Are Nigerian Mobile Networks Heading For Financial Crisis?

Recently, one of Nigeria’s four GSM Service Providers, Etisalat Nigeria, rolled out a unique bundle offering  called EasyFlex. In this offering, you get to choose a bundle comprising of Short Messaging Service (SMS), voice and data services.

For N1000, one of the plans offer you 100 minutes of talk time to any local network, 100 Megabytes of data and 400 sms – also to any network. This same GSM provider ordinarily offers calls to other local networks at very low rates, forcing their counterparts to tow the line.

It is very comforting that market forces is now driving the Telecomm sector in Nigeria. However, the offer of cheap SMS by mobile networks may not be particularly enticing as the trend worldwide is placing increasingly less focus on SMS as a means of communication. People would rather use other Instant Messaging (IM) medium like Samsung’s ChatOn, Apple’s iMessage, WhatsApp, Nimbuzz, Imsy and numerous others.

Personally, I can not remember the last time I used a paid SMS service. Some services like VConnect and get2Sms offer specific numbers of sms freely. Google also allow you to send free SMS to most Nigerian networks while Facebook allow you free access on select networks.

These free services have always come in handy the few times i need to use SMS.

The bundled SMS is, however, not a deal breaker for Etisalat because even with the SMS taken out of the equation, the N1000 package is probably worth almost N3000 if the included services are used on a Pay as you go basis.

Promotional offers is now the trend in Nigeria and the subscribers are finally getting back what they had been ripped off of in the past. So much so that the regulatory body, NCC, had to step in to put a halt to the ”çat fight”. Competition is now fierce as revenue, especially, from voice calls keep plummeting. This is partly because the number and duration of voice calls have drastically reduced. There was a time in this country when networks were billing per minute. They are now billing per second, coupled with the fact that competition has driven down voice call charges to less than a quarter of what they used to be. SIM cards are being given out (practically) for free. One of the other things eating into the revenue of these networks is the use of satellite telephony to connection to the internet for close to free.

All these pose serious financial challenges to our networks here.

Meanwhile, like with every business in Nigeria, running costs keep rising. Recurrent expenditure is shooting through the roof for these networks.

Revenues are dwindling, running costs are rising. Add these two together, and you have a veritable recipe for business disaster.

It is no surprise that most CDMA Operators have closed shop in Nigeria. There are mergers and acquisitions going on. With or without economies of scale, it appears that revenue in the Telecommunications Sector is dwindling and will continue to dwindle in the foreseeable future.

This has left me wondering whether the pervading cutthroat competition in the telecoms sector would not  leave casualties in its path.

We have a situation where there is a crying need to improve the Quality of service of the Operators by investing more in infrastructure. They need to expand the network capacity. How are they going to be able to do this when revenue is being forced downwards? Any business faced with this kind of scenario would look for ways to reduce expenditure, so as to improve on their bottomline.

And I fear the first ports of call would probably be ‘downsizing’, more pronounced outsourcing, reduction of staff emolument, smart tax avoidance (not evasion) strategy.

This may not be all good news for subscribers at all.

In what way do you think these networks can escape this “Catch – 99” situation?

Do you forsee a improvement s in the Quality of Service, due to the ferocious combination.

Or are you like me – I can already see cracks, and a deterioration in service rendition. I see vicious competition having a “MAD” quality about it already– Mutually Assured Destruction.

What is your take?

6 thoughts on “Are Nigerian Mobile Networks Heading For Financial Crisis?

  1. It is a nice premise for an article, Eye_Bee_Kay. Showing pity for our oppressors. Especially MTHell, a company that is determined to put Nigerians into GSM Slavery, repatriating our money to South Africa and so many other sharp practises to destroy the subscribers’ soul.

    GSM super heroes like Etisalat, Glo and Airtel are consistently taking customers from them on account of better tariffs that was why they entered the promo Game. For a company that can give out millions of Naira or an airplane free as a promo gift to a subscriber, should be able to get enough monies to rehabilitate infrastructures.

