" ITREALMS: GSM, the journey so far

Wednesday, August 23, 2006

GSM, the journey so far

Features of the week:

This month, the Global System for Mobile communications (GSM) services clock five years in the country, REMMY NWEKE and CHIKE ONWUEGBUCHI, in this report, examine the journey so far.

Half a decade later
Oh! It is already five years since the Global System for Mobile communications (GSM) made its debut in the nation’s telecommunication sector.

Precisely on August 8, 2001, Nigerians witnessed a new dawn in what is now referred to as the GSM revolution, with the launch of services by GSM operators, after they scaled through the hurdle of auction conducted by the Nigerian Communications Commission (NCC).

The three operators that made the hurdle include Econet Wireless now Vee Networks, MTN Nigeria Communications and the Nigerian Telecommunications Limited (NITEL).

Specifically, NCC gave the operators till August 8, 2001 to roll out services after the completion of the auction on February of the same year.

Contentious GSM pioneer
The position of who was the first among these operators to roll out has remained a contentious one as operators continued to claim different dates that is most suitable to them.

While Vmobile claims to be the first having taken off on August 6, 2001; two days ahead of competition and three days ahead of the regulatory deadline. Vmobile emerged on March, 15, 2004 and has since transformed its ownership structurally, with the acquisition of the majority shares by CelTel Netherlands recently.

Having recorded its 1 millionth subscriber in December of 2003, Vmobile has over six million subscribers actively on its network with two numbering plans; 0802 and 0808.

MTN Nigeria, on the other hand, also lays claim to having made the first GSM call on May 16, 2001. As part of the MTN Group based in South Africa and acclaimed continental leading cellular telecommunications company, MTN Nigerian, noted it paid $285 million for one of the four GSM licences on offer as at January 2001.

Till date, MTN has invested in excess of US$1.8 billion in building mobile telecommunications infrastructure in the country.

Recently, MTN Nigeria expanded its network capacity to include a new numbering range with the prefix 0806, which is after exhausting its initial subscriber numbering range of 0803.

Nevertheless, as long as this contention persists on actually who was the first to pioneer GSM calls in the country, it is only NCC that can be the arbiter.

As postulated by one subscriber, “being the ‘first’ is for the regulator to unravel.”

Whereas the claim for the pioneer status continues, the third, NITEL was no doubt in battle with anybody.

The auction
Remarkable about the GSM auction was what experts described as its globally accepted transparency. This was also attributed for attracting massive Foreign Direct Investment (FDI) in the country since 2001.

At the auction, all the three initial GSM operators, that is MTN, Econet and NITEL paid the sum of $285 million each.

Presently, Nigeria records about N1.143 Trillion in telecommunication sector alone, which is second to Petroleum.

Expert on Information and Communication Technology (ICT) exhibitions, Mr. John Thomason, had earlier predicted an increased flow of FDI in the nation’s telecommunications sector.

He pointed out that there is renewed confidence on the nation’s economy and particularly on Information and Communication Technology (ICT) sub-sector.

ITREALMS Online recalled that Nigeria’s FDI in telecom sector rose to $10 billion as at December 2005, against $5 million in 1999.

By 2003
As at the last quarter of 2003, when the Second National Operator (SNO) Globacom entered the telecom scene in the country, a different ball-game eventually began as competition somewhat hot up.

This brought about more Value Added Services (VAS) and change of market predictions, which have grown tremendously and as at June 30, 2006, Nigeria has recorded 25 million subscriber base across the networks with Glo in the neighbourhood of 9 million.

Glo’s entrance also marked the sign of good tidings to come the way of subscribers in the country, because sooner than it commenced operation, the telco began to lay infrastructure nationwide.

This step, industry watchers said, was an indication that it is ready for business and in fact has been leading the pack ever since then.

High tariff
On launch of services, however, GSM operators were confronted with the challenges of lack of
basic infrastructure such as erratic power supply, insecurity and transmission facilities.

They had to build their own transmission backbone, provide power supply at all their base stations with backups, as well as security; all these add to high operating cost.

In spite of these inadequacies, operators managed to roll out services in the country and gradually extended to various parts of the country.

Unfortunately, subscribers of these networks were meant to bear the pains of inadequate infrastructure through high tariffs as per minute call was then N50.

