PPP Projects in Nigeria: Current prospects in
Telecoms
Akinwale Goodluck, Corporate Services Executive, MTN
Overview
• Executive Summary
• The Growth of the Mobile Sector - Socio Economic Contributions to Nigeria
• The Infrastructure Challenge
• PPP Models to address the Challenges
• Meeting the Infrastructure Challenge through effective PPP
• Recommended Actions to Overcoming the Roadblocks
• Conclusion
Executive Summary
• The Nigerian Telecommunications Sector has seen tremendous growth over the last decade and is an important
reference point for the country. Mobile subscriber base has grown from below 500,000 in 2001 to over 130 million.
Contribution to Gross Domestic Product (GDP) has been on a steady increase over the years from below 1% in 2001
to a rebased level of about 8% in 2013.
• In 2012, the Nigerian Mobile Telecommunications Industry became the largest in Africa ahead of South Africa and
remains among the fastest growing globally. These growth has been led by the Private sector led investments in the
Telecommunications sector.
• Despite the unprecedented growth, the Telecommunications industry has experienced its own challenges. The
dearth of infrastructure has long been an obstacle for the country’s fledging telecommunications industry. Power,
Right of Way, Security and other network costs make network operating costs two to three times higher than other
African countries.
• While telecommunications sector contribution to infrastructure development had been premised on the need to
facilitate service delivery by focusing primarily on creating physical infrastructure (through self-owned/managed
networks), it has also facilitated social infrastructure through Social Responsibility initiatives which aid capacity
building for wealth creation.
• The telecommunications industry has continued to support Government’s objectives by empowering Nigerian
citizens, showcasing Foreign Direct Investment, and improving governance through the provision of information
communication & technology.
• Notwithstanding these remarkable achievements, the industry recognizes as a critical element for success the need
to partner with Government at the Federal, State and Local Government’s in the development and protection of
Critical Infrastructure required to support the delivery of best in class next generation services.
• This presentation will examine the contributions of the telecoms sub-sector in this regard and make suggestions for
effective and sustainable Public-Private Sector Participation in infrastructure development.
The Growth of the Mobile Sector - Socio Economic
Contributions to Nigeria
•
Central Socio-economic Infrastructure
• Mobile facilitates GDP growth by enabling increase in productivity: an increase of 10 mobile phones per 100 people
boosts GDP growth by 6% (Vodafone , 2005).
• Contributes around 4% of the country’s federal tax collection receipts and 10% of federal taxes generated outside the
oil and gas sector
• The telecoms sector contributions provide more than half of the country’s FDI. In this respect, the sector remains
unquestionably critical to Nigeria’s ability to attract foreign capital
• Other contributions to the economy include corporate social responsibility programs running into billions of naira.
•
Employment Generation
• Over 12,000 Nigerians in direct employment; millions others gainfully engaged.
• 3% to 5% of Nigerian telecoms services revenues are paid out in wages and benefits for some of the highest skilled jobs
in the economy.
•
A Model for Growth
•
•
•
•
Growth has outstripped all projections, a model for other sectors.
The telecommunications Industry is now at the Broadband threshold: it is estimated that 10 % increase in broadband
penetration will yield an additional 1.38 in GDP growth www.itu.int/broadband
Submarine cable landings (Main-1, Glo-1 and MTN’s WACS) promise further growth, lower tariffs and better quality
services.
• Industry is set to enable possibilities in telemedicine, m-finance, e-education and other life-enhancing services.
Growth has been enabled by conducive licensing/regulatory framework;
but Infrastructure deficit has exerted a huge cost on operations.
The Infrastructure Challenge
•
Telecoms Infrastructure Challenge – The Four In One Network, Paucity of infrastructure no longer news, operators
run parallel (1)transmission, (2)security, (3)power/diesel distribution and (4)telecom networks.
•
Transport and Communications - Poor road, rail and port infrastructure adds about 40% to cost of goods. Shipping
costs are about 50% higher than other low-income developing regions (International Commission for Africa)
•
Costs - CAPEX/OPEX required to address infrastructure needs equals higher costs for consumers:
 Average Nigerian operator monthly spend per BTS is $6,000 compared to $3,000 in Ghana.
 MTN spent over N30bn on power generation in 2013. As an industry total cost on power is over N50bn a year
accounting for about 60% of operators’ network costs.
