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Making Indigenous Operators Competitive

January 5, 2022

Making Indigenous Operators Competitive

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ADEYEMI ADEPETUN, in this report, writes that indigenous operators have expressed readiness to up their game in Nigeria’s $75 billion telecoms sector if handed the opportunities and the environment becomes more conducive.

WITH 20 years of Nigeria’s telecommunications revolution largely dominated by foreign operators, indigenous players have expressed readiness to contribute more to the economy if given the opportunity to demonstrate their capabilities at the highest levels.

These operators said they are ready to improve the worth of the sector, which is currently put at over $75 billion.
According to them, Small and Medium Enterprises (SMEs) in most countries are recognized as key drivers of accelerated and sustainable economic development. They stressed that their flexibility, dynamic adaptation to changing market conditions, and ability to stimulate ingenious entrepreneurship and respond to technological innovations make them significant systems for technology acquisition and transfer.
This, they claimed is the reason why the development strategies of many governments now indicate that particular attention be paid to the SME sector as a prerequisite for long-term social and technological progress.

These operators spoke at the maiden Policy Implementation Assisted Forum event (PIAFo) on the National Policy for Promotion of Indigenous Content in the Nigerian Telecommunications Sector themed: “Facilitating policy implementation to deliver value in the Nigerian Telecoms Sector,” the virtual edition.

Operators want Five Years Tax Holiday

According to them, a five-year tax holiday would do a lot to improve their offerings in the sector, cum economy, and allow them to compete favorably with bigger players, which had enjoyed the same benefits in the past.

The operators said local players in the industry deserved pioneer status incentives, which should include tax and duty waivers on their importations.
According to them, these incentives were enjoyed by the GSM operators when they newly got their licenses in 2001 and such gestures led to their rapid growth.

The Executive Director, Business Development at Broad-based Communications Ltd., Chidi Ibisi, said aside from tax waivers for the small players, the telecoms sector was seriously in need of intervention from the government.

According to him, the sector needs a special fund like the Nigerian Content Intervention Fund (NCIF) supervised by the Bank of Industry. “We need a similar Fund as NCIF with seven percent interest rate, 10 to 15 years loans, and equity participation,” he said.

Ibisi said indigenous players need seed funds, increased subsidies, incentives for local device manufacturers including duty waivers for equipment and components, pioneer status for indigenous players in manufacturing, services, research and development, and innovation fund.

The Broad-based Communications chief said in other climes, they make some funds available to indigenous players.
For instance, Ibisi said in the USA, there is a $65 billion Broadband Fund, which comprises $42.45 billion for a new Broadband Equity, Access and Deployment program focused on connecting un-and underserved areas; a $1 billion grant program targeting middle-mile infrastructure; and $14.2 billion for an Affordable Connectivity subsidy program.

According to him, in the UK, there is a £30 billion broadband expansion program, while Germany has $14.5 billion Digital Infrastructure Fund and $10 billion for broadband expansion.

Making reference to the New National Broadband Plan (2020-2025), which requires $5 billion for implementation, Ibisi said national backbone and metro fibre of 80,000km would cost $1.5 billion; 4G roll out targeting 2,500 base stations is expected to gulp between $1-2 billion; 5G roll out with 6,000 base stations is pegged at $500 million; local manufacture of devices to cost $100 million.

He recalled that there have been power and aviation funds via the Bank of Industry of about N300 billion, with seven percent interest rate, and between 10 and15 years tenure.

According to him, there has been $37 billion Infrastructure Fund of the Infrastructure Corp of Nigeria (InfraCorp), managed by four asset managers with $2.4 billion seed capital from the Federal Government. He added that there was also the Nigerian Content Intervention Fund (NCIF) supervised by the Bank of Industry.

“We need a similar fund as NCIF with a seven percent interest rate, 10 to 15 years loan and equity participation; equity participation by InfraCorp; subsidies and grants, and pioneer status for five years (Tax Waivers and Duty Waivers),” Ibisi stressed.
Need for low-interest rates

Corroborating Ibisi at the forum, the Chief Executive Officer of Swift Telephone Network, Oluwole Adetuyi, said for the indigenous operators to grow, the sector would require access to funding for telecoms from financial institutions at low-interest rates.
“We need easy access to FOREX at Central Bank of Nigeria (CBN) approved rate, and provision of special intervention funds for the telecoms sector by CBN – as has been applied to other sectors,” he noted.

