Nigeria’s Mobile telecom operators: Prospering In A Perfect Storm


MTN-OFFICEA perfect storm is an expression that describes a situation where a rare combination of circumstances aggravates a situation drastically. The Nigerian telecommunications industry is currently heading towards a perfect storm.

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Since 2001, the telecommunications industry in Nigeria has experienced impressive growth which has been fueled by the low teledensity before the advent of (affordable) mobile telephony in the country, the emergence of business opportunities enabled by the mass proliferation of mobile connections, and the “warm” Nigerian culture which encourages longer than average phone conversations, amongst other factors. In this period, the contribution of the telecoms industry to Nigeria’s GDP has risen from 0.3% in 2001 to 8.53% today.

In recent times, this growth has slowed as Mobile Telecoms Operators now face a series of business, technical and market challenges which pose risks to long term profitability. Whilst many of these challenges are already being faced by mobile operators globally, there are additional local market conditions which exacerbate the situation.

According to the National Communications Commission(NCC), in 2001 there were a total of about 867,000 connected lines nationally, with about 266,000 mobile connections. This number increased over 10,000% to over150million connections today, with about 135million mobile connections, largely driven by the launch of GSM mobile services in Nigeria. However, looking at the total number of subscriptions only is misleading as a large number of subscribers have multiple handsets, and about 19% of all mobile subscriptions are inactive. In addition, according to pyramid research, monthly minutes of use (MOU) dropped by over 365% between 2001 and 2009. Over this same period, peak mobile tariffs have dropped by over 35% due largely to competition and regulatory policies. In other words, subscribers are increasingly obtaining multiple mobile subscriptions and hence diluting spend on each mobile operator,they are spending less time on the phone and they are paying less for the minutes they actually spend on phone calls.

The recently introduced mobile number portability scheme by the NCC has further increased competition by making it easier for subscribers to move from one network to another to take advantage of deals and offers, whilst retaining their numbers. This has created a Ping-Pong effect as subscribers move between operators and force prices downwards.

In the last decade as teledensity in Nigeria has increased from 0.73 to 80.5, the number of internet connections has risen to over 50million today. This trend has generally been good for subscribers as it has lowered entry barriers for“over-the-top” (OTT) service providers, created a wealth of choices for subscribers and helped reduced prices. However, thegrowth of internet connectivity in Nigeria has been both a blessing and a curse for mobile telecoms operators. Whilst they have profited from this trend by providing mobile broadband products and services to customers, they have seen traditional revenue streams begin to dry up due in large part, to the emergence of these OTT services such as whatsapp and Skype, which provide cheaper alternatives to traditional operator offerings.

Telecoms operators have also had to invest in the upgrade and maintenanceof network infrastructure. In the last 10 years, as mobile technology has evolved from 2G (GSM) to 3G (WCDMA), and now to 4G (LTE andWimax) technology, Nigerian telecoms operators have spentin excess of $12billionin order to offer faster, better and more efficient services to subscribers. Over this same period, the value of the Naira has depreciated by over 14% against the US dollar, possibly increasing the actual costs (in Naira terms) of procuring telecoms equipment, most of which are priced in US dollars. These huge investments, coupled with the high operational expenditure due to high power and infrastructure maintenance costs have further squeezed operators’ margins.

Operators in Nigeria (and globally) are increasingly turning to outsourcing (managed services) arrangements in an attempt to maintain profitability. Operators must ensure that detailed scenario planning taking into cognisance local market conditions is done, otherwise they could find themselves unable to respond quickly to challenges and opportunities due to the additional organisational, technical and legal interfaces that these outsourcing arrangements could create.

This combination of growth challenges, increasing competition from mobile providers as well as OTT service providers and highcapital and operational expenditure,is helping tocreate the perfect storm – asituation which couldhinder operators’ability to provide new and innovative products and services, and eventually slownational economic growth.

All hope is not lost. It is possible for operators not just to survive this storm, but to thrive and grow. In order to do this, operators will have to take a combination of innovative steps to address each challenge.

Firstly, operators must begin to address and improve customer experience. Operators must take advantage of every interaction with the customer to improve customers’ perception of their service, and thereby create opportunities for additional sales.  Direct service experience from usingmobile services, as well as service experience at call centres and sales centres must be closely monitored and improved. Traditionally, operators’ technical functions are siloed in nature, requiring technical teams with very different but complimentary skillsets to work together to create an end-to-end service. All too often the assurance of these technical services is not easily aligned with the subscribers’ experience of these services at a granular level. Effective customer experience management will require a change in strategy, processes, organisation structure and systems, in order to ensure that operators are able to improve customer experience and cultivate long-lasting relationships with customers. Keeping customers happy is essential to long term growth and profitability.

Secondly, operators must utilise one of their biggest assets–knowledge ofsubscribers’location and usage patterns, to their advantage using analytics. Studies have shown that subscribers are open to offers and promotions at different times of the day, depending on work schedule, commute, etc. Operators must study and understand these patterns, and offer targeted service offerings to subscribers, at times when they are likely to be most receptive to these offers, in places where these offers are most relevant.

Thirdly, operators must adopt a combination of offensive and defensive strategies in response to competition from OTT service providers. For example, operators could partner with OTT service providers whose counter-intuitive business models, pose a serious threat to operators revenue streams. Recent efforts to compete with these service providers using initiatives such as joynTM, have had limited success in part due to the global and easy availability of OTT offerings and the investments required to implement competing offerings. Partnership may be the better approach in many cases. Operators should also use every opportunity to go on the offensive and exploit service quality differences between their offerings and OTT services where they exist.

Finally, operators must pay close attention to opportunities in the bourgeoning machine-to-machine (M2M) market, to drive growth. For example, the recent overhaul of the Nigerian power sector is likely to create smart metering opportunities. Operators must develop the necessary business models and partnerships to take advantage of these opportunities.

Operators still own the most valuable real-estate in the telecoms industry – the “pipes”, and the knowledge of subscribers’ usage patterns. Operators must use this information to guide subscribers to destinations in a manner that maximises revenue, whilst ensuring that subscribers continue to enjoy high levels of service quality at affordable prices.

By: Tolu Akinluyi

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Babatunde Akinsola
Babatunde Akinsola
Babatunde Akinsola is aNaija247news' Southwest editor. He's based in Lagos and writes on the Yoruba Nation political issues, news and investigative reports

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