"Multiple Regulation, Telecoms

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Dec 12, 2013 (4 years and 19 days ago)

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"Multiple
Regulation, Telecoms
Penetration, the Environment and
Industry Growth and Expansion"

Oyeronke Oyetunde, GM Regulatory Affairs, MTN Nigeria

10
th

October 2013

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Table of Contents


Commitment to Service Delivery


Nigeria Success Story of Telecoms


Current Realities


Key Issues & Challenges


Industry Growth and Expansion


Conclusion



Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Committed to the Delivering Best in Class Services

MTN Nigeria


A

commitment

to

our

vision
:

to

deliver

a

bold,

new

digital

world

to

our

stakeholders
;

making

our

customers’

lives

a

whole

lot

brighter
.





We

have

built

Sub
-
Saharan

Africa’s

largest

and

most

sophisticated

Telecoms

Network

in

Nigeria



as

the

largest

telecoms

investor

in

Nigeria

with

over

N
1
trillion

invested
.




We

are

re
-
engineering

our

network

with

conversion

to

an

all

IP

network

coupled

with

intensive

investment

in

human

capacity

for

Broadband

rollout

and

operation
.



Our

service

footprint

covers

over

766

of

Nigeria's

774

LGAs,

our

10
,
000
+km

fibre
-
optic

&

11
,
400
+km

microwave

transmission

backbone

rank

amongst

Africa’s

most

extensive
.




We

have

led

the

growth

in

the

voice

market

since

2001

with

over

50

million

subscribers
.



Positioned

to

deliver

services

to

our

esteemed

Customers

through

our

extensive

customer

service

network

that

transcends

the

traditional

contact

centers


Our commitment to Nigeria and its economy is building confidence for investment in our
sector and in Nigeria.

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Nigeria Telecoms Industry


Success Story of the
Decade

Nigeria Mobile Penetration in Regional Context
-

2012

Evolution of Nigeria Mobile Penetration

Source: Pyramid Research

0
5
10
15
20
25
30
2005
2006
2007
2008
2009
2010
2011
US$ billion
Nigeria Internet User Penetration vs. Peer Markets
-

2012

Evolution of Cumulative Telecoms Capital Expenditure in Nigeria

10.8%
13.7%
18.2%
21%
26%
29%
29%
34%
0%
5%
10%
15%
20%
25%
30%
35%
40%
Uganda
Kenya
Senegal
AME
Nigeria
Morocco
South Africa
Egypt
Penetration of population
Source: Pyramid Research

Source: NCC, Pyramid Research estimates

Source: Pyramid Research

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

2001

2013

Contribution to GDP

0.75%

8.5%

Private investment

~US$50million

~US$25billion (as
@EOY’2010)

Connection cost


~US$700/line

~N 0
-
100/line

Teledensity

0.4%

84%

Active Lines

866,782 lines

153,665,438 lines

The Journey so far
-

Critical Success Factors

Stable
Regulatory
Environment

Transparent
Licensing Process

Competition

Consolidation

Nigerian Industry has benefitted from sound policy and regulation



Technology
-
neutral
regulatory policy aided
market entry for new
players.



Nigeria now one of the
most competitive mobile
markets in the world.


Commitment to best
practice regulatory
principles of
Predictability,
Accountability
, etc.


Pioneer Status and Mobile
Exclusivity aided growth.


Nigeria's global
competitiveness for FDI
preserved.


2G Auction of 2001
& 3G licensing of
2007 deepened
investor confidence.


African operators
seriously
participated; still
driving growth.


2012/2013 New ICT and
Broadband Policy. NCC
unveiled its five
-
year
strategic master plan for
the 2013
-
2017



Nigeria now set to drive
digital inclusion, bridge
the digital divide and
spur on a knowledge
based economy
.

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Nigeria Telecoms


Current Realities



Industry

struggling

with

high

operating

costs,

Lower

Average

Returns

and

Investor

Skittishness

owing

to

operating

environment
.



Sector

growth

expected

to

decline

from

34
.
58
%

in

2011

to

16
.
53
%

in

2017

(source

FSDH

Nigeria

Economic

Outlook

2013
-
2017
)














Immediate

impact

of

declining

growth

will

include
:



Difficulty

sourcing

Capital

(huge

capital

outlay

required

to

position

industry

for

next

phase

of

evolution



lower

investments,

particularly

in

new

areas

such

as

broadband

deployment

and





Huge

potentials

for

Nigerian

telecoms

market,

though

it

still

seems

to

operate

below

potential
.




