Nigeria needs more investments to improve telecoms services, says Venn
David Venn is the Chief Executive Officer, Spectranet Nigeria, a provider of 4G/LTE technology and broadband service provider in the country, and has been in the telecommunications industry for about 35 years. He has lived and worked in many other countries in the Middle East, Asia and Africa as well as America. He spoke with ADEYEMI ADEPETUN, on germane industry issues.
To what extent has Spectranet repositioned Nigeria’s telecommunications sector?
Spectranet is a product company. We provide good quality broadband service. We are not a mobile phone company, we don’t offer phone and voice services, we offer data and Internet services, and basic broadband.
Our services are targeted at the home and offices. We are not talking about the big corporations; we are talking about people’s homes; those who want broadband services for their families, and also the small and medium sized enterprises. We give good quality broadband service. We do that in Abuja, Lagos, Ibadan and Port Harcourt.
Our main market is Nigerian families that want to have broadband in their homes, with WiFi for the whole family to use. And not just to use it for browsing, they use it for entertainment, for Television, YouTube, for Netflix; but also for email, for gaming, for Skype and every other thing the family will use it for. So, what we provide is Modem, put it in your house, scan it to 4G and it picks up our signal. That is the main thing we offer.
We have a lot of MiFi devices as pocket modems, you can take them with you, so you have data with you everywhere you go. It comes with a 12-hour battery.
The current data revolution is changing a lot of things. A lot of people now watch video, entertainment via Internet streaming, much more than they used to. Two years ago, if someone sent you a Facebook message with a video with it, you delete it straightaway, because you don’t want it to consume your data bundle. But now it starts playing automatically, and people watch it. People now watch more videos, and YouTube. You get a lot more content. And that’s a major change in the past two years in Nigeria.
How will you describe the Nigerian ICT market?
Spectranet initial investment was in 2009 with the licensing, and the 4G-LTE wasn’t available then, so the company launched with an earlier technology. As soon as LTE was available, we got it swapped with 4G-LTE Technology. So 4G-LTE has only been around here with Spectranet for about three to four years. So that is what we have here, we don’t have the old technology.
And that is when the growth really started, because 4G drive much faster and better experience for the customer. And it is more affordable too; the technology is more efficient in the way it uses the spectrum to get more data.
The investments in that period, we cannot talk about numbers but it is in hundreds of millions of dollars that have been invested. All these equipment, and the modems as well, mostly the network equipment all come from overseas, because there is only a certain number of suppliers around the world that make these equipment. They are extremely sophisticated equipment; none of them is made in Nigeria, it’s all imported. All of that is in dollars and there’s been a huge investment in all that. We have spent a bit more in the past couple of years in rolling out, in marketing and in trying to get our name out there, but most of the investment is going to equipment and network infrastructure.
We have a lot of base stations out there. People are quite often surprised by how many towers it takes to service a city. In Lagos alone, we have 400 towers. We have over 600 towers across the four cities. Lagos is more spread out. And you provide towers not just for coverage, but for capacity. So most of the investments we spent in the past year have really been to enhance the capacity of the network, because the coverage was already there. But as the tower starts to get busy, we need to put more towers to take up the capacity, so that you can support the customers. Because you can just get so many customers on the tower before it starts getting congested. We install new base stations all the time.
As a 4G/LTE service provider, how will you describe this technology in the telecoms sector?
Let me start from 3G. It was designed as a voice network with good data. You make most of your money out of voice calls. They don’t make much money out of data. It is not because data is not used very much, but because per megabit of voice phone call, they make about 100 times more revenue from voice calls than they will make for data. This is because data is quite cheap based on network capacity.
This is one of the reasons why the mobile operators don’t really want data everywhere. Because if there’s data everywhere, most people will start using WhatsApp and Skype, they will stop using the voice networks, they will stop paying for voice calls. I see in Nigeria that in the next couple of years, maybe two or three years, no one is going to pay for calls, they’ll just be buying data bundles, that is what is happening in Europe now. In United Kingdom (UK), I have five SIM cards on one network, and they are all one account with 10 Gigabyte plan. I pay a certain amount for that and they are all shared. All the phone calls and SMS are free, unlimited.
A 3G network takes data and voice and handles both. But you have to configure it as to how much capacity you have for voice and how much capacity you have for data. So you can be full on data, but still have space for voice. That is how 3G works. So, if you are making 100 times more revenue from voice calls, you are going to make sure that it doesn’t get congested. But if you make just one per cent on data, it doesn’t matter if it gets congested.
With 4G, it’s different. 4G is all about data. And actually using Voice Over 4G is a new thing. You see that some of our competitors have launched Voice-Over-LTE that is actually special because LTE wasn’t designed for voice, it was designed for data. It is designed so that you can use any voice app you want on your data to do your voice call.
Some of the older technologies that happened between 3G and 4G, things like Wimax, they are all prejudiced to be called 4G. Because it is more than 3G, they are 4G. But it is not actually really 4G, because the speed is not fast enough. So, that is why in Nigeria, the new operators that won the latest technology call 4G-LTE. It is actually a standard for what is proper 4G. And the idea is that there is a specification that says, this is what 4G-LTE should deliver, not today, but the plan is that it evolves over the next 10 years. So, the specification says you should be able to get 100 Megabyte per second speed when you are mobile when you are moving; and you should be able to get 1 GB per second when you are static. This is the standard, but no one does it here. That is the plan. And when we upgrade and upgrade, that is where we should reach. So, you can imagine, there is nothing like 3G.