 Only 15% of over 20000 BTS sites in the country connected to National Electric Grid. MTN alone generates
about 400MW combined output from thousands of generating sets
•
Governance as a challenge - Lack of maintenance, corruption & waste further deplete available infrastructure.
•
Multiple Taxation and Regulation also a major barrier to the roll out of infrastructure - cost of multiple taxation to
industry which includes combination of increased operating costs and lost revenue costs is around N9bn each year
to the telecoms industry, as more sites get targeted for taxation purposes, or about N20bn if most of the arbitrary
fees in some key states are upheld.
•
Funding as a challenge - But even if pledged/available funds are well utilised, the World Bank estimates a funding
gap of US$31 billion, particularly for water and power infrastructure.
•
Government Can’t do it Alone - For Nigeria, the ICRC estimates a budget of between US$12 billion and US$15 billion
yearly for infrastructure development over the next five to six years – just to catch up!
PPP Models to address the Challenges
Traditionally, PPPs are arrangement whereby “the project proponent or contractor undertakes
the construction, including financing of any infrastructure, facility and the operation and
maintenance thereof (including) the supply of any equipment and machinery for any
infrastructure and the provision of any services” S.36, Infrastructure Concession Regulatory
Commission Act, 2005
Models include:
Design-Build (DB):
• PO designs and builds the
asset for a fixed price.
Build-Own-Operate (BOO)
• PO is in full ownership and
control, subject to regulatory
oversight.
Operation & Maintenance
Contract (O & M)
• PO operates asset for a
specified term under contract.
Design-Build-Finance-Operate
(DBFO)
• PO designs, builds and operates and
transfers asset under a long-term
contract.
Build-Own-OperateTransfer (BOOT)
Buy-Build-Operate (BBO)
• Asset is transferred to PO,
improved and operated for an
agreed term.
• PO builds and charges for use
then transfers ownership after
agreed period.
Operation License
Finance Only
• PO is licensed to operate a
public service for an agreed
term
• Private participation limited to
arrangement of Finance.
PO = Private Operator
Source: Canadian Council for Public-Private Partnerships
Meeting the Infrastructure Challenge
through Effective PPP
Current realities
•
“Four-in-one” networks are telecoms‘ contribution to overcoming the infrastructure challenge.
•
Telecoms investment in Physical Infrastructure has not followed the traditional PPP model
(consortia, funding, build-operate-transfer, etc) because telecommunications itself is a key physical
infrastructure which relies on others (power, transmission, etc) to deliver service.
•
Operators however partner with the NCC using the traditional model (through USPF, SABI, etc.) to
either
•
•
•
take basic telecoms service infrastructure to the underserved in remote communities, or
make broadband and other innovative services available to the otherwise disadvantaged.
Our “PPP” model is multi-dimensional, with both physical, social and economic elements.
Key Success Factors for PPP Collaboration
•
Transparency & trust; independence
•
Certainty, consistency/stability
•
Adequate information sharing (equal access to information)
•
Participatory representation, active/contributory roles respectively
•
Resource pooling & incentivization
•
A comprehensive impact assessment mechanism
Current Industry approach to building
Capacity in the Industry
To effectively address operational exigencies prevalent in Nigeria, the Telecoms industry has
explored the following initiatives:
Managed Services
•
Managed Services has also become necessary to address the persisting ecosystem challenges which
have in recent months escalated to levels prejudicial to our core ICT business.
•
3rd Party vendors Build and maintenance of passive network infrastructure at BTS sites, they also
provide network optimisation services in addition to the supply of radio and active network
components.
•
They are also responsible for the Monitoring and Field Engineering Services – which involves day to
day monitoring, preventive and corrective maintenance of active network elements. in line with
industry best practices.
Infrastructure Service Provision by Licensed 3rd Parties
•
NCC licensed infrastructure service providers are now actively engaged in the roll out, building
operation and maintenance of BTS and other network infrastructure.
Outsourcing of Support Services such as Call Centers
•
Indigenous Nigerian companies have now built extensive capacity to support the establishment and
operation of call center facilities to support.
•
These companies have developed extensive ICT and employed thousands of young Nigerians in
support of the Telecoms industry.
Meeting the Infrastructure Challenge - A
Comparative Analysis
Approach
Country Examples
Comment
1
Infrastructure: Competitive tender
&/or Government initiative to build
new backbone &/or access
infrastructure, including use of
universal services funds or similar.