He said tax waivers as well as provision of grants and subsidies to telecoms operators would help the small players grow. Adetuyi also called for the reduction and harmonisation of Right-of-Way charges across states and local government areas.
While calling on the Nigerian Communications Commission (NCC) to put in place a strong local content policy because of the need to create employment, increase FDIs, improved technology adoption, enhance security and revenue and forex earnings, Adetuyi, represented by Chief Technical Officer of the firm, Dare Folorunsho, said most PNLs and local telecommunication companies in Nigeria falls into the SME category accounting for 60 to 70 per cent of jobs in most countries.

He claimed that in Nigerian telecommunication sector, these categories of network operators also account for a large share of entrants and exits.
Adetuyi claimed that the lack of regulation for healthy competition has created outright dominance of four players in the telecoms industry with a heavy legacy load that makes new technology adoption very slow.

“If Nigeria must play in the unfolding IoT market that is in excess of $20 trillion, it must use its local companies with smaller legacy loads to drive faster technology adoption,” he stated.

According to him, there must be urgent reforms, which must promote a regulatory environment conducive to the development of smaller firms as part of the consideration for growth; lesser regulatory burdens on small operators, and NCC should allow the use of Nigerian numbers on a global scale as it is with USA, UK Canada numbers.

More Interventionist Policy

On his part, Divisional CEO, ipNX, Segun Okuneye, seeks more interventionist policies to aid indigenous players.
Okuneye said interventionist policies are a carefully designed system of guidelines adopted, implemented and monitored with feedback for control and acceleration by a government.

He said considering the current relatively slow pace of infrastructure development in the country, interventionist policies by the government have become necessary in order to give telecoms operators the required leverage to resolve challenges that impede their ability to deliver seamless services to subscribers.

Supporting the views of both Adetuyi and Ibisi, Okuneye said interventionist policies will enable Nigeria to benefit from the increasingly global digital technology market; help to conserve foreign exchange for the country and boost exports; drive adoption of high quality for “Made in Nigeria” digital economy products are of globally accepted quality, and position Nigeria as a global outsourcing destination for digital jobs.

The ipNX chief said the telecoms sector in Nigeria is in dire need of some forms of government intervention to address the myriad of challenges facing the sector such as high interest rates, limited access to forex, high taxation, steep cost of Right-of-Way permits, denial of permits for infrastructure roll-out, damage to infrastructure, unstable power supply and others.

Government to encourage local production of telecoms equipment

In his keynote at the forum, the Executive Vice Chairman of NCC, Prof. Umar Danbatta, who said the Federal Government is ready to encourage domestic production of telecommunications equipment, components and software to meet local and export demands, noted that the Commission had established the Nigeria Office for Developing the Indigenous Telecoms Sector (NODITS) as part of the implementation of government’s local content policy in the telecoms sector.

According to him, the office is saddled with the responsibility of implementation of the local content policy as well as the Executive Orders 003 and 005.
“With the constitution of the NODITS, the industry should expect new guidelines and regulations bothering on indigenous content, local manufacturing of telecom equipment, outsourcing of services, construction and lease of telecoms ducts, succession planning in the telecoms sector, corporate governance, corporate social responsibility, etc. as the need arises,” said Prof Danbatta, who was represented by the Team Lead, NODITS, Babagana Digima.

Earlier in his welcome address, the Chairman, Organising Committee for PIAFo, Omobayo Azeez, said the forum was designed by the Business Metrics Nigeria Team to take the promises of the indigenous content policy in the telecoms sector beyond verbal commitment.

“We believe we can only achieve objectives of the policy by creating active dialogue around it to ensure that individual stakeholders understand how they fit into the bigger picture and what role is expected of them to attain these objectives for the greater good of our economy,” he said.

“Our desire is to change this order of poetic policy pronouncement and prosaic execution by creating a midpoint interface between the government and private sector players, where policies can be dissected, digested and driven to effective implementation, and later appraised using measurable metrics to assess their success over time,” he added.

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Making Indigenous Operators Competitive

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