Nigeria: Nigeria Communication Profile

Africa’s largest telecom market with more than 110 million subscribers

Nigeria is one of the biggest and fastest growing telecom markets in Africa, attracting huge amounts of foreign investment, and is yet standing at relatively low levels of market penetration. Far reaching liberalisation has led to hundreds of companies providing virtually all kinds of telecom and value-added services in an independently regulated market. After a decade of failed privatisation attempts, the incumbent national telco Nitel and its mobile arm M-Tel are currently in liquidation.

The West African country has overtaken South Africa to become the continent’s largest mobile market with now more than 110 million subscribers, and yet market penetration stands at only around 70% in early 2013. Subscriber growth accelerated again in 2012, driven by lower prices and a growing demand for mobile broadband services. The rapid growth has led to problems with network congestion and quality of service, prompting the regulatory authority NCC to impose fines and sanctions. Every year the network operators are investing billions of US$ into additional base stations and fibre optic transmission to support the ever increasing demand for bandwidth.

Much of the remaining addressable market is in the country’s rural areas where network rollouts and operations are expensive. This in combination with declining ARPU levels is forcing the networks to streamline their operations and to develop new revenue streams from services such as third generation (3G) mobile broadband, mobile payments/banking, and others. Major infrastructure sharing and outsourcing deals have been concluded. Several LTE networks are being rolled out, but commercial launches have been hindered by delays with frequency spectrum allocations.

Nigeria is also the most competitive fixed-line market in Africa, featuring a second national operator (SNO, Globacom) and over 80 other companies licensed to provide fixed telephony services. The alternative carriers combined now provide over 85% of all fixed connections, the majority of which has been implemented using wireless technologies. This in combination with a unified licensing regime gives the network operators the opportunity to also enter the lucrative mobile market and has helped them to secure hundreds of millions of US$ in investments from local and foreign investors. However, fixed-wireless connections have declined in the past few years in favour of mobile services. This has prompted mergers and acquisitions (M&A) in the sector, which is likely to continue in the coming years.

The arrival of a second international submarine fibre-optic cable (Glo-1) in 2009 and a third and fourth in 2010 and 2012 (Main-One and WACS) has broken the monopoly of Nitel’s notorious SAT-3/WASC cable and is revolutionising the country’s underdeveloped Internet and broadband sector by reducing the cost of international bandwidth by up to 90%. Additional submarine cables are scheduled to go online in 2013 and 2014. Significant consolidation has occurred among Internet service providers (ISPs) as new powerful players from the fixed-wireless and mobile sector have entered this market with 3G mobile and advanced wireless broadband services such as WiMAX. The Internet Protocol (IP)-based next generation networks currently being rolled out are enabling converged voice, data/Internet and video services, VoIP is already carrying the bulk of Nigeria’s international voice traffic. Applications such as e-commerce, online banking and e-payments, e-health, e-learning and e-government are rapidly evolving.

Although the market is one of the most competitive in Africa, the industry regulator is tightening price caps and mandating further reductions of interconnect rates. Following years of delays, mobile number portability (MNP) was finally introduced in 2013, promising to make the market even more competitive.

Estimated market penetration rates in Nigeria’s telecoms sector – end 2013

(Source: BuddeComm based on various sources) Convergence, Broadband and Internet Market

Considerable consolidation has occurred in Nigeria's Internet and broadband part, from over 400 ISPs three years ago to around 150. New leading cluster from the fixed-wireless and mobile network operator camps have entered the market with 3G mobile and advanced wireless broadband services such as WiMAX. T

the Internet Protocol (IP)-based next generation networks currently being rolled out are enabling converged voice, data/Internet and video services. VoIP is by presently carrying the bulk of Nigeria's international voice traffic. The coming of a second international submarine fibre optic cable (Glo-1) in 2009 broke the monopoly of Nitel's notorious SAT-3/WASC cable and is set to revolutionize the market by dropping the cost of international bandwidth by up to 90%. Supported by the expansion of several competing national fibre backbone networks, applications such as e-commerce, online banking and e-payments, e-health, e-learning and e-government are rapidly evolving.

Fixed Line Market and Infrastructure

Nigeria is the majority aggressive fixed-line market in Africa, featuring a second national operator (SNO, Globacom) and over 80 other companies licensed to provide fixed telephony services. The option carriers combined presently provide over 95% of all fixed connections while the ailing incumbent, Nitel, is looking for a new planned shareholder and new business models to turn the company around.

The predominance of fixed lines has been implemented using wireless technologies, which gives the network operators the occasion to as well enter the profitable mobile market under a new unified licensing regime and has helped them to fasten hundreds of millions of US$ in investments from local and foreign investors. Several microwave and fibre-based national backbone infrastructures are being rolled out by various companies.

Nitel's control on worldwide fibre bandwidth via the SAT-3/WASC submarine cable system ended in 2009 at the same time as Globacom's Glo-1 cable landed in the country, which will as well deliver a boost to the country's underdeveloped Internet and broadband sector. Additional submarine cables are scheduled to go online in 2010 and 2011.

Telecom Market and Regulatory

Nigeria is one of the major and greatest growing telecom markets in Africa, attracting huge amounts of foreign investment , and is from presently on rank at relatively low levels of market penetration. Far reaching liberalisation has led additional than hundreds of companies providing virtually all kinds of telecom and price-added services in an separately regulated market. The mobile segment, which has seen triple digit increase rates five years in a row since competition was introduced, has been joined by a number of additional players under a new unified licensing regime which is expected to as well boost the country's underdeveloped Internet and broadband sector.

Third generation mobile and WiMAX wireless broadband services are being rolled out at a rapid pace. Next failing three times in the completed, the privatisation of Nitel, the incumbent national telco, is scheduled to be finally completed in 2010.

Mobile Market - Overview

Nigeria has overtaken South Africa to become the continent's major mobile market with presently over 75 million subscribers, and from presently on market diffusion stands at only around 50% in early 2010. However, subscriber increase slowed appreciably during 2009, half as a consequence of the world economic crisis. A large all of the remaining addressable market is in the country's rural areas where network rollouts and operations are costly.

This in mixture with declining ARPU levels is forcing the networks to streamline their operations and to develop new revenue streams from services such as third generation (3G) mobile broadband, mobile payments/banking, and others. In the mean time the operators are progressing out national fiber backbone networks to support the ever increasing request for bandwidth.

Telecoms Market Statistics

Nigeria is one of the major and fastest growing telecom markets in Africa with still gigantic further increase potential in all sectors. A new unified licensing government has intensified contest between service providers and is driving them to initiate converged fixed and mobile, voice and broadband services to uphold market share and limit the decline in average revenue per user (ARPU). Both fixed and mobile service providers are benefitting from an increasing request for Internet access and broadband capabilities.