Tuesday, May 25, 2010

Nigeria - Proliferation of operators is likely to lead to consolidation

[daily independent] One thing that has continually bothered telecom operators, stakeholders and subscribers, is the perceived proliferation of licensed telecom operators in the country. Many believe that the number of operational and non-operational telecom operators in the country is too many, compared to the 80 million subscribers across networks, and they are of the opinion that the situation is bringing undue competition that is adversely affecting the rate of development in the telecom sector.

Several debates have been made over the issue, but the telecom regulatory body, the Nigerian Communications Commission (NCC), has refused to make any definite statement on the issue, thereby tacitly allowing market forces, and not regulatory policies, to address the issue.

In 2003, when the debate was hottest, there were 23 licensed telecom operators in the country, but today the number has been pruned to 16, by what many believed to be natural market forces

Although the effect of market forces acting on the number of telecom operators appear glaring, some operators still believed that regulatory policies of government would handle the issue in a faster and more desirable way.

One of such operators is Starcomms, the largest Coded Division Multiple Access (CDMA) market player in the country.

Worried by the entire situation, Chief Executive Officer of Starcomms, Mr. Maher Qubain, spoke his mind on the need for proper government regulatory policies, as the best measure to tame proliferation of telecom operators in the country. Qubain, who spoke in Lagos at the weekend, blamed NCC and the government for the ugly situation, and explained that most of the licences issued by NCC were not put to use by the operators, thus making them dormant and unavailable to those who actually needed them.

He called on government to enforce merger and acquisition among telecom operators, especially with operators that have licences and could not rollout their operations. If done, it would further strengthen the entire networks, he added.

He cited the financial sector consolidation among banks, adding that the idea helped Nigeria to raise and have stronger and reliable banks in the country. The bank success story, he explained, was as a result of the enforcement of regulatory policies handed down to banks from its regulatory body, the Central Bank of Nigeria (CBN).

Qubain argued that India, with three times the size of Nigeria's population has about four operators managing the entire country's network, and wondered why Nigeria with smaller population compared to China, would be interested in multiple operators.

But Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON), Gbenga Adebayo, is among some telecom experts who strongly believed that regulatory policies werenot the best option to address the issue of proliferation of telecom operators in Nigeria. He rather believed in natural market forces, and the ability of individual players to operate freely in a telecom market that is highly capital intensive.

Adebayo who listed four categories of telecom operators, said "the first category are those who have licence and are operational, the second are those who have licence and are not operational, the third category are those who have licence but do not have network, while the fourth category are those that have licence, were once operational, but no longer in operation.

Each of the four categories of telecom operators, according to him, has its own challenges, which he said, would not be solved through policies and regulation, but by some natural market forces that would compel those with dissimilar problems to merge or allow acquisition from bigger and willing operators.

Explaining what he meant by dissimilar problems, he said two operators that have similar problem like insufficient funding would not do well if compelled by regulation to merge. They will rather do well if for instance one has problem of funding, and the other has a dissimilar problem of network capacity, he said.

Adebayo called on NCC, to continue to allow market forces to determine the growth of the market, but to probe into cases where operators apply for licence, get such licence and refused to rollout for reasons best known to them.

Another telecom expert, who is in support of market forces as against regulatory policies in dealing with issues of proliferation of telecom operators, is the National President of the Association of Telecom Companies of Nigeria (ATCON), Titi Omo-Ettu. Reacting to the issue on phone, Omo-Ettu dismissed the idea of regulatory policies in handling such matter, while supporting market force as the best way to address the issue. He said it would not be in the interest of the telecom industry to enforce policies of merger and acquisition, and suggested that natural market force be allowed drive the market. He gave instance of the large number of licensed operators in 2003, adding that the number has reduced to 16 based on natural market forces, insisting that the number would further reduce before the end of the year.

Citing example with newspaper ownership in the past, Omo-Ettu said government used to be the only proprietor of newspapers, and as a result determine the cover price, but explained that the whole scenario changed with time, especially with the emergence of several newspapers and magazines that are currently owned and controlled by individuals, which he said was a true function of market forces playing their roles in newspaper business. He, therefore, advised subscribers, stakeholders and telecom operators to allow market forces to determine the growth and stability of telecom industry in the country.

Be that as it may, the truth is that the liberalisation of the telecom market by the NCC, helped in opening up the market, a situation that led to fair play and fair competition in the telecom market.

Some are of the opinion that the market is vast to accommodate even larger number of operators, but which ever, one thing that is paramount is the need for a steady growth in the Nigerian telecom market, adjudged by world bodies as the fastest growing telecom market globally.

Nigeria: Between Policies And Market Forces in Telecoms Merger

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