There is a need to declare telecoms infrastructure as critical national infrastructure to give needed protection to these infrastructures in view of their critical importance to socio-economic well-being and also national security.
What should government do or should have done as a deliberate policy in terms of broadband development?
The Nigerian National Broadband Plan has been approved by the president. This is a step in the right direction.
It is a milestone and we applaud the government for this. The next step will be the implementation of the plan. Airtel is urging the Federal Government to implement this plan as this move will open a wider window for us to serve our customers with the latest broadband value offerings.
What are your thoughts on three-tier Broadband policy- Active, Passive and Retail segments?
We trust that the NCC would ensure appropriate regulatory specifications that will continue to drive competition and lead to greater broadband penetration.
With roll-out obligations, reasonable conditions for access to infrastructure and financial incentives, the current licensing structure in the industry adequately addresses the requirement for robust infrastructural roll-out and support broadband penetration.
ITU has a 40 per cent bench mark for Broadband penetration in developing countries by 2015, are we on track to meeting that target?
The newly approved Nigerian National Broadband Plan envisions a five-fold increase in broadband penetration by 2017.
As a key player in the telecom sector with 3.75G in 36 States of the Federation and the Federal Capital Territory, Airtel is well positioned to assist Government drive the Plan, given positive policy action by government.
Where do you see your company in the next five years?
The vision is always to be the best and provide innovative and quality service that will delight Nigerians. There is a lot of room for growth in this area. The growth will be aided, from the supply side, through timely availability of spectrum in the 700/800MHz (Digital Dividend) and 2.5/2.6GHz to enable delivery of 4G services in the country.
There is also a need for support for application development and local content to assist broadband adoption by the citizenry.
We have seen the termination of Trans-Atlantic Fibre Optic Cables in the country in the last five years or more, but the cost of Internet is still high, penetration is still available in selected cities. What is the way forward?
The challenge is moving the capacity in-land, criss-crossing the country with fibre-cables. Several challenges adversely impacting above include: right-of-way issues, multiple taxation, multiple regulation and digging of fibre negatively impact on the roll-out of fibre.
The good news is that these challenges have been identified in the Nigerian National Broadband plan and it is our hope that government will continue to give the right support for the implementation of the plan.
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