ISPs market shrinks as operators lose 60% earnings to tower, connectivity charges
Except urgent measures are taken, the Internet Service Providers (ISPs) market in Nigeria, which has been on a steep decline, may eventually collapse.
Already, 90 per cent of ISPs in the country have gone out of business, leaving the space for the likes of Spectranet, Swift, Direct on Data and Smile Communications, among others.
Due to Nigeria’s harsh business environment, which has led to the closure of several companies, even outside the telecoms sector, surviving ISPs are lamenting that over 40 per cent of their earnings is spent on tower operations, while 20 per cent go for connectivity charges.The challenge, if not urgently tackled, could also negatively impact Federal Government’s plan of meeting 30 per cent broadband penetration this year.
The Guardian gathered that in the past five years, the Nigeria Communications Commission (NCC) has licensed 103 ISPs, but as at the end of 2017, only 10 per cent applied for the renewal of their licences.
The likes of Multilinks, Starcomms, Reliance Telecoms; MTS First Communications; Disc Communications, WiTel, O’Net (Odua Telecom), Rainbownet, Monarch Communications, XS Broadband, Webcom and others have either closed shop or exited the telecoms space.In 2016, MTN acquired the last surviving Code Division Multiple Access (CDMA) operator, Visafone.
Explaining the challenges of the ISPs in the country, Chief Executive Officer of Spectranet, Ajay Awasthi, said cost structure was adverse to the operators’ survival, stressing that 30 to 40 per cent of their earnings is spent on tower expenses.He added that another 20 per cent goes for connectivity charges on international and metro lease lines and there is still license fee.
“All put together, almost 2/3 of our costs are increasing, leading to a stressful and challenging situation for ISPs in Nigeria. It is only about 30 per cent of the costs that we can control, which are employment and others,” he said.
Awasthi said industry cost structure should be addressed if the country must meet the targeted 30 per cent broadband penetration, adding that Spectranet and other ISPs are barely able to keep their heads above the stormy waters.Speaking on ISPs exposures in the country, a telecoms expert, Kehinde Aluko, told The Guardian that factors confronting services providers include high cost of tower rentals, which are competition and service cost.
He said: “Competition in the co-location business is not deep enough to bring about reduced cost and efficient management.”President, Internet Service Providers Association of Nigeria (ISPAN), Sunday Folayan, said tower rental cost will not be cheap, as it is determined by the number of users on the tower, as well as power and security cost at the towers.
A senior official of the NCC told The Guardian that the commission was not resting on its oars but advised ISPs to develop new business models that would help them remain in business.
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