Theft, vandalism cap investment in telecom industry

Theft, vandalism cap investment in telecom industry

In the past few days, the Nigerian Communications Commission (NCC) has increased its advocacy across communities in the country, calling for an end to the vandalism of telecom infrastructure.

According to Garba Umar Danbatta, its chief executive officer, there are 40 vandalism reports on telecom structures across the federation daily, which has necessitated the need to bring stakeholders together to find a solution.

“Vandalisation of telecom infrastructure will discourage investors from investing in Nigeria should their infrastructures be continuously vandalised or stolen,” Danbatta said. “It will also reduce the quality of service as well as reduce coverage area, leading to dead spots on the network which result in poor quality of service.”

Foreign direct investment (FDI) into the telecom industry rose to 2.6 percent year-on-year at $57.79 million when compared with the $56.28 million generated in the first quarter of 2021.

Since 2013 when the National Bureau of Statistics has been compiling data on foreign direct investment, the industry has seen a decline of over 150 percent. The industry recorded the most FDI in a calendar year in 2014, when it hit $994 million, making it the third most attractive sector in the Nigerian economy for investors.

The next year, 2015, the amount dropped slightly to $938 million, which was still enough to make telecom the second most attractive sector. FDI to the industry continued to decline in subsequent years, reaching an all-time low of $107 million in 2021 and telecom dropped to the ninth most attractive sector in Nigeria.

The $57.79 million generated in the first quarter of 2022 still puts the telecom industry below the pecking order of attractive sectors and the prospect of regaining a position in the top three by the end of the year may be slim, given the myriad of problems that it faces.

Industry leaders such as MTN Nigeria and Airtel may be leading the stock exchange currently and are very invested in the payment industry, however, they are not rushing to invest in new telecom infrastructure. MTN Nigeria may have a 5G licence from the NCC, but it is waiting for the NCC’s approval in August to push out infrastructure for the service.

MTN is, however, not immune to the problems of theft and vandalism that plague other operators; this is despite selling off her towers to IHS. In 2020, MTN Nigeria reportedly suffered an average of 30 fibre cuts in different locations monthly.

It may have finally convinced the telco to sell off its remaining tower assets to IHS. Currently, IHS runs 9,000 towers for the biggest telecom operator in Nigeria. The implication is that vandalism on those assets now affects IHS directly, while MTN Nigeria only gets the cost indirectly.

Airtel Nigeria still runs most of its assets directly. Hence, it is not surprising it has had to bear the cost of replacing the tower assets directly. In 2020, the telco said it suffered 1,022 fibre cuts, which affected its quality of services, at the time.

Airtel said it also faces other challenges including thefts of power generating sets, inverter batteries, and sometimes, the entire base station facilities the network rides on.

Airtel said road construction is also a big challenge the industry faces. Out of the 1,022 damages, 405 cases were a result of road rehabilitation activities by construction workers, while 617 cases were due to vandalism.

Experts noted that beyond theft, replacing the vandalised equipment is also a herculean task for operators. This is why the current foreign exchange crisis facing the country is a major problem for the industry.

All equipment used in the telecom industry is imported. In essence, imported equipment including towers, switching, gears, and radio have foreign exchange components

“It is common knowledge that the majority of equipment used is foreign bought and access to a letter of credit in Nigeria is like threading a needle. So many operators have therefore resorted to buying through a proxy and or black markets, and we all know the result of that,” said Kenny Joda, head of sales and marketing at FiberOne.

Experts say local outsourcing of base stations, as MTN Nigeria has done, could be the answer to reducing telcos’ forex exposure.

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