All is not well within the telecoms community in Nigeria. There is a ‘silent war’ brewing among telecom stakeholders over the seeming one-sidedness in the variety of frequency spectra in the basket of MTN Nigeria. In this report Olubayo Abiodun brings out the intrigues, facts and foibles over the disquiet in the Spectrum terrace.
IN 2013 MTN Nigeria was declared as the dominant Mobile Network Operator (MNO) in both the retail mobile voice and wholesale leased line markets, following the 2013 Dominance Determination Report (DDR). This declaration was made by the industry regulator; the Nigerian Communications Commission (NCC) following a very detailed and comprehensive analysis of industry facts and figures. With that profiling, MTN Nigeria was ranked first amongst equals with the attendant risks, responsibilities and opportunities.
This South African firm had pioneer the digital mobile race in Nigeria alongside Econet Wireless (now Bharti Airtel) and NITEL (now NATCOM trading as ntel) when the legendary Digital Mobile Licence (DML) was auctioned in an unprecedented open and transparent process midwifed by the Nigerian Communications Commission in 2001. NCC declared MTN dominant and also imposed specific obligations meant to ensure it balances competitive behaviour and to ensure the sustenance of long term competition in the telecommunications industry.
With growth trajectories in the DML space exploding beyond comprehension and followed by the intractable twists and turns in the emergence of new technologies, the telecom regulator decided to rejig its licensing policy after the expiration of the pioneer status of the DML holders. This change of policy heralded the Universal Access Services Licence (UASL) which was predicated on technology neutrality that cancelled out the original mandate which compelled the pioneers to roll out on the Global System for Mobile communication technology (GSM), Europe’s response to the dominant Code Division Multiple Access (CDMA) technology in America.
But the question that has yet to be answered is: After the emergence of MTN Nigeria as the dominant player in the voice market in 2013, did its competitors go to sleep and did MTN Nigeria roll up its sleeves for the next battle ground: data market? It was evident that the voice market had reached its tipping point with the significant dip in the voice revenues even in the global market. Going by sheer assessment of the decibel level rating, it would seem the telcos all brazed up for the battle in the market space with claims and counter claims over their deliverables in the data market. The offensives were made plausible with the transition from one platform to another as the industry evolved from 2G, 3G, 3.5G and now 4G. It was not long before the telecoms ecosphere introduced terminologies like WiMax, and LTE among others with which the MNOs used every space to lure customers to their networks. And by share of voice assessment, Airtel and Smile Communications would seem to have taken the lead in projecting their readiness for the 4G platform.
While these flurries of activities were going on, NCC also opened up its vault for telcos to access the arrays of frequency spectra in order to deepen the massive opportunities that beckons in the digital mobile space. The regulator called for bids in the different spectrum segment: 2.3GHz, 2.6GHz, and 3.5GHz among others. The avalanche of frequency spectra being thrown into the market are expected to deliver top notch broadband services across the nooks and crannies of the country as enshrined in the National Broadband Plan developed in 2013.
Beyond the snag that attended the award of award of the 2.3GHz to Bitflux, the company that emerged as the preferred bidder in the auction exercise, NCC would seem to have come out stronger and smarter from the pitfalls of that particular exercise. And so it seemed when the various auction templates for the plethora of frequency spectra since 2015 were made public.
But there were ‘buried’ grudges against the way and manner MTN Nigeria was snapping up some of the critical frequency spectra for rollout obligations. The industry was awaken to a curious concern when the 2.6GHz spectrum was advertise and by the time the process was concluded only one ‘qualified bidder’ emerged and that development foreclosed proceeding to the auction stage. The MoU had provided that if “If the aggregate demand from Approved Bidders is less than, or equal to the number of lots on offer, the Commission will provisionally award the license to the party/parties at the reserve price”. In this case, MTN Nigeria was the only qualified bidder and it automatically acquired the 2.6GHz frequency spectrum by paying N18.96 billion.
Predictably, that singular acquisition triggered a wave of outburst against the telecom behemoth. The intensity of the animosity among the operators over frequency assets was instantly heightened. MTN had previously outsmarted other operators by acquiring Visafone the biggest surviving CDMA operator in Nigeria in order to have access to its 800 MHz spectrum band, which will enable it provide 4G LTE services and apparently place it in enviable position of being the only GSM operator with access to this spectrum. MTN, which controls 43 per cent of market share, with 61 million subscribers, also strengthened its position in the highly competitive market when it paid N34 billion to the National Broadcasting Commission (NBC) for the acquisition of the 700MHz spectrum license. MTN Nigeria launched its digital television service via the first fully converged broadcast and OTT-VOD service in Jos, Plateau State, North Central Nigeria in May 2016.
