Friday 29 December 2017


Ahead of the sale of 9Mobile, some analysts in the telecommunications sector are of the view that the broader interests of the telecom sector and the larger economy may be best served in its ongoing sale if a fresh telecom player with the demonstrated ability to source offshore capital is selected. Of course such a player, according to them, must also possess demonstrable technical competence.

The December 31, 2017 deadline set for the sales may not be feasible due to some issues that must be sorted out. However, those that are privy to the process said the curtain is expected to be drawn on the sale of 9mobile in mid-January, 2018.

The bidding process is currently in its last stage, five major organizations are in the final shortlist in the 9-Mobile bid, these includes Globacom, Airtel, Helios, Teleology and Smile Communications, respectively.

Globacom possesses a Second National Operator license, obtained in 2003, while Airtel is the Nigerian subsidiary of Bharti Airtel. Smile Communications operates a 4G/LTE network while Helios is a private equity firm. Teleology is made of a number of professionals with several dozens of years of international telecom experience, including experience in Nigeria, mainly under the auspices of MTN.

While some analysts believed that the experience of Globacom and its financial war chest in the Nigerian market could serve as a major advantage, others believed that a Greenfield operator, without a current presence in Nigeria may be best placed to add value to the industry and economy at large, because it would be forced to source financing internationally in order to compete effectively with current players in the market.

An analyst with PriceWaterhouseCoopers (PwC), who does not want his name mentioned because of the sensitivity of issue, expressed the view that the telecom industry is currently in a severe crisis. According to him, many do not realize this, but if the contribution of the telecom sector to Nigeria’s GDP is declining from 9.3 per cent in 2016 to 7.4 per cent in 2017, according to the Nigerian Bureau of Statistics, (NBS) at a time when the economy is experiencing positive growth, it is an indication that there is a fundamental problem with the telecom sector.

Still making reference to the NBS, he said the Nigerian economy experienced year-on-year GDP growth of 1.40 per cent between 2016 and 2017, “the current scenario is alarming and should send a signal to the regulators that the sale of 9mobile must be treated as a national priority.”

The PwC official reasoned that the 9-mobile sale will be crucial to the gradual recovery of the telecom sector, if it is done in such a manner that systematically stimulates the inflow of foreign direct investment into the country.

The telecom industry in Nigeria is indeed passing through a difficult period, perhaps the very worst since 2001. For instance, in 2016, MTN, the biggest of the operators posted a financial loss on the back of the fine that had been slammed on it by the NCC for purportedly failing to disconnect some SIMs within a specified deadline. In addition, in the last few years, the Forex regime in Nigeria has been fairly difficult and complicated with telecom operators repeatedly protesting about the difficulties of accessing Forex to fund their operations. Not unsurprisingly therefore, capital expenditures by the telecom firms have been declining sharply over the years. It was down by 40 percent (in dollar terms) in 2016, for instance, even though this decline was also partly due to fluctuation in the local currency.

Despite these pressures, revenues are fast falling. Whereas voice used to be regarded as “king” in the telecom sector, this no longer holds. Consumers have found a way to by-pass paying for voice calls on telecom networks by making calls via the data networks going through other-the-top applications like WhatsApp, Facebook, Skype and others. What used to be SMS revenues are also lost via free chat services provided by the same OTT operators. To make matters worse, operators are experiencing huge operational difficulties in the local environment.

The Chairman, Association of Licensed Telecoms Operators of Nigeria, Gbenga Adebayo, regularly complained about multiple taxation across the country where every tier of government has come to see itself as a bonafide regulator of the telecom industry which is imagined to be a cash cow.

Based on the latest figures released by the NCC, active subscriber numbers of all the operators have declined considerably from over 110 million subscribers in October 2016 to about 100 million subscribers a year later, while internet subscriptions are practically stagnant, having been on the same level over the same 12-month period, despite the gaps in the broadband industry.

According to the PwC official, all of these further highlight why it is crucial that 9mobile’s sale is conducted as strategically as possible. “It must be such as to guarantee the injection of fresh capital into the organization and the economy, in such a manner that the company is saved from its financial troubles but also empowered to take on its competitors and compete aggressively for market share. Ultimately it is the Nigerian consumer and the larger economy that will be the winner,” he stressed.

9mobile ran into financial trouble some months ago after it defaulted in the servicing of a syndicated loan which it had obtained from a consortium of lenders. Before then, it had given a good account of itself, competing aggressively with older telecom operations. In the wake of its financial crisis its erstwhile technical partners, divested from the operations, departing with the franchise for the trading name, “Etisalat”, and forcing a hurried re-branding of the company to 9mobile. (Guardian)

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