JOHANNESBURG, South Africa-Many eyes in the wireless industry have recently focused on the emerging market of Africa with a lot of attention going to the recent auction of four mobile network licenses in Nigeria. The road to victory for Nigerian mobile prosperity has not been an easy one.
The licensing process for the four GSM licenses was cancelled early in 2000 only to be restarted in December of the same year as the government managed to attract what it termed “the correct type of bidder.” The four winners of the license auction were South African-based Mobile Telephone Networks (MTN), Econet Wireless from Zimbabwe, Communication Investments Nigeria, and M-Tel, the mobile division of the state-owned fixed-line operator Nitel.
Each of the winners was instructed to settle the US$285 million license fee within 14 days. However, Communications Investments Nigeria failed to make the deposit into the Nigerian Communications Commission’s account, and thus, forfeited its license and is forbidden from participating in any Nigerian telecommunications-related auction for another five years.
Communications Investments has contested the commission’s findings, yet it has effectively been removed from the race to acquire subscribers. The frequency spectrum originally allocated to Communications Investments will be given to the second national operator when the fixed-line market is deregulated, expected in the latter half of 2001 and coupled with the privatization of the national operator, Nitel. Thus, the yet-to-be-determined second operator will receive a GSM license in addition to its fixed license.
Six global telecom vendors are vying to build out Nitel’s GSM network in Nigeria. U.S.-based Motorola, Germany’s Siemens, France’s Alcatel, Ericsson of Sweden and Chinese firms Huawei Technologies and Shanghai Bell all submitted bids that included vendor financing, according to international press reports. Motorola reportedly offered the lowest bid of just under US$30 million. About 100,000 mobile lines are planned within a year.
Econet Wireless Nigeria has recently been beset with internal wrangling, as the Nigerian counterparts of the consortium announced they would cut the equity stake of Econet Wireless International from 40 percent to 5 percent. The reasons given were that Zimbabwean counterpart Strive Masiwiya had failed to finance the agreed US$80 million.
These initial setbacks have caused vendor financing negotiations between Econet and Ericsson to stall, prompting speculation that if Econet’s network is not live by the August deadline, the company could also forfeit its license.
The license period has been set for five years; however, the operators have the option to extend this time frame. The licenses also allow for the networks to operate in the GSM 900 MHz and GSM 1800 MHz frequencies. This should enable the networks to go live with a bouquet of world-class services, such as short message service (SMS) and mobile data.
In terms of license obligations, the networks will each have to achieve a minimum of 100,000 subscribers within the first year of operation and 1.5 million subscribers by the end of the five-year license, plus a minimum of 5-percent network coverage in each of the country’s states.
The license holders are each expected to invest a further US$360 million in network infrastructure. The initial layout of the license fee and the infrastructure costs have prompted observers to speculate that the operators could find it difficult to recoup their investments, citing the notion that the market may not be able to afford the mobile services.
