Rising smartphone acquisition costs slow telcos’ 3G expansion

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By Alex C

Telecommunications companies in Nigeria, Africa’s most populous nation, are demanding that handset manufacturers operating in-country drive down the cost of smartphones to under $50 in order to trigger greater usage of 3G (Third Generation) data services.

This call by mobile operators is however compelling considering that high smartphone acquisition cost, along with exorbitant spectrum licensing fees have been identified as the major barriers hindering widespread adoption and usage of 3G data services in the country.

The nation is currently utilising only about 30 percent of its 3G capacity, six years after commercial rollout of 3G services, according to the Oxford Business Group (OBG). MTN, the nation’s largest mobile operator, with about 56 million customers, says that there are only 12 million 3G smartphones in Africa’s largest economy by GDP, out of a population of 170 million.

“As an industry, we need to urgently address the issue of affordability of 3G smartphones. If phone manufacturers make these smartphones more affordable, more Nigeria can use them,” Wale Goodluck, corporate services executive, MTN said at the 76th edition of repackaged Telecoms Consumer Parliament (TCP) in Lagos.

According to Goodluck, increased smartphone ownership becomes an incentive for mobile operators to improve consumer experience on 3G data services. High cost of 3G smartphones is further worsened by the recent ban on import of electronics, Information Technology (IT) and telecoms equipment with official Foreign Exchange (FOREX) by the Central Bank of Nigeria (CBN). O.I Gbadamosi, director of Trade and Exchange Department, CBN, in a circular, titled, ‘Exclusion of Transactions From RDAS Window’, explained that the above items would be funded from the inter-bank foreign exchange market.

He added that the decision to move in this direction was necessitated by the need to “maintain the existing stability in the FOREX market and to further strengthen the various policy measures already initiated by CBN,” Goodluck said, “CBN’s recent declaration on imports will ultimately increase the cost of 3G smartphones and telecoms equipment.

“This would also mean that smartphone and devices will remain unaccessible to majority of the Nigerians”, further adding that it would have a massive impact on Nigeria’s broadband plans and targets. The federal government has set the target of an 80 percent growth penetration in 3G services by 2018, in consonance with the National Broadband Plan (NBP).

Market observers also say low usage of 3G services amongst the Nigerian populace has become a disincentive to telcos’ efforts to attain 100 percent 3G network coverage across the country.

In response to NCC’s consultation paper on dominance in selected market, Globacom, national carrier, said, “all mobile operators have paid huge sums of money to get 3G license and the cost of 3G infrastructure is very high. Both factors have made 3G services very expensive for the normal customer. This has hindered the growth of 3G services in Nigeria.”

The commission issued 3G licences to MTN Nigeria, Airtel Nigeria, Globacom and Alheri Mobile Services in March 2007. By December 2010, Etisalat Nigeria acquired a licence to provide 3G services by buying start-up Alheri, a wholly-owned subsidiary of conglomerate Dangote Group. Globacom however launched commercial 3G services in December 2007 in Lagos, Abuja and Port Harcourt. The four successful applicants were expected to each pay the $150 million fee, being the Reserve Price, less the Intention-to-Bid deposit of $15 million.

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