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Nigeria's leading finance and market intelligence news report.

As 5G beckons, can IHS meet Nigeria’s growing cell tower needs?

In the coming months, Africa’s largest economy would be finalising plans to launch a 5G network on a commercial level, and it would require thousands of additional cell sites to make the technology function efficiently.

“Already, we are set for the auction of some spectrum slots in the 3.5GHz band. The other day I was at the National Assembly, I informed the senate that we were 95 percent ready for 5G. Today, as we speak, I am delighted to tell you that we are already at 97 percent completion,” Umar Garba Danbatta, executive vice chairman and CEO of the Nigerian Communications Commission (NCC) said at the annual African Tech Alliance Forum (AfriTech 2021) held in Lagos recently.

While spectrum licence is a cost that does not affect the tower companies directly, the spectrum deployment depends on the number of base stations or cell towers.

According to an NCC spokesperson who would not be named because he is not in the position to speak for the commission, these cell towers would need to be located very close to each other, hence the operators with the licence would likely need multiple new cell towers and in some cases make use of tall buildings to mount the cells.
Issam Darwish, co-founder, and CEO of IHS Towers, the largest tower operator in Nigeria says Nigeria requires about 40,000 additional cell towers to complement an existing 37,625 towers in Nigeria to meet broadband demand and his company is working to ensure the 5G network is launched.

Read Also: IHS’s New York listing a win for Nigeria’s 5G ambition

IHS Holding was able to raise $378 million from its listing on the New York Stock Exchange (NYSE) in October, which was below the expectation of raising over $500 million. Nonetheless, IHS has a sizable funding chest, $4.5 billion in the capital with total borrowings at $2.2 billion.

However, Nigeria may be the company’s birthplace and the largest market where it controls a 44 percent share of the market. The closest competition to IHS is the American Tower Corporation, with approximately 5,800 as of December 31, 2020. But the allure of new markets and Nigeria’s current unappealing macroeconomic variables could be overwhelmingly attractive.

An IHS spokesperson told BusinessDay it was not taking questions.

While Nigeria seems fixated on launching 5G, the country has not done spectacularly well in ensuring wide coverage of the previous generations of cellular networks like 3G and 4G. 3G coverage as of 2020 was at 49.4 million, a decline compared to 50.4 million recorded in 2019. 4G coverage in Nigeria is at 36.5 million in 2020 from 21.7 million reported in 2019. The National Broadband Plan 2020 set an ambitious target for 3G coverage to at least 80 percent of the population by 2025. Less than 4 years to the timeline, coverage stands at about 50 percent while 4G is at 37 percent coverage.

Beyond the challenge of 40,000 additional cell towers, experts say the inadequacy in the supply of electricity may present a big hurdle in cost for operators.

Ajibola Olude, executive secretary and chief operating officer of the Association of Telecommunication Operators of Nigeria said the 5G would need the deployment of alternative or non-grid sources of electricity like solar. Darwish said in an interview IHS was already considering using Tesla batteries to power its cell tower site.

Olude also suggests that the tower needs for 5G might be more than 40,000 given the close proximity that is needed for 5G. Because of the spectrum that 5G technology uses compared to 4G, telecom operators need to install many times more towers to deliver the advertised bandwidth with the same quality signal that users expect.

Operators will use a combination of low, mid, and high range spectrum to support different 5G use cases. Some applications will require high bandwidth and constant connectivity, enabled by millimeter Wave (mmWave) frequencies that offer great speeds and capacity. However, this is tempered by the low range and poor propagation qualities. This means that in addition to using traditional mobile masts for 5G, operators will need to densify their networks in urban areas, through micro infrastructure such as small cells.

Apart from that, the overall market colocation rate in Nigeria is lower than in other markets where companies like IHS operate. Colocation refers to the installation of equipment on existing towers for a new tenant alongside current.

The country’s lag in colocation rate is due to telcos like Globacom and the expansion of single-tenant rural solutions that target areas that would be otherwise uneconomical for MNOs. Glo is expected to continue building its own sites instead of colocating on existing tower sites, which will continue to keep the market colocation rate low.

Nevertheless, IHS sees demand for towers rising in Nigeria driven by the need for MNOs to increase coverage and improve quality of service, capacity needs due to shifting to 3G, 4G, and 5G, and growth in subscribers. The company also expects the three largest MNOs to continue their expansion of geographical coverage in the near future.

Demand for 3G traffic is expected to be overtaken by demand for 4G traffic in the short term. Roll-out of 4G is expected to continue at a rapid pace through the projection period, driven both by capacity and coverage requirements.

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