While

strong,

mobile

penetration

is

still

lower

than

in

a

number

of

other

African

markets
.



Broadband

penetration

remains

low

at

less

than

10
%
,

with

the

government

setting

a

target

of

20
%

by

2017
.

Fundamental

challenge

remains

impact

of

declining

growth

on

investment

in

broadband

infrastructure

needed

to

provide

platform

for

vibrant

internet

economy



There

are

imminent

threats

to

projected

GDP

contribution

by

industry





Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Our Operational Experience

Service
Delivery

Security
Challenges

Power
Issues

Community
Issues

Multiple
Taxation
and
Regulation


Fluctuations responsible for about
70% outages.


Frequent switchovers damage
infrastructure.


Cost of maintaining/replacing
generators impact on tariffs and
services.


Power remains the most direct
implication is for network costs.
Nigerian operators spend around
N8bn to N10bn a year in diesel
costs to power up their base
stations.


Such costs account for about 60%
of operators’ network costs.
Primarily because of such fuel
costs, average network costs in
Nigeria are 2x to 3x higher than in
a number of other African markets.



Constant theft of generators & equipment; vandalisation
of fiber, over 16000 instances of theft etc.


Average of +70 fibre cuts monthly nationwide.


Several attacks on personnel & facilities. 6 people killed in
Aba, Abia State in 2010.


Bombing of sites in Northern Nigeria and flooding a new
challenge.



MDAs at all levels of Govt
target telecoms for
revenue.


Industry under extremely
heavy MTR burden;
critical equipment often
damaged by shutdowns.


Service outages and loss
of revenues experienced
by shutdowns


CNI designation is critical
to deter unlawful
interference.



Operators often prevented from entering
sites to fuel generators & maintain
critical equipment.


Landowner & other issues often
transferred to operator/tenants.

Operators, have undertaken a number of initiatives like infrastructure sharing, and increasing
asset productivity, yet operational challenges remain.

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Multiple Taxation &
Regulation

Legal
Premise of Taxation


1999

Constitution

-

item

46

of

the

Exclusive

Legislative

List

places

Post,

telegraphs

and

telephones

within

the

jurisdiction

of

the

Federal

Government


Section

135
,

Nigerian

Communications

Act

2003

-

operators

may

be

required

to

procure

approvals

of

State

Government,

local

government

or

other

relevant

authority

for

installation,

placing,

laying

or

maintenance

of

any

network

facilities



norm

is

for

such

authority

to

recover

administrative

costs

that

are

commensurate

with

the

costs

of

carrying

out

the

specified

functions



Taxes

and

Levies

(Approved

List

for

Collection)

Act

1998



specifies

the

taxes,

charges

and

levies

payable

by

each

tier

of

government
:


State

-

employee/

expatriate

PAYE,

withholding

tax,

personal

income

tax,

Business

Premises

permit,

parking

permit

&

tenement

rate



Local

authority

-

tenement

rates,

development

levies,

sanitation

/

sewage

/

waste,

advertising,

customary

fees,

operational

permits,

sign

post

and

advertisement

fees


Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Multiple Taxation & Regulation

The Challenge

ISSUES

CURRENT

POSITION


The

perception of Telecoms Operators as cash
cows drives demands by MDAs to assume primary
regulator status, imposing onerous financial
demands.


Federal & State MDAs:
consistently isolate/target
telecoms infrastructure in the guise of collecting
arbitrary/duplicated/frivolous taxes/charges.


Uncertain/Non
-
Uniform regimes/fees for RoW and
other approvals in many states.


NLRC
:

insists

on

regulating

sales

promotions

as

lotteries

with

attendant

registration/financial

obligations
.


NESREA
:

enacted

Environmental

Regulations,

imposing

onerous

EIA,

approval

and

other

terms
.



Pursuit

of

Presidential

Declaration

of

Telecoms

infrastructure

as

CNI
;

and

ultimately

passage

of

CNI

Bill
.


Harmonized

industry

position

that

current

MTR

regime

is

not

sustainable

and

will

ultimately

stunt

the

telecoms

industry
.


