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This emerging monopoly in telecoms sector

By Sopuru Uwadiegwu
05 May 2015   |   11:11 pm
IN business, it is said that big things often start small. In nature, science has proven that mega things commence almost unnoticed. What with the torrential rainfall starting with vapour? For major things, it is a matter of little drops of water making a mighty ocean. This gives strategy its pride of place in business.…

Telecoms-operatorsIN business, it is said that big things often start small. In nature, science has proven that mega things commence almost unnoticed. What with the torrential rainfall starting with vapour? For major things, it is a matter of little drops of water making a mighty ocean. This gives strategy its pride of place in business.

Foresight, belief, courage and willingness to take risks characterise those who venture. In today’s world, success stories are made of people who rely on these traits to explore nature, markets, terrains or territories where others often have reason to doubt or stay away.

They, in part, confer the early mover advantage on businesses, together with the numerous benefits that come with it. The story of the telecommunications industry in Nigeria illustrates this. With the auctioning of GSM licences in 2001, Nigerians felt liberated from the shackles of the then state-run monopoly, NITEL.

MTN and Airtel (then trading as Econet Wireless) enjoyed early mover advantage in mobile communications market in Nigeria. Globacom and Etisalat Nigeria joined much later. Ironically, while Airtel and MTN enjoyed the comfort of duopoly and milked the masses with high call charges and poor quality services, the entry of Globacom and Etisalat has proved the game changer in the industry, and has long delivered more value and higher quality of services to consumers.
Airtel’s frequent rebranding might have given its closest rival MTN some undue advantage which has seen MTN gain leadership first – and then dominance, as the case of the strategic business.

So massive has the growth of MTN been that it has almost 50 per cent of the voice market which saw it consequently declared dominant operator by industry regulator, the Nigerian Communications Commission (NCC) in 2013.
One would have thought that the NCC that made this observation and imposed obligations on the dominant operator ought to have been more cautious in approving the acquisition of a rival business that could easily transform the dominance into a monopoly. But with recent events showing that MTN is in the process of acquiring Visafone, there is the fear that Nigerians are in for the worst!

Monopoly is a business monster that economies that want to develop and be competitive should take every legal step to avoid. It is a pitfall that greedy businessmen carefully gravitate unsuspecting governments and their agencies to, which is why NCC ought to have seen through the strategy of a dominant operator, seeking to enthrone monopoly by the proposed acquisition. The NCC ought to know that it took MTN below 10 years to become a dominant operator in a race it started simultaneously with a competitor.

Given the same level of ruthless growth, it would require less than those number of years to take out other fringe players in an acquisition that has given it a head-start. The ordinary consumer would be the ultimate loser in a possible way to the days of per second billing and all manner of arm-twisting in the sector.

Though the NCC in its 2013 Dominance Determination recognized no operator was dominant in the mobile data market, MTN’s acquisition of Visafone and its resultant access to valuable sub-1GHz spectrum to provide 4G services to the exclusion of other operators will clearly give it an unfair advantage.

The question is ‘could it be that MTN has conquered the voice segment and is strategizing to add data to it?’ The NCC ought to have seen through this. Does MTN have a strategy to progress from dominance to monopoly? This should be for the industry regulator to discern.

Other sector players should be blamed for not rising up to the challenge and bring such matters to national consciousness. I think the NCC is failing in its duties. I don’t want to believe that the lobbying for the approval of this transaction was so intense that no one at the NCC could discern the grave dangers in it.

This acquisition confers on the leading provider the unfair advantage of exclusivity because the 800 MHz spectrum band is characterized 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 MTN. This scenario is a fearful dominance that can only lead to monopoly!

Also, the NCC, as regulator and custodian of information on the industry, knows that re-farming the 800MHz spectrum to make it available for operators who have demonstrated the ability to deploy telecoms services would be a challenge for the regulator as the current licence holders in the spectrum band have been unable to meet their roll-out obligations.

The NCC is fully aware that MTN’s access to sub 1GHz spectrum to the exclusion of other GSM operators will confer an unfair competitive advantage in the data market where it can easily deploy its size, liquidity and profitability to further entrench its dominance in the market and stifle other players, who would be left with little or no capacity to compete. Given their capacity to control both spectrum and access at prices they dictate to industry and consumers makes this an unhealthy state of affairs.

This poses a grave threat to the viability of the industry as it potentially leaves it with one dominant player in both the retail voice and data markets, which is a clear signal of monopoly. Sadly, the Nigerian subscriber will ultimately pay for this in the form of higher tariffs, poor quality of service levels and little or no incentive for innovation due to the lack of competition in this market segment.

THERE is no better time to reorder priorities in many segments of the Nigerian society.

 •Uwadiegwu, a public affairs analyst, wrote from Lagos.