Nigerian mobile auction could set tone for Africa - Government Activity

CommunicationsWeek International, Dec 18, 2000 by Reuben Muoka

Some of the world's top mobile operators will bid for four GSM licenses due for auction in Nigeria early next year, in what observers see as a vital cellular building block on the continent.

One of the four licenses is reserved for monopoly fixed line carrier, Nigerian Telecommunications Ltd. (Nitel) and the national mobile cellular operator, Mobile Telecommunications Co. (M-Tel), two state-owned companies whose merger--already approved by government--will be announced soon.

Among operators in the ten consortia negotiating to clinch the remaining three licenses up for grabs at Abuja on 17 January are Vodafone plc, of Newbury, England, and France Telecom.

"We expect the licenses to be keenly contested," said Andre Wills, chief telecoms consultant at research and consultancy company BMI-Techknowledge, of Rivonia, South Africa. 'Nigeria's huge market should be an attraction to many operators who intend to penetrate the continent." Nigeria's population of 120 million constitutes one in every five Africans.

And there are indications that Vodafone is making overtures to the two state-owned companies to form a partnership for implementing their joint GSM license.

With only 800,000 fixed lines and a 35,000-subscriber capacity E-Tacs analog cellular network, Nigeria still has plenty of scope for subscribers to GSM services.

"We estimate in five years from now the licenses being auctioned will add at least six million subscribers," said Ernest Ndukwe, chief executive of regulatory authority the Nigerian Communications Commission (NCC.)

Also up for licenses are the three main cellular operators attempting to build pan-African networks: Mobile Telecommunications Network (MTN), of Sandton, South Africa; MSI Cellular Investments Holdings BV, of Amsterdam; and Telecel USA Inc., of Florida.

Other foreign operators are teaming up with the pan-African operators to bid for the licenses at a reserve price of US$100 million set by the authorities. Scores of local operators will make up the consortia, including those whose GSM licenses were recently cancelled by the government.

The four licenses for digital mobile services were put on offer last year, but were heavily oversubscribed early this year forcing the NCC to abandon the comparative selection process, or beauty contest, which ended in chaos.

GSM wins out

The announcement last week by the NCC that GSM would be the preferred mobile standard ended months of criticism by proponents of CDMA who argued that a country the size of Nigeria needed a combination of technologies.

NCC's Wills said in parts of Africa the cellular market was overtaking fixed line penetration. "It took more than 100 years for South Africa to have 5.5 million lines," he said. "But it has taken just six years to have 5.5 million mobile subscribers."

Wills said he expected the Nigerian market to reach this figure in about three years.

MTN, Telecel and MSI are competing to establish a Pan-African network. Telecel has secured about 20 cellular network licenses across Africa, with 14 on air, and is entering the auction in a consortium that includes Nigerian local operator Mobile Telecommunications Services Ltd., of Yaba, Lagos.

MTN recently acquired a GSM license in Cameroon. It has licenses in three other African countries, including South Africa where it has about 2.5 million subscribers, and sees Nigeria as the next most important market in Africa.

"Nigeria is crucial and we are going to give it a good shot," said Andrew Bing, international business development manager at MTN.

MSI, which has 14 networks on air across Africa, will also bid.

A condition of the auction is that any operator granted a license must have 100,000 subscribers in the first year. No roaming arrangements will be allowed between operators' networks within Nigeria until a year after services begin. International roaming between license winners and operators outside Nigeria will be permitted immediately. Bidders must make a refundable US$20 million deposit to enter the auction.