High
-
level

lobby

resulted

in

NEC

engagement



to

harmonise

conflicting

regulation

and

thereby

minimise

multiple

taxation/regulation


Active

participation

in

NCC/Industry

Working

Group

on

MTR



implementation

of

strategies

to

eliminate

cash

cow

mentality

and

reducing

MTR
.



Operators

pursuing

opportunities

to

harmonise

NESREA

Regulations

with

NCC’s

Technical

Specs

for

the

Installation

of

Masts

and

Towers

to

limit

opportunities/impact

of

NESREA’s

intrusions
.


Applicable Instruments


CFRN 1979,


States & Local Govts (Approved Taxes, etc) Act.


Sundry Tax Laws and MDA Establishment Statutes.

OBJECTIVES: MTN’s engagements anchored on prompt settlement of
legitimate obligations, but strict resistance to illegitimate demands/taxes
which ultimately stultify growth.

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Multiple Taxation & Regulation

Realities
of Multiple Taxation


Features

of

multiple

taxation

as

experienced

by

mobile

operators
:


Charged

by

all

tiers

of

government
:

federal,

state

and

local

government

on

the

same

infrastructure



at

times

duplicated

by

several

arms

of

a

state

government



Fees,

charges

or

some

form

of

taxation

levied

on

installation

of

communication

infrastructure,

while

some

authorities

attempt

to

introduce

annual

licences



such

impositions

are

ultra

vires


Not

supported

by

the

legal

premise

of

taxation

and

extend

beyond

administrative

fees

to

be

are



range

between

N
250
,
000

to

N
1
,

000
,
000

per

mast


Fees

cannot

be

sustained

by

the

industry



a

crippling

burden

on

the

industry


An

increasing

trend

and

the

subject

of

new

edicts

and

regulations

with

no

legal

basis


Our

staff

have

been

harassed

and

our

sites

subjected

to

obstructive

activities

which

ultimately

affect

the

quality

of

service


Not

in

line

with

international

best

practices

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Drivers for Broadband Rollout


The

World Bank estimates that in developing countries, a
10% increase in Broadband penetration will result in
economic growth of about 1.38%.



Nigeria’s Broadband penetration rate is estimated at 10%
-

government plans to double this to 20% by 2017.



International connectivity may be deemed sufficient (with a total of
12.9

terabits/s of bandwidth capacity at the shores), but capacity is
only about 10% utilised.



The last mile remains a huge opportunity for development


the
estimated current 30,000km of inter
-
city fibre is clearly
insufficient
. It is estimated that about $2 billion in funding (private
and government provided) will be required annually over the next
five years to bridge the broadband infrastructure gap
-

Nigeria’s
National Broadband Plan 2013


2018.



As with other developing countries, there is a huge disparity in
penetration at densely populated urban areas versus rural
communities
-

a wide coverage gap at the last mile both in urban
and rural areas.

Industry Growth and Expansion
-

Broadband The New Frontier

Broadband Penetration


Nigeria vs. BRICS

Source: ITU


Nascent appetite for Data (2012
-
2013)

Source: NCC

With successful penetration of voice service, industry now set for Broadband penetration


Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Drivers for Broadband Rollout


There is clearly a latent demand for broadband access and
infrastructure to drive broadband inclusion across all strata.



IDC estimates private sector/SME spend on ‘Other’ data
services (e.g. current demand for IP VPN & Digital Leased
Lines) will increase from $219.1 million in 2012 to 235.6
million by 2017.



Connectivity is a key necessity for driving e
-
Governance,
financial inclusion and electronic services in the financial
services sector and other key industries.



Drivers for the mass market include affordability of available
smart devices, attractive content & mobile broadband
coverage.



Machina’s Research for the GSMA (
The Connected Life
)
estimates that between 2011 and 2020:


the number of connected devices globally
will grow from
9billion to 24billion.


global machine
-
to
-
machine connections
will rise from
2billion to 12billion.


the global impact of the Connected Life is valued at
USD4.5 trillion.

Industry Growth and Expansion
-

Broadband The New Frontier

There is an urgent need to drive penetration & rollout of Broadband infrastructure e.g.
fiscal & financial incentives, overlay cables over utility/social infrastructure

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Opportunities for New ICT
Products & Services


Current Service & Product Offerings


Cloud & Data
Centre Services
e.g.
Colocation, Data
Hosting, Managed
hosting.