Initially, when GSM came, subscribers were billed per minute only, but two years later, when the quality of service deteriorated as a result of congestion experienced basically because the two network operators then dominant, Vmobile and MTN, could not contend the rush for their services by Nigerians.

This was due to high cost of acquiring NITEL lines, which had monopoly of telecommunication services in the country hitherto.

This scenario did not go down well with Nigerians, which prompted National Association of
Telecommunication Subscribers (NATCOMS) to stage a protest by encouraging subscribers to switch off their phones for about 12 hours on September 19, 2003.

They complained among others, the inability of operators, particularly GSM, to introduce per second billing (PSB) options and reduction of tariff charges.

Although, the protest yielded some positive results, yet it took the roll out of the SNO, Globacom, for the introduction of PSB into the system.

Essentially, some of the operators had earlier told Nigerians that it would take till end of this year, 2006, for PSB to take effect before the Glo launch on August 30, 2003.

With the PSB made possible, other operators have no choice than to commence introduction of PSB in their networks, crashing tariffs to N48 and N40 per second and per minute respectively.

Five years after
But five years after, the story of poor quality of service and high tariffs are still the same. It is believed that the bigger a business grows, the higher the profit, especially with telecommunication industry where volume drives the business.

Till date, for instance, Nigerians have been paying N15 for 160 words of Short Messaging Service (SMS) since inception of GSM, even as the like of Vmobile offers N10 SMS off peak, across network as from 10pm.

Compared with other developing countries in Africa such as Cameroun, Egypt and Zimbabwe, network operators in those countries give free weekend calls to their subscribers.

Presently, Nigerians are asking for free intra-network calls at least, during the off peak periods where operators will not incur any interconnect debt.

This year also seems like the year of promos, as Glo began the year with 180 in 180 days, Vmobile continued with its ROSE – Roll Out Service Everywhere, MTN was not left out as it made several millionaires among its subscribers.

Before 2001
However, before August 2001, Nigeria had less than 500,000 fixed and mobile telephone lines in all. Today, the country has about 25 million mobile lines and a little over one million fixed lines for a population estimated at over 150 million.

The nation’s teledensity ratio, according to the International Telecommunication Union (ITU), has marked up tremendously from 0.004 to 18.18 as at March this year. It is regarded thus as among the fastest growing telecom markets in the world.

The real cost of acquiring a phone has gone down from about N100,000 to about N5,000, approximated 0.2 per cent.

The same could be said of the Subscriber Identification Module (SIM) cards, which are now often attached to airtime credit and given out free to fresh subscribers when once they pay for the airtime.

GSM has also changed the way Nigerians live as communications between families, friends and colleagues have been tremendously enhanced.

It has as well opened the windows of employment to most Nigerians, who are now gainfully engaged in operating ‘call centres’ others earn their living by the sale of recharge cards, SIM cards as well as phones and its accessories.

Some states governments have collaborated with GSM operators to launch schemes designed to give jobless people employment by establishing for them ‘call centre’ businesses. Operators have also contributed through engaged social responsibility schemes.

Outside Nigeria

Drawing from the experiences of Europe and United States (US), Chief executive, Infosoft Nigeria Limited, Mr. Pius Okigbo Jr, said GSM services have not been fully exploited in the country, asserting that mobile phones “can do all things.”

He also noted that with an effective GSM services in the country, a bank shareholder in a remote village in Abia State need not come to Lagos to check his holdings. All the bank’s registrar needs to do is to text details of the company’s financial position to the shareholder via a GSM phone.

“Imagine a business life in which a cell phone constantly gives an Ijaw fisherman in Brass weather report about the sea, or a business life in which you can buy an airline ticket through your cell phone,” said Okigbo, referring to a riverine town in Rivers state.

Unified Licensing Regime
As Nigeria moves into the next level of convergence, the Unified Licensing Regime (ULR), it is hoped that things will change for the better. Nigerians want promos such as free intra-network calls on weekends as well as reduction on the cost of SMS, among others.

Before now, NCC has licensed eight telcos to commence operation as Unified Licensing Operators (ULO), of which all are still very enthusiastic about.

These telcos with ULR licenses include Multi-Links, Starcomms, Prestel and Intercellular as well as MTN Nigeria Communications, VGCCL, Danjey and Bodex.

After this anniversary, more operators are expected to join in the ULR game and industry analysts predict that by this time next year, a far great difference must have been made in the sector due to the coming of ULR.

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