    I believe that the article may be rather melodramatic. These our Carriers in Nigeria aren’t trying well enough as it because they want to garner more money all the time with little or no commensurate investments. Their contemporaries overseas offer fixed cable network and fibre optics broadband internet which is bottom cheap for data. Ours do nothing of such. They also offer contracts and subsidise phones. Ours do nothing of such again.

    All they are after is immediate profits. No plan for the future. That is the bane of our GSM carriers today. When the price finally gets to rock bottom and they stop fleecing Nigerians, maybe they’ll change for the better with impeccable services.

    1. Glo has been in the news lately with their “enhanced” data offering. Well, till i use it before i can comment on it.

      I dont think Eyebeekay is being sympathetic to the telcos. Personally, i believe we need as many players for the prices to remain competitive and subscriber friendly, especially MTN.

  2. Good analysis there. But, I’m beginning to view these offers and promos from slightly different perspective. There is nothing that beats economy of scale.

    Let me use Apple for example. Why do you think that in spite of the obvious bullying attitude of Apple to the developer community in its AppStore, developers are still still not grumbling much? Right inside their hearts, they would really appreciate a little more freedom and control of affairs where it concerns how they do business on the AppStore and outside of it. But no, Apple simply have the final say. They are being treated like kids some times and still Apple cuts into the money they make out of the store and still yet, there is no visible show of dissatisfaction.

    Apple simply made it possible to reach millions of paying customers, and even at the rock bottom price tag of say $1, when you figure in the millions, tens of millions of customers they reach through Apple, it becomes difficult to grudge. Yes, some or rather most of these apps are worth by far more than $1. In fact, so many of them would be worth more than $10, but would you stay on your own and sell less than 10,000 copies of your software at $10 or would you rather reach tens of millions at $1? This is another reason why, even though Android users are generally not as willing as the docile Apple users to dole out their money, you just can’t ignore the share numbers which may even translate to more money than what a developer gets from the AppStore, but I digress.

    Now back to the local scene of our GSM operators. With this new offerings from Etisalat, though the cheapest when you look at the minute to naira ratio, I think the person that crafted it know something about optimization. One that will not necessarily weigh down their infrastructures but still guarantee optimal use of it. Just think of what it would mean to guarantee say N1000 from say a quarter of their customers and the possible effects it may have on their prospective customers as well. For instance, my Etisalat lines have not been in active use ever since I tried the Airtel’s BB Social Plan, but most certainly will start using it from this moment.

    MTN have something that does or is supposed to do a similar thing to help guarantee optimal use of their infrastructures in the form of MTN Zone. How? I believe that even this should be a lot better to MTN though, because it should analyse when resources are in a particular percentage of use and offer a calling rate that will either encourage or discourage use of the voice services at that time thereby helping them to regulate usage, at least on the side of the person initiating the call. And even though I don’t make voice calls often, I still have some folks I could not reach through any of the Social Media Networks and wouldn’t mind reaching them through voice calls sometimes.

    My point is, though Etisalat’s Easyflex may not appear to be good for the operator, their target may be to ensure optimal use of their infrastructures and guarantee that most users on their network generate money for them. And yes, there is still the fear that inane or not properly analyzed package from competition could drive further reaction that may also not be analyzed properly that will eventually bring the sector to ruins. I sincerely hope such does not happen.

  3. Your submission is quite detailed and appreciated. But by it, are you suggesting that Etisalat’s network is underutilized? I have heard a lot of people complain of degraded services from this network, probably as a result of overselling.

  4. I’m not exactly suggesting that, but it is obvious most of the promos going on for some time now by all the networks are geared towards making maximum use of their infrastructures. The NCC has put a stop to that and assuming they complied, that would mean that people will not have strong motivation to keep recharging as they were doing before and their infrastructures may not be put to maximum use. So with this present offer, people will still see reason to stay with Etisalat.

  5. While this may be a rather bad times for the networks, I personally will continue to laugh and jeer at them. They have ripped us off so much that we are reduced to the very skeleton. So anything that can take back that pound of flesh is really welcomed.

    My sympathies go to the likes of etisalat who are new entrants in the market. They have really tried for us to some extent and they show a semblance of “human face”

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