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Nigeria looks to new licences to lower telecom costs

Not all African regions have experienced price declines due to competition

While competition has caused the cost of mobile communications in many eastern and southern African countries to plummet, prices in Nigeria's telecom sector remain high and the country's regulators now say they may issue new telecom licenses in order to spur a more competitive market.

Nigeria is Africa's largest telecom market by investment and subscription. The cost of mobile communications has remained high, however, as operators are not competitive enough to fuel a price war.

The country has more than seven major operators -- including MTN, Bharti Airtel, Globacom, Mobile TV and Mobile Data Service -- with a combined customer base of about 90 million. But the providers are not competing enough to fuel the sort of stiff competition that will drive down prices, according to the Nigerian Communication Commission (NCC), the country's telecom sector regulator.

Due to lack of competition, most of Nigeria's remote rural areas still remain unconnected to mobile communication networks.

NCC Vice President Eugene Juawah said last week that because prices have not been coming down, the commission will bring in new operators by issuing more licenses. The NCC said it has no intentions of directly forcing operators to bring down prices, but that competition will force them to do so.

Like in many other African countries, the telecom sector is Nigeria's major economic driver after oil. The NCC believes new operators will bring competition that will force operators to expand networks to rural areas in search of new customers.

Kenya, Zambia, South Africa, Uganda and Tanzania are among the countries in Africa with the cheapest call rates, as a result of stiff competition. Officials in some of these countries appear to be satisfied with the number of operators they have currently.

"The government will not license a fourth operator in order to allow more competition," said Dominic Sichinga, permanent secretary in the Zambian Ministry of Communications and Transport, this week via telephone.

The effects of the price war by operators have been great in the eastern and southern African regions, where the rapidly growing telecom sector has seen investments by international operators, all competing for new phone subscribers.

The competition is, however, digging into the operators' profit margins, especially for small operators, and reports indicate that the lower margins are affecting government tax revenue.

In Zambia, as in the eastern African region, the price war has mainly been instigated by new players including Lap Green of Libya pushing to attract subscribers.

A price war similar to the one in eastern Africa has been raging in the Zambian market, where operators have been out to erode Bharti Airtel's dominance in voice. Bharti is fighting back.

"We have so far spent $4,200 in the freedom fiesta promotion that will contributor to subscriber growth," said Bharti Airtel Zambia Information Technology Director James Museba at an event earlier this month.

Meanwhile, MTN, Bharti Airtel and Lap Green have all been able to grow their subscriber bases by slashing prices and giving subscribers free calling time of up to 15 minutes within the networks for fear of losing customers.

The whole West African region is now looking to see whether the NCC's move to license more operators will help increase competition and reduce high prices.


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