.Operators battle inflation, energy costs, interest rate burden
Telecommunication operators, which have committed huge investments into the deployment of the fifth generation (5G) and fibre access networks have decried their inability to recoup their investments.
Several operators across the globe, including Vodafone, BT, Orange, MTN, Airtel, Mafab Communications among others have deployed huge resources in countries, including Nigeria, to introduce the technologies.
International Telecommunications Union (ITU) Mobile Network Coverage facts and figures 2023 claimed that since commercial deployment began in 2019, 5G coverage reached 40 per cent of the world population in 2023.
Distribution, according to ITU, however, remained very uneven. While 89 per cent of the population in high-income countries is covered by a 5G network, coverage remained limited in low-income countries.
Currently, