Search

 

Cablegate: Nigeria: Telecom Companies Face Nigeria Market

This record is a partial extract of the original cable. The full text of the original cable is not available.

141420Z Oct 04

UNCLAS SECTION 01 OF 02 LAGOS 002104

SIPDIS

STATE PLEASE PASS TO FCC, EX-IM, AND OPIC

E.O. 12958: N/A
TAGS: ECPS ECON NI
SUBJECT: Nigeria: TELECOM COMPANIES FACE NIGERIA MARKET
CHANGES


Summary: The July 2004 Central bank decision requiring
25 billion naira minimum capitalization for all banks
has affected the telecommunications sector. Banks have
reduced their loan portfolios in order to minimize
their risks and thus appear more attractive as a
potential partner for merger with other banks. Bank
mergers are one of the ways institutions are coping
with the recapitalization requirement. For
telecommunications firms, this shrinkage of loan funds
comes at a bad time. Due to strong competition in the
sector, major telecom operators have been slashing
connection fees, reducing acquisition costs, and
introducing value added services in an effort to
increase and/or maintain market share. The Nigerian
Communications Commission (NCC) plans licensing changes
in 2006 that will further liberalize the sector,
bringing fixed operator licenses more in line with GSM
licenses. End summary.

--------------------------------------------- --
Banks on Loan Recovery Drive; Telecoms Hard-Hit
--------------------------------------------- --

2. (U) Since the Central Bank of Nigeria announced
reforms requiring banks to recapitalize to 25 billion
naira ($188 million) by the end of 2005, most banks
have tried reducing risk assets by calling in existing
loans and decreasing the number of new loans and
credits. The telecoms, major recipients of bank
credits since wireless telecoms took off in 2001, have
been hard hit by these recovery efforts.

3. (U) Since liberalization of the telecom sector in
2001, telecoms have been an attractive sector for
Nigerian banks - second only to the oil/gas industry.
In 2003, Stanbic Bank, in a consortium with 15 other
smaller banks, granted MTN -- the largest mobile
telephone company -- a N53 billion ($398 million) short-
term loan.


4. (U) Perhaps an unintended consequence of the CBN
capitalization requirement, Dirk Smet, Managing
Director of Starcomms Telecomm, said his company
responded to the new rule by satisfying local debts.
Starcomms' debt for its Nigeria operations is now
entirely external.

--------------------------------------------- -------
Keener Competition In Telecoms; Connection Fees Fall
--------------------------------------------- -------

5. (U) The Nigerian telecom consumer is becoming more
sophisticated as service provider options and telecom
consumer education expand. While the Nigerian telecom
market is large and the potential for future growth is
enormous, there is a saturation point for any given
time period and for players like Starcomms, Smet
believes that point may be closer than many people
think.

6. (U) In their efforts to maintain customers, telecom
operators have been lowering connection fees despite
the fees' importance in generating the majority of
telecom profits. Telecoms are also offering value
added services like internet and data transmission.
Reduction in access charges and elimination of negative
billing (whereby a customer is billed for periods when
the line was used on credit) have also become major
selling points.

--------------------------------------------- --
More Liberal Sector Guidelines To Be Introduced
--------------------------------------------- --

7. (U) Exclusivity rights of GSM operators end in 2006
when the Nigerian Communications Commission (NCC) plans
to introduce at least three unified licenses to Private
Telecom Operators (PTOs). Unified licenses will cover a
larger area, including across currently sacrosanct
state borders. This will allow fixed wireless to
operate more like mobile phone services. Investors are
expected to respond favorably to the liberalization.

8. (U) Presently, MTN, Vmobile and Glo Mobile have 2
million, 1.5 million and 1.3 million subscribers
respectively. State-owned Mtel has about 800,000
subscribers while PTOs like Starcomms have about
100,000 subscribers on each of their networks. The
introduction of unified licenses will significantly
increase PTOs' subscriber base.

--------------------------------
PTOs Talk With Foreign Investors
--------------------------------

9. (U) Some telecom companies have already started
talking to foreign investors in anticipation of the
unified license policy. According to Smet, Starcomms
is presently talking with investors in the US and UK,
including Emerging Market Partnership (EMP) of
Washington, DC. He believes the next 18 months will be
important for Nigeria's telecom industry as competition
for limited local and international financing grows.

Browne

© Scoop Media

 
 
 
World Headlines

 


Myanmar: UN Condemns Escalating Violence In Deadliest Day Of Protests So Far

In response to the killing of at least 18 protesters demonstrating against Myanmar’s military coup, the UN human rights office (OHCHR) on Sunday together with the UN chief, strongly condemned the “escalating violence” and called for an immediate end to the use of force... More>>

Syria: Economic Decline, Rising Hunger And Surging Humanitarian Needs

Syria’s fragile economy has “suffered multiple shocks” over the past 18 months, with its currency plummeting and joblessness swelling as people struggle to cover their basic needs, the UN Emergency Relief Coordinator told the Security Council ... More>>

OECD: Final Quarter Of 2020 Shows Continued Recovery In G20 International Merchandise Trade

G20 international merchandise trade continued to rebound in the fourth quarter of 2020 ( exports up 7.2% and imports up 6.8%), following the sharp falls seen in the first half of 2020, as lockdown measures affected trade globally. Although growth ... More>>


Focus On: UN SDGs


UNFCCC: Greater Climate Ambition Urged As Initial NDC Synthesis Report Is Published

UN Climate Change today published the Initial NDC Synthesis Report, showing nations must redouble efforts and submit stronger, more ambitious national climate action plans in 2021 if they’re to achieve the Paris Agreement goal of limiting global temperature rise by 2°C—ideally 1.5°C—by the end of the century... More>>


2021: Critical Year To ‘reset Our Relationship With Nature’ – UN Chief

During this time of “crisis and fragility”, the UN chief told the United Nations Environment Assembly on Monday that human well-being and prosperity can be vastly improved by prioritizing nature-based solutions. Painting a picture of the turmoil ... More>>


Paris Agreement: UN Secretary-General António Guterres To Mark U.S. Reentry With Envoy For Climate John Kerry

Watch live at webtv.un.org UN Secretary-General António Guterres will join U.S. Special Presidential Envoy for Climate John F. Kerry at an event marking the United States’ reentry into the Paris Agreement this Friday. The discussion with the Secretary-General ... More>>