In Q3 2007, MTN Nigeria had acquired XS Broadband (formerly UBA Capital & Trust), a fixed wireless access (FWA) licensee owned by United Bank of Africa (UBA), one of Nigeria’s largest banks, in a deal worth about $32.1 million (N4 billion). XS had a FWA licence which covered 24 states including Lagos. The purchase followed MTN’s $70 million (N9.3 billion) acquisition of FWA operator and unified access service licensee VGC Communications in January of same year. VGC was licensed to provide cabling and radio telephone services nationwide and had laid extensive fibre optic cables. It also obtained ULO from the NCC mid-2006. Those earlier acquisition would seem the compass for MTN Nigeria’s roadmap of its intention to dominate the markets in Nigeria.
The NCC described the 2.6GHz spectrum as a significant trigger for broadband revolution that will unlock benefits such as greater coverage, access, affordability and innovation, with the customer at the centre of these gains. MTN Nigeria CEO, Ferdi Moolman while relishing the latest addition to its bouquet of spectrum said: “This license acquisition further demonstrates MTN’s abiding faith in the future of Nigeria and the resilience of the Nigerian economy. MTN continues to believe in Nigeria and we have expressed this belief in the level of our investment, which currently stands at approximately $15 billion and counting. We strongly believe that there is need for significant levels of investment in Broadband infrastructure and services to truly launch Nigeria into the information age. We are honoured to be the arrowhead.”
What special advantage does the 2.6GHz spectrum confer on MTN Nigeria to the extent that its competitors are now spoiling for a fight? Moolman succinctly puts it: “Our subscribers, especially those in clustered areas such as the major cities, can expect distinct improvements in browsing speed, quality and experience. This means that they will have fast access to high definition video streaming, as well as conferencing and calling, lag-free music streaming, and improved data uploads and downloads.” This is the real and potential danger that MTN Nigeria now poses to other operators.
Funke Opeke, CEO MainOne, suspects that something was seriously amiss in the frequency spectra enclave. She expressed her concern at the Alliance for Affordable Internet (A4AI) forum on Monday, 4 July at the Intercontinental Hotel, Lagos. According to her, why did other operators fail to bid for a spectrum (2.6GHz) that they need to deliver services that Nigerians are yearning for? Also at the same forum, Ernest Ndukwe, erstwhile EVC NCC was similarly worried that a single bidder emerged in the 2.6GHz spectrum bid. The man who was in charge at NCC, when the Commission climbed to the global stage of recognition with the transparent management of the DML auction in 2001 said that it was important to get to the root of the matter because “there must be proper competition”. The competitors speaking through Bharti Airtel Nigeria and Smile Communications, at the A4AI roundtable, did not mince words when their representatives expressed strong worries that MTN Nigeria could again emerge as the dominant operator in the data market following on the heels of its dominant status in the voice market.
Shola Adeyemi, Director, Legal and Regulatory/Company Secretary, Bharti Airtel Nigeria said that Bharti Airtel was not comfortable with the way the 700MHz (digital dividend) was acquired by MTN because other stakeholders had expected the National Frequency Management Council (NFMC) to allow equal access to the spectrum before it was controversially concluded between the National Broadcasting Commission (NBC) and MTN Nigeria. Responding to a question on why other telcos folded their arms and watch MTN acquire key frequency spectra like the 2.6GHz, Adeyemi of Airtel said that the regulator had made the spectrum unattractive because the reserve price was overpriced. According to him, going by Bharti Airtel’s market analysis, it was not comfortable with the Return on Investments (RoI) based on the reserved price.
Tony Ojobo, Director Public Affairs NCC who represented his Executive Vice Chairman, at the A4AI forum, said that the Commission, too, was perturbed at the outcome of the 2.6GHz and was already committed to a post-mortem in order to understand the lassitude demonstrated by the other players. On the reserve price, he said that the Commission based its decisions on the ITU template and the feedback from jurisdictions with similar demographics with Nigeria. He said that NCC played its part by ensuring equitable participation by all stakeholders. According to him, apart from publishing the MoU on its website, the Commission also called for inputs from the stakeholders because of its principle on participatory engagement before the final document was made public. He also challenged the aggrieved telcos to look inward to be able to identify why they were being outsmarted most of the time. He also assured that the NFMC had already stepped into the logjam over the 700MHz and would soon make its stand public.
Uche Osuji, General Manager, Network Performance and Quality Assurance, MTN Nigeria, defended the position of MTN on its acquisition spree in the frequency market.