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Industry Analysis – Nigerian Mobile Telco

Introduction

Nigerian Mobile Telco has been referred to as the fastest growing market in Africa. Nigerian telecoms came into mainstream in 2001 when the deregulation of the subsector of the economy gave way to the private involvement. The telecommunication system was opened up with the issuance of Global System for mobile communication (GSM) unified license in 2001. GSM license in Nigeria cost about US$285million. Nigerian Telecommunication (NITEL) was the only operator in the market before 2001 with subscribers of about 500,000 from a population of 140 million.

The deregulation usher in telecom players like MTN, Glo Mobile, Zain formerly Celtel, Etisalat, Visafone,Nigerian Music Multilinks, Starcomm and Zoom formerly Reltel. The telecom regulator in Nigeria is Nigerian Telecommunication Commission (NCC), with reference to NCC Act 2003; 3-(1) “There is established of a commission to be known as Nigerian Telecommunications Commission with responsibility for the regulation of the telecommunication sector in Nigeria”.

Product/ market Segmentation

The market is divided into urban and semi-urban, and rural market. Tele density in the urban is about 65% while semi urban is about 45% and rural is less than 15%. Product Segmentation is GSM and CDMA.

Major Players

MTN, Zain, Glo and Etisalat control the GSM market. While Visafone, Multilinks, Starcomm and Zoom formerly Reltel are CDMA product segment. The market share of these major mobile telecoms are MTN-40.54%, Zain- 30.20%, Glo Mobile-28.11 and Etisalat- 0.7%, M-Tel Mobile phone business of NITEL-0.45%. While Visafone leads the CDMA market, follow by Multilinks, Starcomms, and Zoom.

Fig.1. Market shares (percentage of total subscriptions)

Factors affecting the industry

o Infrastructure

o High demand

o Frequency problem

o Regulatory institution (NCC)

o Inadequate base station

o Large market

o Economic sabotage

o Interconnectivity problem

o Quality of Service-Due to the problem of capacity constraint

Product Differentiation

The telecom operators offer similar products with slight difference such as

– CDMA and GSM- Voice Service

– VAS; SMS, mobile news, online banking, music, data card, etc

– With diverse product differentiation, voice is the main source of income for Telco in Nigeria.

Growth in the Industry

Nigeria has maintained its lead as African’s largest telecom market with active subscribers of about 65million relegating South Africa to second place with about 45million subscribers. From a bit above 500,000 NITEL fixed wire line and mobile subscribers in 2001. The industry grew to over 7million subscribers in 2004; in December 2008 the subscribers in the market grew to 62.99million. An addition of 22.59 million subscribers in 2008 alone represented 56% annual growth rate. Recent figure as at January 2009 put the subscribers’ base at 64.16. While GSM subscribers are in the range of 57million, CDMA subscription in Nigeria grew from just 380,000 in 2007 to more than 6million at the end of 2008. The country intelligent report on Nigeria by Pyramid research stated that the market grew by 23% with total industry revenue of US$8.42billion. With mobile penetration of 42% revenue will increase to US$11.14billion by 2013 with forecasted annual increase of 5.7%. The telecom market has been named the largest mobile market in Africa. Tele density of 0.73% in 2001 has steadily increase over the year to 33.72% as at December 2006 and about 45% aggregate in December 2008. The current market installed capacity is 117.892 million as at December 2008. The mobile industry ARPU in 2003 was around US$54 per month but as at 2008 December was US$13.

Demand in the Industry

There is increase in demand due to;

o Population explosion in urban cities and metropolis

o Business purpose- Growth in SMEs

o Improved Banking operations

o Competition-The opening up of the market to competition in all segments of the industry has resulted in major drop in price for telecommunications services.

o VAS

o Business expansion by the operator- CAPEX and OPEX investment in the industry

 

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