The economics of 5G deployment in Nigeria

Nigeria’s 140 million internet subscribers have mostly conducted their online business on microwave internet or 2G and 3G networks. The country has higher coverage of both networks with 2G at over 70 percent and 3G at 50 percent.

Compared to 4G and 5G networks, the speeds of these networks are exceptionally slow. The average speed of 3G connections is 3 megabits per second (Mbps), which is 30 times faster than the 2G average speed of 100 kilobits per second (or 0.1 Mbps). Some connections could achieve speeds of 7Mbps.

Nevertheless, they work quite well with VoIP, video conferencing, web browsing, office 365, and any other specialist software. And their ease of deployment, suitability to different terrains ensuring they reach the last mile, and lower cost compared to 4G and 5G, make them attractive for many operators.

Their attractiveness, however, pales in comparison to the speeds of 4G and 5G networks. To put it in context, it would take roughly 40 minutes on 4G to download two full seasons of The Office, which is 5GB in size. It would take over 2 hours to download on 3G. 5G reduced the time it would take to download the same seasons to a mere 35 seconds.

4G boasts peak speeds clocking in at 150Mbps upload and 50Mbps download speeds. These are vast improvements over 3G, yet Nigeria has yet to realise the full potential of 4G which only has 37 percent coverage in the country.

But the attention of the NCC is already turning to 5G deployment, which the auction concluded in December, and winners are expected to complete payment in February 2022.

Inasmuch as 5G holds more promise for internet speeds and service, the economics of deploying the technology is steep for operators in a country where previous networks generations have yet to gain wide penetration.

Here are six areas that could present the most cost challenge identified by researchers at Advocaat, a legal services firm.

Inadequate fibre optic infrastructure

There are five subsea cables that have landed on Nigerian shores. These include MainOne (10Tb), SAT3/SAFE (800Gb); Glo1 (2.5Tb), ACE (5Tb), and WACS (14.5Tb) with a combined capacity of 32.800Tbps. While Nigeria expects these assets to provide high-speed internet to the country, only about 10 percent of the capacity has been utilised.

Most of the country’s internet needs are served by mobile broadband, which is the marketing term for wireless internet access through a portable modem, mobile phone, USB wireless modem, table, or other mobile devices. 2G and 3G services are mainly provided through mobile broadband. Fixed broadband which is through fibre optic cable remains at a very low level of deployment.

It is estimated that to achieve full broadband penetration, 120,000km of fibre needs to be installed, given Nigeria’s landmass. Nigeria reportedly has a deficit of about 80,000km of fibre which needs to be met before effective nationwide deployment of broadband can be achieved. The operators also suffer vandalism and damage to existing fibre infrastructure from road construction.

Device availability and affordability

The 5G network cannot work on any mobile device. The first all-5G smartphones to come out in 2020 – Samsung’s Galaxy S20 lineup — starting at $1,000. To compare, 2019’s lineup of premium 4G smartphones started at $750 with the Galaxy S10e.

The high cost of 4G devices has played a role in why its coverage is not widespread in the country and this could be the case for 5G networks. In 2018, Ntel, a full 4G operator identified devices as the biggest problem to the adoption of the network. According to the operator, 4G is operated in over 4G sub-bands and there are fewer devices operating in the bands; and they are much more expensive.

Instability in the FX market

The 5G operators in Nigeria would face a big cost hurdle while trying to navigate the foreign exchange market in Nigeria. The telecom industry in Nigeria depends heavily on foreign equipment manufacturers and imported technical expertise for the deployment and maintenance of networks.

While the Nigerian government expects the 5G spectrum winners to deploy the technology within the first quarter of 2022, stakeholders in the industry say the major challenge is getting the offshore funding or accessing US dollar at a favourable exchange rate from Nigerian banks to import the needed equipment for 5G deployment.

Inadequate power supply

The electricity requirement for 5G technology is very high due to the need for more density coverage, more base stations, and additional equipment. According to a report entitled Operators facing power cost crunch by MTN Consulting, a 5G base station consumes four times more electricity than its 4G counterpart.

Currently, telcos spend on average 5 percent to 6 percent of their operating expenses, excluding depreciation and amortization, on energy costs, according to MTN Consulting. And this is expected to rise with the shift to 5G.

Read also: Mafab Communications, MTN face 4 hurdles ahead 5G deployment

Exact estimates differ by source, but MTN says the industry consensus is that 5G will double to triple energy consumption for mobile operators, once networks scale.

Insecurity

The researchers at Advocaat pointed out the licence requirement for deployment in at least one state in the various geopolitical zones in Nigeria within stipulated timelines. However, the security challenges being experienced at the moment by many states in the Northern region of the country, which has led to the shutdown of telecom services in some areas over a long period, would pose a huge problem for the operators. Some stakeholders had told BusinessDay that their personnel no longer accept assignments to areas considered high-security risks in the country.

Right of Way

The states across the country continue to charge high Right of Way fees despite an agreement secured by the Federal Government to reduce the charges to N140 per linear metre, the different RoW charges continue to be a disincentive for operators to deploy fibre infrastructure across the country. Linked to the low level of fibre optic deployment is the divergent policies and inability to obtain RoW permits from the various states.

Operators would also need to come to terms with multiple taxation, inconsistencies in government policies, and legal problems that could arise from deploying the technology. In 2021, for example, 5G carriers in South Korea found themselves the subject of a class action by consumers who were not impressed by the quality of network they were sold. Nigeria would need to work with lawmakers to come up with legal frameworks to guide service delivery in the new 5G era.