Interview: NATCOM Set to Roll Out Its 4G Voice Mobile Network 

Kamar Abass, Managing Director of, NATCOM, the consortium that paid $252.52 million to acquire the assets of the defunct NITEL in this interview bares  his mind on the imminent commercial rollout of their 4G voice mobile network, plans to raise additional funding, network expansion and the next broadband revolution in the telecom space.
Q. NITEL has taken nearly 15 years before it could be privatised, what are the attractions you saw in a First National Operator (FNO) that has been redundant for years?
Let me make a correction here. We acquired the telecommunications assets of NITEL and MTEL. That was all we did. We did not buy NITEL or MTEL and frankly, neither NITEL nor MTEL was for sale, they will not be sold, they will be wind up. They have been subject of a liquidation process but the assets, those were sold to us.
It is those assets that we will take and that we will turn into productive telecom assets in a total telecoms business and by total telecoms, I mean fixed, mobile, voice, data and services. Hence, total telecoms services. The things that are very interesting, attractive and reusable about NITEL and MTEL are the spectrum, which is grade one. As I said, it cannot be better in terms of spectrum.
Second is the international submarine cable (SAT3) which is a great asset especially in a growing economy where demand for internet access is growing by the day. Third is the licences, the licences are the way in which we can operate the telecom services essential. Towers have equipment on them but it is not of interest but the interesting thing is the towns and their locations.
Then there are physical building located up and down the countries so we need tons of space for data centres, for mobile switching centres  and offices and retail premises very valuable for that. There are ducts that we can lay our own fibre. They may not be complete but there are certainly a good number of them that are vital for us creating connectivity between various exchanges and ultimately our sites which are high capacity sites with fibre to draw down technology.
Ultimately, there are a small number of satellite earth stations which are useful to provide international backups but also potentially rural coverage services. Notice, I didn’t list old exchange equipment, which is irrelevant; CDMA mobile gear, irrelevant. Some of the satellite earth station equipment is obsolete. But the reality is that obsolescence gives us the strategic courage clarity that we have, which is to say focus on 4G. 4G is from 2008.
ENTEL had barely 2G leave alone 4G. So, we start from a new clean sheet to address the opportunity.  This is where I will emphasise that we start not from the assets. In fact, the assets were only incidental. The question was: Is there a market opportunity to enter the telecom market for the new company?  Yes, there is and it is vast.

Q. What gave you the courage to go ahead and venture in where investors have shied away from?  
I think this is a very good question and I think there are two answers to it. The first is that before we ever came to make a taller interest in NITEL or MTEL, we had studied the opportunity to enter the market with this sort of assets for somewhere around two years. When we performed the studies, we identified a major gap in the market and we accessed whether or not the NITEL/MTEL assets could be useful in plugging that gap and we were able to confirm this.
This gave us the rational to go after these assets, to purchase them and to pay the price that we paid. There is the second reason and that was something that was frankly just about timing. The assets that we have acquired are spectrum from 2001 and that means it is very high quality spectrum. All of MTEL customers had come off that network; the network has not been on operation for years, so that spectrum has been unused.
It is owned by NATCOM now but it was unused, so there were no customers on that spectrum and that means we can apply to that entire spectrum to a brand new technology. And just around now 4G mobile technology is coming into being. It is available in terms of handsets, radio performance that is stable and in term of voice and data services and most importantly it plugs the gap in the Nigerian market.
 Let me just characterize that gap for you, in the last 15 years of mobile, we have put on somewhere around 147 million active customers in 15 years. Over the next four and half years, the total number of mobile broadband customers alone will be greater than all of the customers that have come into the market on mobile since its inception. In other words, we are at a point where a major transformation is in the making. You will see 168 million mobile broadband customers coming into being between now and the end of 2019, which is more than all the mobile customers (both narrow and broadband) that we have seen in the last 15 years.
That sounds like an enormous transformation. When it comes to the supply of broadband services, we are unique because we have more spectrum which can deliver more throughput than any network available today and potentially any network in the future. The spectrum we have has unique features which are simply unrepeatable on any other spectrum band and others who have the same spectrum as us have all that spectrum taken off with their 2G services.

Q. How come people didn’t see this opportunity?
Honestly, it was not the first thing that we saw when we looked at it from two years of study. When I was in Ericsson, we took a commission from NATCOM investors and we studied it for two years and that is where we found the opportunity, it does not just jump off the page. Even now that we have been preparing ourselves, as we interview people, as we speak to manufacturers of equipment and devices, they are still saying, so what is your strategy?
It is very straight forward as far as we are concerned because we have put dots in the row and we have joined the map. But you’ve got to take a look at this and I dare say it wasn’t free. I was head of Ericsson in Nigeria and had to bring consultants from our headquarters and from around the world to do the analysis of the market, to do this study. It was a considerable investment for the shareholders and it might have led to the conclusion that there was no market.
But it didn’t lead to the conclusion that there was no great opportunity. But there was also a unique opportunity too. It is one thing coming into marketplace that is overcrowded and say I am going to sell cheap or more quality or whatever. This was in addition to the opportunity to do something on price and do something on quality and the experience available to customers and this was the edge that we found.