My experience of 3G in Nigeria is awful. Some places, when you speed-test you get a good speed, and you move down the road, there is nothing. This is because its 3G, you get signal here, and you get signal there. But with 4G, there should be data everywhere, and it is continuous data. The 4G spec that says that you should be getting 100Mb speed when you are mobile, also says that if you are doing a 150 mile per hour on a high speed train; you should on 4G get 150 Mb per sec on your data. That is the standard that is what they are aiming for. But currently, what you get with the 4G is probably from a few MB to about 40-50 MB.
Has competition impacted the sector positively?
There are almost 100 million Internet users in Nigeria. About 95 percent are using 3G. But there are a few of the operators that operate 4G, and we know that with time everyone will have 4G in Nigeria, though it is going to take time. We only operate 4G network, and we only provide data at Spectranet. We don’t do voice, we don’t do 2G or 3G.
When you are introducing a new technology like 4G, if you are a mobile operator you tend to be careful. You don’t want to be disruptive because then you will damage your existing revenue stream. If you don’t have an existing revenue stream, you don’t care about that. That is why I am happy to say phone calls should be free, because I haven’t got any phone revenue.
When it comes to competition, we have a few 4G operators around and we have a small part of the market between us. There are a few cable operators cabling up communities and very small percentage of people got broadband and fibre, and that will be the case for a very long time in Nigeria. So, majority of the people on Internet are on 3G. One of our biggest challenges is to get people to try out 4G. For a lot of people, their only experience of the internet is 3G. That is what they are used to. They are not used to watching Netflix on big TV screen on High Definition (HD). The quality of satellite TV is not as good as the HD. It changes your experience totally.
How do you see the current data rate in the country?
The actual cost of data at the moment is too low. The problem is that the GSM operators have been competing on price for data, and they are taking the data way down below the cost of provision. And they are complaining that WhatsApp shouldn’t be allowed because it is eating into their voice revenue. That is because they are charging too low for data. And the problem is that when the data charge is too low, no one is going to invest in rolling out more networks for data.
What we are talking about is affordability, maybe it is too high for the people to afford. That is different from how much does it cost me to deliver it in the first place.
Spectranet is probably the lowest cost operator in terms of delivering data to people in their homes and we try to reflect that in the pricing as well. The mobile operators have huge revenue stream from voice. So they can supply data cheap at a loss so they can win voice customers and make money out of voice revenue. So, what they are doing is that they are charging more for the voice calls to make up for data. NCC is going to regulate this. They have announced that they are going to regulate the price of data, so that people are not unfairly competing. You shouldn’t be allowed to sell below cost that is anti-competitive. But Spectranet will not do an upwards review.
The difference between customers on 3G network and customers on Spectranet is that our customers use a lot of data. If you don’t use much data, maybe do your email and occasional browsing, use your phone. Maybe you use a few hundred megabits or at most one GB a month. But our average customer uses 25 GB a month. And the modem can be shared with the whole family. The 3G is quite expensive for data, and it is not that fast. We are a Broadband company and our customers are much heavier users than your average internet user.
What is your view on government’s plan to ensure 30 per cent broadband penetration by 2018?
I think we are moving in the right direction. Things slowed down a bit, but now we seem to have caught up a little bit. The biggest problem at the moment is that of roll out. To get that penetration up, you have to roll out broadband to new areas. At the moment just some of the main cities have broadband. But you have to roll out in all the cities, and you have to roll out to other areas as well before you can achieve that target.
The challenge is that very few network operators can get hold of the equipment. You can’t import it because of lack of dollars and because of lack of funding. In the past, you can go to an equipment supplier and you buy a whole chunk of network equipment, they will deliver it and you will pay in two years’ time or on your payment schedule. It doesn’t work in Nigeria anymore. You can’t pay over a period of five years financing scheme, the banks can’t do it unless you have a Letter of Credit (LC). If I want to buy equipment in dollars, I have to open an LC and give it to the supplier. But the bank won’t open an LC unless I give them a million dollars cash. So what’s the use? So that makes it extremely difficult to import equipment. And if you can’t import equipment, you can’t roll out to new areas. So as I mentioned earlier, we managed to get Port Harcourt done this year. All the other base stations we have we are saving for capacity because as our business grows in existing cities, we need to put up more capacities so that it won’t get congested.
How will you describe Spectrum auction and management in Nigeria?
The Nigerian Communications Commission (NCC) chooses to do spectrum allocation by public open auction. This is because they seriously want to make sure that there is transparency. My comment is that it is well and good. But if you are going to allocate limited resources like spectrum through an auction, it is going to go to the people with the deepest pockets, and so the smaller players can’t afford to play.
In many markets, the government is more interested in getting partners that will roll out, and so rather than pay upfront, they say they need $50 million for licence, so they give you licence for free or for a very small amount, and in return, as your business grows, you give a percentage of your revenue to government. So, you pay as you grow, rather than pay upfront. It happens all over the world. It could be three per cent or four per cent. And it is for the lifespan of the licence.
Government makes more money than they would have made if they sold the licence. The only challenge in Nigeria is transparency.