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Concerns as ranks of Tiers 2, 3 telecoms operators shrink in five years

By Adeyemi Adepetun
17 August 2022   |   2:44 am
While the mobile network operators (MNOs), otherwise known as Tier 1 service providers in Nigeria’s telecoms sector have continued to grow rapidly, this is not the same story

Telecom mast SOURCE:File photo

ADEYEMI ADEPETUN, in this piece, examines the dwindling fortunes of Tiers 2 and 3 operators in the country and the possible collapse of the struggling service providers.

While the mobile network operators (MNOs), otherwise known as Tier 1 service providers in Nigeria’s telecoms sector have continued to grow rapidly, this is not the same story with other players, the Tiers 2 and 3 operators, which are largely indigenous.  
The ranks of Tiers 2 and Tier 3 operators have continued to plummet, even on a large scale. This dying trajectory has been on for the past five years.
In Nigeria’s telecoms sector, with investment put at over $75 billion, Tier 1 operators are GSM players, composed of MTN, Globacom, Airtel and 9mobile. Tiers 2 and 3 operators include the Internet Service Providers (ISPs) and players like Spectranet, Smile Communications, ipNX, Swift Networks, Tizeti, 21st Century, nTel, and Broad-based Communications, among others 

It is interesting to note that in the first half of the year, the MNOs, which were badly hit by the Federal Government’s directive on SIM ban and hiccups from NIN-SIM linkages are fast recovering. The operators garnered 8.9 million new subscribers in the first half of the year, gradually making up for the about 15 million subscribers lost to the directive.  
Statistics from the Nigerian Communications Commission (NCC) put total active telephone users at 206 million, which pushed the country’s teledensity to 108 per cent and broadband penetration hitting 44.3 per cent.

Dominance status of MNOs
In an upward trajectory, Internet penetration grew from 143.5 million in January 2022 to 151 million by the end of June, and the service provider MTN upped its data subscribers by 4.2 million, from 59.6 million users at the beginning of 2022 to 63.4 million at the end of the first half of the year. Globacom added 332,083 users to its data service rolls as its total grew to 39.9 million in June.

Airtel too enjoyed an increase in data usage, adding 3.4 million new data subscribers over the period and ending the half-year with 41.7 million in June. However, 9mobile lost 502,144 data service subscribers in six months to finish the first half of the year with 5.23 million.

MTN kept its coveted number-one position in the overall connectivity chart with 79 million subscribers and a 38.36 per cent market share, while Airtel came in second place with 58.1 million users and a 28.21 per cent share. Globacom followed it with 56.2 million customers and a 27.28 per cent share, while 9mobile remained in fourth place with just 6.14 per cent of the market and 12.6 million customers.

Slow growth of other players
While the big players maintained an upward profile, Tiers 2 and 3 service players moved at a snail’s speed in H1. For instance, Smile Communications added 20,938, totalling 338,871 Internet users since operations began. Ntel however, lost 2,302 users, dropping from 27,296 to 24,994 in the first half of 2022.  
In terms of fixed wired/wireless service, the NCC statistics showed that while ipNX added 903 new users to hit 11,788 as of June, 21st Century lost 27 customers, moving from 2,580 in January to 2553 in June.

Challenges and fear over extinction of indigenous operators
Analysing the current trend in the telecoms sector, former Special Assistant to the former Chief Executive Officer, Nigerian Communications Commission (NCC) Ernest Ndukwe, Barr. Ayoola Oke said the situation remains very dangerous. He stressed that over 90 per cent of home-grown telecom operators may go bust within the next five years.

The ICT legal and regulatory expert said the bigger telecoms operators are suffocating the local ones.
He explained that the industry is subdivided into three tiers, with tier 1 for big network operators, the GSM players; Starcomms, MTS 1st Wireless, Intercellular, Startech and the likes belonging to Tier 2 and smaller operators such as Internet service providers, PNLs, International Data Access Service Providers, Swift Telephone networks, Rainbownet and the likes for Tier 3.
Oke further stated that almost all the operators that were active and vibrant 14 years ago are now dead or struggling, leaving the Tier 2 space almost empty, noting that Tier 1 operators face no competition or incentive to improve.
He said none of the local operators in Tier 3 has been able to grow to become Tier 2 operators because they are dying, adding that the country would be left with a Tier 1 Oligopoly if the home-grown operators eventually die out.

A case of illegality
The Former Special Assistant cited the instance of bigger operators asking smaller operators to pay for termination rate in dollars rather than the country’s legal tender, which is the naira and consequently leading to their disconnection.
“It is not a prophecy. If certain regulatory steps are not taken and things are not done the way they should, more than 90 per cent of home-grown local telecoms operators will probably all die out in the next five years like what happened to tier 1 operator in the past 14 years and that will be terrible for the country and consumers.
“From the way the industry is structured now, the bigger operators are suffocating the industry.
“None of the ones in Tier 3 have been able to grow to become Tier 2 because they are dying. Once they all die out, we will be left with an oligopoly, where the few big operators, mostly originally foreign-owned and controlled companies will dominate the market to the detriment of the country.

“For instance, there was a determination of the International Termination Rate made by NCC last December. All of a sudden, the bigger operators are interpreting the Determination to mean that the smaller operators must pay them in dollars for even the downstream portion of the international traffic.
“Meanwhile, such is illegality and a contravention of the provisions Section 15 and 20 of the Central Bank of Nigeria Act, Section 20 of the CBN Act expressly criminalising demand.
“Due to this, small operators are being disconnected by big operators for flimsy reasons without the notice of the NCC,” he said.

568 ISPs now inactive
Admitting there are challenges, the NCC revealed that 568 ISPs have become inactive to date.

The Executive Vice Chairman, NCC, Prof. Umar Danbatta informed that a total of 756 companies had been licensed as ISPs in Nigeria as of March 2022, but only 188 of them are currently active.
At a Telecoms Sector Sustainability Forum organised by Business Remarks, in Lagos, with the theme: “Examining the Nigerian Internet Service Providers (ISPs) Viability in a Digitised Environment”, Danbatta said several issues including inadequate spectrum, the high price of bandwidth, high cost of Right of Way, and lack of good corporate governance practice in some of the companies have contributed in some of the licensed operators becoming inactive.

Way forward
Oke, who was also a former Special Assistant to Mobolaji Johnson, the former Minister of Communications and Technology, urged the Ministry of Communications and the NCC to come up with policy restrictions and regulatory steps respectively.
Oke proposed an asymmetric regulation whereby the Commission controls the big operators more so that their weights won’t crush smaller operators.

Ayoola, who hailed the Commission’s dominance and significant market power, asked that they should be more proactive in conducting timely investigations on big operators whenever they disconnect smaller operators.
“Federal Government should come up with policy restrictions and regulatory steps. NCC did well when it had dominance and significant market power whose purpose was to subject those companies to asymmetric regulations.
“NCC has to be proactive, by encouraging smaller operators by conducting timely investigations on big operators for disconnecting smaller operators.
“NCC must monitor more and in fact should have automatic technical monitoring because it is the consumers that would suffer. They should penalize bigger operators if found wanting.
“NCC should do more asymmetric regulations whereby they would impose more regulatory controls and obligations on the big operators so that their weights won’t crush small operators,” he said.