Nigeria telecom sector heats up

The Nigerian telecommunications market is heating up, as South African service providers in particular see investment opportunities and potential growth in the country’s communications sector, especially for mobile technology.

Telkom SA Ltd., for example, recently launched a bid to acquire the Nigerian government’s 51 per cent stake in Nigeria Telecommunications Ltd. (Nitel).

“We have not yet been officially notified as to the outcome of our expression of interest in Nitel,” said Xolisa Vapi, a public relations official for Telkom, via e-mail.

According to Vapi, Telkom considered the Nigerian market a strategic investment opportunity for the company.

“We would be interested in various avenues of Nigeria’s business, including the mobile communications business, which is one of the fastest-growing in the world,” said Vapi.

Another South African telecom provider, MTN Group Ltd., began commercial operations in Nigeria in August 2001, and according to Yvonne Muthien, group executive for corporate affairs, investment opportunities in the West African country influenced the company.

“With a largely untapped market (at the time of launch there were an estimated 400,000 working fixed lines in Nigeria), an estimated population of 130 million and an economy that enjoys a constant growth rate the opportunity in Nigeria was and remains significant,” Muthien said via e-mail.

MTN’s investment in Nigeria has paid off. As of March 2004 MTN Nigeria was contributing 29 per cent of MTN Group revenue.

Muthien attributes the progress of MTN in Nigeria to the extent of its investment in the country and the speed of its infrastructure rollout.

MTN initiated its own nationwide transmission infrastructure, Y’elloBahn, to increase its network capacity and improve call quality.

Muthien called Y’elloBahn, which runs for 3,400 kilometres, “Africa’s most extensive digital transmission infrastructure.”

“Constructed at an initial cost of US$120 million, the first phase of the Y’elloBahn covers Nigeria’s 36 states including the Federal Capital Territory, Abuja. The second phase of the Y’elloBahn will transverse another 4,500 kilometres,” said Muthien.

Last April, another South African telecom company, Vodacom Group, signed a five-year management agreement with Econet Wireless Nigeria Ltd. Vodacom subsequently pulled out of the agreement, citing issues relating to good corporate governance and trust.

MTN on the other hand is consolidating its investment in Nigeria.

“A key challenge lies in accelerating the Nigerian network rollout,” Muthien said. The company began initiatives designed to meet customer demand, improve network quality and maintain brand and market leadership, he said.

MTN is looking beyond the Nigerian market and will consider other continent expansions that meet their investment criteria, according to Muthien.

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