Q. Looking at the MTEL spectrum now, other telecom operators are complaining of lack of spectrum to leapfrog to 4G. With the CDMA spectrum available to the previous NITEL, is it what you are going to leapfrog to 4G or are you going to wait for NCC to give you another 4G spectrum?  
No. We have NCC’s approval to use this spectrum that we have for 4G services. When more is sold we will consider whether or not what is available is a useful addition to what we have now. It is true that other network operators want more spectrum and there is a process for releasing spectrum in a way that does not harm competition in the industry which we encourage very much the NCC to support competition by releasing the spectrum in the best possible way.

Q. People complain that the $252.52 million that NATCOMS paid for NITEL assets is below the actual value considering the opportunities you have x-rayed?
The reality is that we didn’t set the price. What did was we were asked to bid and we made a bid and the bid was successful. The bid was an open bid and anyone who wished could have done the analysis. I suspect that many did do the analysis.

Q. Are there physical assets as part of the acquisitions?
Oh yes, there are a whole range of assets. Although, there are very clear stipulation of our sales and purchase agreement which is that they be deployed in a telecom context. So, the whole assets must be used for telecom business purpose. But the thing I will say is I am sure everyone looked at the numbers in the way we did and maybe a few even saw what we saw in terms of the data opportunity and the 4G opportunity and the whole broad opportunity to grow not just the Nigerian subscribers marketing broadband but the GDP as a whole which are common to our sector.
But the reality is this, we forecast that over the next five years in order to create a sustainable telecom business which Nigerians could be proud of, we will need to spend somewhere around $1.1 billion. NATCOM would have to spend that amount of money in total on operating expenditure (Opex) and capital expenditure (Carpex) and working capital and all other things we buy. The reality is that $252.52 million is just the beginning of the story and in some senses is the easy part.
It is one cheque, however painful and big, it is one cheque. Then come the rest $850 million on top and that is not for the faint-hearted. It is not for people who struggle to get together $10 million for a bond. You know, the reality is it is a very serious long term commitment and you need to find the resources, the people who are experienced in the sector who have the know- how, who can come together to build this business. I am really flattered and grateful that we have managed to persuade very experienced people as my colleagues in Nigeria to join this enterprise. I am very proud of what we have managed to achieve in terms of people joining us.
The second part is raising the money and that has involved repeated, long and demanding discussions with bankers. Thankfully, we are in a place where we can progress to the next level of our business. It has also been very vigorous our analysis of the marketplace to see where is the space and to test the validity of our assumptions and to really test the reality of commercial opportunity.
That is an enormous amount of work, demanding analysis, demanding market research, expense and time. All these things are not the things that everyone can pull out of a heart and if you haven’t done it by the date of the bid, then once the bid is announced it is too late.  It took us certainly about two years. Even if we are very quick, we would have done it probably 18 months. People who came late to the party may have suffered for not having enough time to prepare adequately.

Q. It is a big business involving $1.1billion. Are you thinking of using the capital market to raise money in the future?
Honestly, we would love to access the public market in Nigeria and we are of course, speaking to banks and investors today of all sorts which is, of course, a confidential matter. Clearly, we need to be funded and shareholders are doing a good part and we are looking to other parties to assist with this.

Q. You mean you want to remain a limited liability; you don’t want to open up to other investors to assist and to be listed?
We are open to the idea of going public, of course, we are. It is a good means of not only raising money but also giving Nigerians the opportunity to own a share of the telecoms company so, this is an obvious opportunity. But there are some things we like to do first. We would like to build a significant and stable business that is clearly doing good things. We have got to show the Nigerian investors who would be interested in what is possible, what we can do and make it absolutely sellable.
I certainly think that ours will not be the rush to Initial Public Offering (IPO) after the very first one hundred customers that would have come on board, or a million or even three million customers. Certainly, a few years down the tracks, I’d say probably not earlier than three to four years down the tracks would we begin to contemplate this.  That is probably two years process from the time we make the decision. I said an event like that should probably not be earlier than five years but maybe a little earlier or later but that is where we will be in our thinking.

Q. Nigeria’s operating environment is tough. You are going to provide your own power system, infrastructure, security and there are multiple taxations to deal with. How are you going to deal with these challenges?
It is true that the ecosystem in Nigeria has a way to go but I tell you, the other thing about timing is that is come so far. Remember, we are in the 15th year of mobile in Nigeria and much has been done to really transform access to shared infrastructure. We could if we wanted to access data centre on a shared basis. We can certainly access towers. Probably in Nigeria alone, more than 25,000 towers can be accessed on a shared basis.
We can access technology providers who are willing to do very good deals on technology. We can access certainly providers who can do same and access companies in local areas who have networks of ducts that we can share in other to lay fibre. There are enormous amounts of sharing infrastructure that was not there 15 years ago. Frankly, was barely there eight years ago when Etisalat launched. As regard the things that are missing, we will find ways in which to address them because missing though they may be in some sense because they are not surprising, we could plan for them; water- borehole, power- generator, diesel- tank supply. These are things that are well trodden down roots, expensive and they add a little bit of complexity to the mix but it is a long way better than it was.

