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Spectrum Trading: NCC seeks public comments on guidelines

ITRealms : The Nigerian Communications Commission (NCC) is seeking public comments on the draft guidelines on Spectrum Trading in the ...

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Monday, April 13, 2015

Emerging monopoly in Nigeria’s telecom industry






While nobody is against fair competition in the market place, there is a need to be concerned when an entity by virtue of its ambitious expansion plans ostensibly develops into a monopoly. That appears to be the implication of the recent development in the telecommunications sector, which has been celebrated for its competitiveness since the deregulation policy of the early 2000s.

MTN’s recent acquisition of Visafone Nigeria gives it access to valuable 800 MHz spectrum band which will enable it provide 4G LTE services. The 800MHz spectrum band is currently characterised by the presence of numerous sub-scale players who have been unable to utilise the spectrum efficiently. This acquisition places MTN in the enviable position of being the only GSM operator with access to this spectrum and thereby growing into a behemoth.

From a dominant player to a full blown monopoly, the Nigerian telecommunications consumer will be the ultimate loser. If a single operator owns all the variables in the market in which it plays, the consumer is left with little choices with the absence of real competition engendering high tariffs and possible poor quality of service.

The Nigerian telecommunications scene, specifically the GSM/CDMA telephony sub-sector, is dominated by four GSM service providers namely, MTN, Airtel, Glo and Etisalat, alongside CDMA operators which have mostly been forced out of business by alleged non-competitive regulations which favour the GSM service providers.  

 According to industry analysts, issues such as interconnect fees and limited coverage areas pushed the CDMA operators to the back seat despite offering cheaper call rates. Interconnect fees favour the networks with larger huge subscriber base. In this regard, MTN Nigeria and Airtel (then known as Econet) are better placed having enjoyed first mover advantage as pioneer GSM service providers in Nigeria.

The 800 MHz spectrum band is characterised by the presence of sub-optimal licensees who have largely been inactive over the last eight years. For the few who have remained active, their performance has been sub-optimal and most lack the financial capacity to deploy services and thus compete effectively with a behemoth like MTN. Re-farming the 800MHz spectrum to make it available for operators who have demonstrated the ability to deploy telecommunication services appeared to be a challenge for the Nigerian Communications Commission (NCC), the industry regulator, as the current licence holders in the spectrum band have been unable to meet their roll-out obligations.

Over the years, MTN has spread its tentacles across the Nigerian market, moving from offering just telephony services to being a one-stop telecommunications service entity. The quest to increase its market share has thrown up an unhealthy trend which, if unchecked by the industry regulator, may lead to a complete monopoly and a throwback to the pre-GSM era when the government corporation, NITEL dispensed service at its whim and caprices. This situation, industry watchers say, will not offer the Nigerian subscriber the viable options that an open market economy throws up.

In 2006, MTN Nigeria acquired VGC Telecoms, a CDMA entity with a growing subscriber base in the Lekki/Victoria Island/Ajah axis of Lagos State. MTN Nigeria purchased VGC Communications Limited (VGCCL) for $70 million (N9.3 billion). VGC has since been subsumed into MTN Nigeria, giving the company the advantage of providing both CDMA and GSM services, unlike other GSM operators.

Visafone only obtained approval for the additional spectrum this year, and two months later it sold the asset. MTN’s access to sub 1GHz spectrum to the exclusion of other leading operators provides it with an unfair competitive advantage in the data market where it can easily deploy its size and profitability to further entrench its dominance in the market and stifle other players’ ability to compete. Given that it has already been declared dominant in the transmission market, MTN’s ability to control both spectrum and access at prices it dictate to industry and consumers makes this an unhealthy development, for which the consumer will be the ultimate loser.

This advantage poses a real threat to the viability of Nigeria’s telecommunication industry as it potentially leaves it with a single dominant player in both the retail voice and data markets. In the long term, the Nigerian subscriber will pay for this in the form of higher tariffs, poor quality of service levels, little or no incentive for innovation and a bully service provider due to the lack of competition in the market.

There is an urgent need for close regulatory scrutiny by the NCC in line with what obtains for any dominant operator in any market. The NCC must carry out an urgent review of the acquisition to ensure that such purchase does not give MTN an unfair advantage in the industry, which may be detrimental to the growth of a viable and healthy telecommunications industry in Nigeria.

Moses Kwambe is a consumer rights advocate based in Lagos
 

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