Ogungboye: Govt Support for Telecoms, Key to Economic Diversification
The Managing Director/CEO and Founder of e.Stream Networks, Muyiwa Ogungboye, spoke with Emma Okonji on the need for government to support telecoms growth in order to enhance economic diversification, among other issues. Excerpts:
Tell us about e.Stream Network?
e.Stream Network is an indigenous company, founded in December 2006 to provide broadband and communications services to corporate organisations. We started out as a satellite communication company, providing VSAT technology services to the people, but as technology and customer taste change, we evolved to providing radio wireless and fibre wireless services. Today we are partnering Bitflux to provide 4G LTE services as well. We are a technology company providing broadband services and we want to be the first choice for organisations that need broadband services.
Being a 4G LTE broadband service provider, what is your coverage area like? We commenced the 4G LTE broadband service delivery last year and we partnered Bitflux to achieve this, since Bitflux is licensed to provide the backbone infrastructure, but is not licensed to sell to endusers. e.Stream is licensed to sell to endusers and we are one of the strategic retailing partners of Bitflux. Although the Bitflux 4G LTE rollout is not as large as it is supposed to be, but with their service offerings, we are able to cover most parts of Lagos like the Tinubu Square, Broad Street, Marina, South West Ikoyi, and part of Victoria Island. Recently we have covered some areas on the mainland of Lagos, like Ogba, Gbagada, Maryland, Ikeja, Ojodu Berger and we are still expanding our services to cover more areas.
How is low broadband penetration in the country, which is currently put at 21 per cent, affecting your kind of 4G LTE broadband service offerings? Yes, we currently have low broadband penetration at 21 per cent with a projection to reach 30 per cent by 2018, but the current indices are clear indications that we may not, as a country, achieve the 30 per cent broadband penetration by 2018, more so that 2018 is just around the corner. We may not be able to achieve 30 per cent penetration because of the challenges in power supply, poor access to fund raising, stiff competition from bigger operators, as well as multiple taxes and levies in the ICT industry. Yes it is affecting our kind of service delivery in broadband and we need government support in this regard.
Why is Nigeria having challenges with broadband penetration, when we have several landings of submarine cables at the shores of the country? It is true that we have several submarine landing cables at the sea shores from big operators like Glo 1, MTN WACS and MainOne, including the SAT 3, but the major challenge is about capacity distribution. There is no national backbone infrastructure to distribute the broadband capacities from the shores of the country to the hinterlands and that is why broadband penetration is still low and expensive. Building national backbone infrastructure is capital intensive and the operators do not have easy access to funding and again the operating environment is harsh. All these put together are adversely affecting broadband penetration and at the same time, affecting our kind of broadband business offerings.
You try painting a picture that small operators like e.Stream Networks are facing serious challenges in the industry, especially from bigger operators. Why is it so? The challenges faced by smaller operators are numerous. We are faced with stiff competition from bigger operators, we are faced with multiple taxes from state governments when laying our fibre cables and we also have cash constraints because access to funding is a difficult one for us who are the smaller operators and we need the regulator, the Nigerian Communications Commission (NCC) to move fast in addressing the issue, which has already forced many smaller operators out of business. There is stiff market competition against smaller operators by the bigger operators and there is the issue of underpricing that is affecting the operations of smaller operators. We have come up with several advocacies through our association, the Association of Telecommunications Companies of Nigeria (ATCON), but government seems not to listen to us and we need the government intervention in these matters also.
The NCC has licensed two Infrastructure Companies (InfraCos) and it is planning to license additional five InfraCos designed to address the challenges of broadband infrastructure. How laudable is this initiative? Licensing InfraCos is not the issue, but the issue is about nurturing the InfraCos and giving them the right support to succeed. The truth is that the licensed InfraCos do not have the support of government to roll out broadband infrastructure across the country. There are no support on tax rebate, access to funding, multiple levies and taxes from government agencies, and all these put together, makes it difficult for the InfraCos to thrive, even though they have the licence. So those InfraCos that already have licences cannot rollout because of the challenges in the industry, which the government must rise up fast to address.
Over time, technology has evolved from 2G, 3G, 3.5G to 4G LTE. How will you classify the 4G LTE adoption rate in the country? The adoption rate of 4G LTE in the country can be categorised in three folds: There is corporate side, small and medium enterprise (SME) side and the individual (home) side. The 4G LTE is playing out more in the SME and the individual sides, than the corporate side. So the adoption rate is still low and this is so because the high dollar rate has eroded so many things. President Muhammadu Buhari is trying to localise most products that are consumed in the country, and support the Nigerian products as against the urge for foreign products. When this is achieved, the purchasing power of Nigerians will increase and more people will adopt 4G LTE technology, which has to do with speed and quality.
