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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?