Machine
-
to
-
Machine Services e.g. Fleet management,
Security
& Surveillance
solutions.


Mobile Solutions for Corporate & SME markets
(one
stop shop ICT solutions).


Introduction
of Managed WAN Service to the Nigerian
ICT
market.



Future

Services



The

Connected

Life

Top

10

Applications

(Machina

Research

for

the

GSMA|)
:


The

Connected

Car

&

Electric

Car

Charging
;


The

Clinical

Remote

Monitoring
;


Advanced

Security

Systems
;


Assisted

Living

for

an

Aging

Population
;


Pay

as

you

Drive

Car

Insurance
;


New

Business

models

for

Car

Usage
;


Smart

meters



water,

electricity

&

other

utilities


Traffic

Management
;

and


Advanced

Facility

&

appliance

management
.

Industry Growth and Expansion
-

Broadband The New Frontier

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Realizing our Objectives

Industry Growth and Expansion
-

Broadband The New Frontier


Fair

Competition


Connecting the 4
-
plus billion people not yet connected to the Internet will require
creativity, greater investment in wireless networks and innovation in service delivery



ITU, State of Broadband Report, 2013.


Delivery of affordable & accessible
solutions tailored to meet needs of
user demographics.



Practical solutions to power,
education, health and delivery of
social services.



Aggressive delivery of
local
content
development ecosystem
(
MTN recently launched an Apps
Development Competition
).



Device partnerships to address
access/affordability gaps.



Investment in carefully deployed
infrastructure to power broadband
dispersion
-

the MTN WACs,
Blaze/Yellobahn as cases in point.



Platform/technology convergence
however requires regulatory
convergence.


Competition is key driver
of investments
:
“private &
competitive markets have
successfully accelerated
service delivery to a large
customer base, boosting
market growth, enhancing
innovation, increasing
subscriptions and reducing
prices
” (ITU, 2013).



Growth requires progressive
infrastructure sharing
models & frameworks
based on best practice
principles.



Universal service
initiatives
will complement
competition to drive
broadband dispersal to
underserved areas.

Constant
Innovation

Fair

Competition

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

Drivers for Innovation and Fair Competition

Industry Growth and Expansion
-

Broadband The New Frontier

Regulatory
Certainty/
Stability

Stakeholder
Support

Supportive
Policy
Outlook


Definitive Roadmap

SMART Goals &
Objectives.


Innovation requires
consistent & forward looking
policy support. Regulatory
flexibility % dynamism also
critical.


Private sector
-
led growth
based on carefully
articulated open
-
access
principles.


Technology
-
neutral

and
transparent
licensing &
spectrum allocation
(including digital dividend).


Clear/efficient LTE
spectrum roadmap.


Best Practice Adherence


Participative Rule
-
making.


Universal Access
Infrastructure financing
through competitively
accessed USFs.


Govt. patronage of
local solutions on a
priority basis.


Robust Infrastructure
Protection framework.


Smart incentives
for
rural roll
-
out
commitments).


Govt
-
Operator rollout
partnerships e.g. RoW
trade
-
offs.


Fair

Competition

Constant
Innovation

Fair

Competition

The Hong Kong Example:
29.9% fixed BB & 75%
mobile BB penetration
-

it
is possible for the market
to drive network roll
-
out
with minimal government
intervention and subsidy .

Copyright 2008 © Mobile Telephone Networks. All rights reserved.

In conclusion



Strong Policy and Regulatory Framework is required to support the realization of
Industry and National Objectives:



Support through right policy and regulatory framework


Concerted stakeholder support to addressing industry challenges


MTTR,
CNI, proritising power supply to industry,
RoW

etc.


Fiscal and other incentives to drive operator Lead investment in
infrastructure


to guarantee speed to market and realisation of objectives


Light touch regulations to enable dynamic and effective industry driven
competition


Government support through the use of policy and fiscal incentives will act as
catalyst for growth of industry.



Realizing the opportunities that Broadband penetration presents to Nigeria
requires concerted effort


facilitation of expedited broadband infrastructure
rollout for the last mile, issuance of requisite spectrum, service innovation and
competitive frameworks which are backed by a supportive policy, regulatory and
stakeholder ecosystem offer the best platform for success

Thank You