Canada, Chile, India, Pakistan, Sri
Lanka,
Singapore, Malaysia, other USF
countries
Addressing Infrastructure: Use of Universal Service
Funds to provide physical infrastructure. USPF facility in
Nigeria may be leveraged and business-friendly models
for allocation advanced
2
Ensuring Return of Investment
(RoI): Create / Underwrite Demand
Malaysia, Singapore, OECD
countries
Addressing Content/Demand: Advance strategy &
policy to drive adoption of e-governance, e-health and
education (bring Government online)
3
Access as a way to ensure RoI:
Stimulate Private Demand in the ICT
Sector – e.g., PC initiatives, industry &
educational initiatives, local services
Korea, China, Egypt, Thailand,
OECD countries
Addressing access to Broadband:Government may
consider proposals to ensure supply/discount affordable
access devices through duty waivers, subsidies etc
4
Enabling Environment: Regulatory
Reform, liberalisation, competitive
fixed & unified licensing, creative
spectrum policies
Pakistan, India, S. Africa, Chile,
Brazil, Peru, New
Zealand, Germany, UK, USA, some
ASEAN
Addressing Regulatory issues: Review of spectrum
policy/pricing and regime of allocation to provide
adequate affordable bandwidth for broadband/
unbundling of existing NITEL resources can be a key
strategy hereunder
5
Securing Requisite Investments:
Broadband investments as part of
Economic Stimulus Packages
USA, UK, Canada, Japan, Finland,
Singapore,
Korea, Australia
Addressing Investment: NCC can be encouraged to
incentivise broadband investments with reciprocal tax
holidays (AOL), discount schemes, etc.
Source Broadband for Development in East Asia & Pacific GSMA Mobile Asia Expo: Public Policy Forum on Market Drivers to Encourage Mobile
Broadband Investment in Asia Pacific, Shanghai, June 21, 2012. Natasha Beschorner, The World Bank. www.worldbank.org/ict
A bespoke or combination of these approaches which takes into consideration the needs and exigencies of the
subjective Nigerian landscape should be considered to encourage PPPs in the Telecoms Industry.
Recommended Action Points for Overcoming the
Roadblocks
Issue
Challenges
Proposed Outcome
Infrastructure
Protection
• Telecoms infrastructure not yet
recognised as essential national
infrastructure.
• Statutory protection for telecoms infrastructure
against shutdowns, theft, and vandalisation.
PPP Policy
framework
• Lack of Policy direction and
Commitment from Government
Public Sector
• Define policy objectives for PPPs
• Due consideration of sector specific
issues/challenges
• Strategic alignment with the policy objectives
and visions for ICT sector
Expectation/
Perception
Management
• Misunderstanding of roles
breeds distrust & impedes cooperation (excessive/multiple
regulation).
• Establishment of sound legal framework based
on (e.g.) the Lagos State Private Sector
Participation Law and the Infrastructure
Concession Regulatory Commission Act 2005
Defining
Clear Roles
• Public sector as development
leader, private sector as
complementor.
• Equal commitment from public sector.
• Avoidance of “punitive” taxes & charges,
• Avoidance of taxation evaluated on the basis of
company profile, rather than measurable
objective
• Avoid resistance to “big business” and provide
minimum levels of protection.
Recommended Action Points for Overcoming the Roadblocks (2)
Issue
Challenges
Proposed Outcome
Dearth in
Public
Infrastructure
• PHCN supplies less than 17%
of sector’s needs; operators
generate 83% at huge cost.
• The Four In One Network
• Power Sector Reform - implementation of
reform will enhance much needed domestic
manufacturing capacity
• Infrastructure development MoUs to support
the roll of public utilities, shared facilities etc
Customs
Reform
• Up to 95% of mobile telephony
equipment is imported – delays
compromise quality of service.
• Track success of ongoing Port Reforms - open
reporting model required.
• Speed up shipment clearance processes.
Structured
Incentives
• Pioneer status appreciated –
measurable impact on
economic growth; but
• reversal of progress possible if
fiscal constraints are ignored.
• Encourage more capital inflow through
relaxation of payment obligations (i.e. Annual
operating levies, Number renewal and
Spectrum fees..
Conclusion
• The private sector has contributed its fair share – and more – to
the revamping of decaying infrastructure.
• But all stakeholders must still do more to empower and
encourage PPPs.
• “Big business” should be encouraged; the governments should
focus on providing conducive environment for businesses to
thrive, regulatory competencies should be improved, and
governments should not be afraid to allow the private sector to
improvise.
Thank You