Q. Telecom operators in the market have already acquired vast number of subscribers. How are going to compete with them?
A lot of 2G subscribers they have acquired and a few 3G subscribers. As I said, the things to consider are the mobile broadband subscribers. When a person has a narrowband mobile telephone (2G telephone), what they can do is that they can speak to people usually anywhere in the world, so that shrinks the planet really down to the time it takes to make a telephone call on voice.
What mobile broadband does is the same thing for information whereas you shrank the world around voice so it doesn’t simply matter where you are sitting whether on the other side of North America, I could speak to you just as easily with the first 2G telephone on voice. What we are doing now on data is to do the same thing as what to be done on that conversation on voice with information anywhere in the world as long as it is on the internet I can access in the palm of my hands.
 Now that in itself is transformative but the specific way in which it transform us here is that  we have got a tiny number of broadband connections, 27 million out of a total of 147 million mobile connections overall. Mobile broadband is merely 20 per cent. In most countries of the world it is about 95 per cent. The reason why it is so small here is because of the poor capillarity of the network. We’ve got a very poor 3G network data in this structure. We’ve got low fixed lines of which so to speak, access broadband is constrained and the effect of that is seen directly in our GDP numbers.
A country such as ours with GDP such as ours is underperforming. We have done some great things but we could be doing so much more if we had better capillarity of our networks with better numbers of connectivity especially to mobile broadband. Now that is for us to change. Those numbers of 27 million are set to rise to 116 million. That is good news that mobile networks broadband will be built in large numbers in addressing that.
We are looking at Nigeria. We’ll honestly give 100 per cent of our focus to giving great coverage.

Q. What efforts are you making to replace NITEL’s vandalised fibre cables in various routes scattered across the nation?
A lot of vandalisation has taken place but we have to remain focus, we have to selectively relay fibre and that job will not finish in five years. As I sit with you here, there are people in Lagos laying fibre as the same work has started in Abuja and Port Harcourt. We have to really lay fibre in towns and villages across the country.

Q. You are starting with 4G, when are you taking off? How many people are you going to employ directly?
We are focusing on the three largest cities starting with Lagos, Abuja, and Port Harcourt. We will start services within the first half of Q4 in 2015. I would imagine that certainly over our first 12 months we would employ hundreds of people. I mean there is a significant job to be done. We are a national player. Let me just give you an example, by 2005 MTN have had 2000 people. That seems to me like a very full number but I don’t think we will be up to that.
We are starting at Q1 of 2016. We have a priority on deep coverage and then we move on to broad coverage. We will cover Lagos, Abuja and Port Harcourt deeply then we will make sure that the second sets of states are covered deeply and then we move on. Our target with Q 1 of 2016 is dependent on the satisfactory outing in Lagos, if not we have to  dig deep in Lagos to make sure Lagos is  getting the right quality before we move on.
 

Q. What should Nigerians expect from NATCOM with all the licences that you?
We have 4G. We have international sub marine capacity which gives us access to the internet and we will have fixed services. We don’t want to talk too much because there is a lot of work still to be done. But certainly, we will be doing something on fixed lines in quarter 1 of 2016. As an important part of our telecom services strategy, it is fixed and it is mobile, voice, data, content services and application of services.

Q. For the first 5-12 months, what should we expect in terms of subscriber numbers?
We project 168 million mobile broadband customers on 3G and 4G network by 2019. I see that and I get the feeling that we could get a significant share of that amount. Certainly today, we see somewhere between three and four million new 3G customers every quarter. There is significant opportunity. We are not in the position yet to declare a forecast. We are working on this numbers internally but certainly we intend to give Nigerian consumers the opportunity for the first time to enjoy an unfettered 4G access.
It will be full coverage of Lagos, Abuja and Port Harcourt unlike today’s 4G coverage which is more modest. We would aim to be a lot better in our quality of services. The demand for data is much bigger and we are positioned to take advantage of that demand and build network of the right coverage, of the right reach, quality and capacity to take on that demand. This is what we are aiming to do and absolutely we must get the quality right because that is an important consideration.

Q. Your parent company’s name is NATCOM. What name would you be launching your 4G mobile network?
We will be called ENTEL.  What we want to build first and foremost is a company that can offer services and products of which we can all be proud of.  Your big consideration and then for us is being able to manage vast amount of data especially video now that is the brief that we have. We have no intention of been surprised and we are putting a lot of time and investment in getting a network that can stand up to the demand of the data and this video dominated world.

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