What do you suggest the government should do to address the adoption rate of 4G LTE? Government must do more to increase the purchasing power of Nigerians and businesses, and government should come up with policies that will encourage business growth in the country. Government must collaborate with ICT experts and work with advocacy groups like ATCON to achieve its goal of diversifying the Nigerian economy. The challenge we have is that government do not listen to us, the advocacy group, yet we contribute our own quota to the country’s gross domestic product (GDP).
What amount of local content do you have in your operations and how has the corporate social responsibility project of e.Stream, impacted on its host community? In the area of local content, I want to make it clear that e.Stream Network is not a content provider, but a broadband and communication provider, and as such we do not provide applications, be it local or foreign, but we provide the enabling environment for applications to thrive. Part of our focus is to have alliance with application and content developers. We have data centre seated in our office where we host the data of some organisations. In the area of corporate social responsibility (CSR) initiative, we focused on the education sector and we have been able to assist schools in Lagos. Recently, we selected a school in Ikorodu area of Lagos that is completely impoverished and we assisted the school in renovating a block of classrooms and we provided tables, chairs and other school materials, and we will do more by appreciating schools that are investing in information technology (IT). We will be looking at schools that are using IT to develop themselves and their students, and teachers. We are developing a product in that regard and our marketing team will be launching it before the end of the year.
You have been a strong advocate for the establishment of telecommunications infrastructure development bank for the information and communications technology (ICT) sector. What value is it going to add to the sector? It is true that I have been a strong advocate for the establishment of telecoms infrastructure development bank for the ICT sector and I do so because of its importance to ICT growth. Telecoms has revolutionise the way businesses are being managed, as well as the lifestyles of people, and these are some of the advantages that telecoms has brought to the sector, but there is a huge challenge in raising capital by the operators to sustain telecoms business in the country, hence we need infrastructure development bank in the telecoms sector, like it is in the oil and gas sector. It will help operators get soft loans to manage their businesses effectively. Banks syndicate loans to bigger operators but will not listen to smaller operators, the reason why we need the infrastructure development bank in the telecoms industry. Government needs to support the telecoms industry just the same way that the regulator, the NCC is supporting the industry. The infrastructure bank will help us to expand our business because majority of the smaller operators are struggling to expand their business.
Such bank will provide the necessary financial support for telecoms operators that would assist them in network expansion and upgrade, instead of relying on money deposit banks, whose interest rates are on the high side and inimical to business growth.
So who will fund the infrastructure bank that you are advocating? The government has to fund it. Who funds the agricultural banks that are giving loans to farmers? So the federal government has to fund it and it is not going to be given free of charge because any operator that has access to a loan from the infrastructure bank will have to pay back, but with minimal interest of single digit rate. What we need is the ease to access to such loans. A country like China did that to support telecoms equipment supplier like Huawei, that has turned out to become the biggest telecoms equipment supply in the whole world, and this can be replicated in Nigeria. Very soon, Europe will stop buying oil from Nigeria because they are planning to stop manufacturing of petrol and diesel cars by 2040, and Nigeria will be taken by surprise, hence the need to diversify the source of government income and telecoms is one big market that government can easily rely on for revenue generation if it is well supported and positioned.
How will you want government to position the telecoms sector in order to expedite economic diversification? Government should see the telecoms business as a long term investment that is capital intensive and therefore should support the telecoms sector to attain better growth. The infrastructure bank I am talking about, for instance, should be able to give loans easily with single digit interest that is between one and nine per cent. What the money deposit banks collect as interest is 30 per cent and above with collaterals and all these make it practically impossible for small operators to access loan from deposit banks for business expansion. So government must support the telecoms industry, invest in it and make quick returns through economic diversification in the telecoms sector.
How will you describe the 9mobile experience that took $1.2 billion loan from a consortium of 13 banks in 2013 and was unable to pay back, based on the terms and conditions of the loan? The 9mobile experience is an unfortunate one that I will not like to discuss, because it is not clear to me what the terms and conditions of the loans were. But the bottom line is that if they were financed by telecoms infrastructure bank, they would not have had issues the way they had.
How can the present competition between the big and small operators be addressed? Regulation is important to address the issue and limited mobility licence that confines operators to a particular coverage area, should be revisited by the NCC. The regulator should wade into the matter of under pricing and stop the bigger operators from stifling the operations of the smaller operators. The big operators should be given condition not to sell beyond certain limit in order to allow the smaller operators to remain in business.