Nigeria’s 5G Challenge And Why It’ll Take Very Long To Happen

Nigeria’s 5G Challenge And Why It’ll Take Very Long To Happen

The Nigerian Communications Commission (NCC) has since provided clarity that it has no interest in regulating Over The Top Technology (OTT) solutions like WhatsApp, WeChat and Skype. Prof Umar Garuba Danbatta, NCC’s Executive Vice Chairman (EVC) noted that few days ago, saying that it will “be difficult to regulate OTT”.  An over-the-top (OTT) application “is any app or service that provides a product over the Internet and bypasses traditional distribution” channels like the ones offered by telecom companies.

Prof Umar Garuba Danbatta, NCC’s Executive Vice Chairman (EVC) disclosed this information on 19 of October 2017 when a delegation from the United States (US) embassy paid a working visit to the commission’s headquarters in Abuja.

According to him, though NCC understands the operators’ “plight” the truth is that there is nothing we can do for now.

The NCC EVC, said he had interacted with heads of telecom industry’s regulatory agencies in the US and some other advanced economies and he was indirectly told that OTT couldn’t be regulated for now.

[…]

“We want investors to come and invest in telecoms infrastructure across the country. I believe they will make their money in no time. Our investment environment is becoming friendlier, our security has improved greatly and the Federal Government had promised some number of incentives for would-be investors.”

 

Largely, this statement is just a confirmation of what many people had expected: NCC lacks the technical capacity and also the legal frameworks to do such. Nigerian people can sue it if it blesses the practice in the industry. While the people are using the WhatsApp, the users have already paid a fee to connect to the Internet in order to have the capacity to use WhatsApp. What the telcos need, in my opinion, is to explore new business models that will move into monthly plan. They have the customer identities and can practically work together to ensure that a monthly plan business works. Once the customers are moved from pay-as-you-go to monthly plans, relying on the data of customers they have, the issue of OTT will be lightly managed. If they offer usage data tiers, people can subscribe to what works for them, monthly.

The Transition to 5G Era

In the next few years, most global telecom operators will begin the transition from 4G to 5G. It is going to be a challenging period for telcos in Africa if they do not find new revenue sources. Yes, we will expect the migration to 5G but without the funds, nothing will happen in Africa. In a way, you have to pity these companies for providing dump pipelines upon which aggregators like Facebook, WhatsApp and WeChat feed upon, without any compensation. Unfortunately, that is the structure of the web. From Fortune Newsletter:

…. Most of them are in the telecoms equipment business. Nokia’s shares fell 15% Thursday after it warned of a wider-than-expected loss this year and said 2018 could be just as miserable. Last week, Ericsson had reported its fourth straight quarterly loss. Mobile carriers have simply stopped spending until it’s time to upgrade to the 5G standard.

I do not see how Nigerian telcos can participate in financing the 5G without capital. MTN will be dealing with fines imposed on it for the SIM card registration over the next few years. Airtel is really challenged in Nigeria as market shows in India. Glo is not making money that much either while 9Mobile is loaded with debts. So, the 5G era may be long before it comes to Nigeria.

What Telcos Can do

The available options to raise capital for 5G are not easy. I will list some of them here:

  • Diversification of Revenue: MTN has been leading in startup investment with its partnership with Germany-based Rocket Internet, the owner of Jumia. MTN invested massively in this business. The problem is that Jumia is not going to make so much profit that will reward MTN with dividend to fund 5G. Kenya’s Safaricom is turning itself into many things: from ecommerce company to taxi app. But Safaricom is unique: it is part of the Kenyan government with the control of MPESA. So, it can do many things which other players in most markets cannot do. I am not sure anyone could have gotten the go-ahead on MPESA if not for the government’s interest in the telecom giant. Nevertheless, even if you build these operations, you need to burn capital to win. The profit will not come fast enough to help in financing 5G network.
  • Ask OTT Players to Pay: There is also an option to ask Facebook which owns WhatsApp to pay the telcos. But this does not make sense. Facebook, if NCC supports such an idea, will simply make WhatsApp not available in Nigeria. Nigeria is not such a critical country to bully Facebook in this way. They will just go instead of having to pay. Google did a similar thing with newspaper companies in a European country and exited its Google News when the regulation became very difficult. Of course, when Google left, the newspapers saw massive drop in traffic and went and begged Google to return.
  • List in Nigerian Stock Exchange: That is a reasonable path. My suggestion will be for them to dual list in Johannesburg Stock Exchange even as they list in Lagos. That will help the telcos raise capital.
  • Private investment: Very tough because if the revenue stream is dropping, due to technology disruption, raising private capital will be more challenging. So, for this to work, the business will be restructured with a business model that shows paths to profitability.

All Together

It will be challenging to have the capacity to raise new funds when your main product is under threat from many angles. The telcos have one clear path to fixing this problem: concatenate all the biometric data they have and quickly use that data to unveil monthly-plan only products in Nigeria. Then make sure there are many options in the monthly plans, structured by data size, for Nigerians to subscribe based on their needs. Once you do that, it is irrelevant whether they are using WhatsApp or Skype in the platforms. At least, they will pay monthly fees to have access to the web to do the WhatsApp or Skye.

The technology industry is very challenging and it is unforgiving: Apple was rumored to have fired an engineer whose daughter posted a video of his iPhone X in YouTube. That shows you that no one wants to lag behind. Apple likes the aura of expectation that comes with its products, even as people paying now for iPhone X can only wait for extra 6 weeks to have the product. So, in this business, there is nothing like forgiveness as everyone wants to win. The telcos need to have that mindset because Silicon Valley will not send them any help: they will continue their global domination. Only novel business models can provide paths for local firms to win. The telcos can do that if they innovate.

 


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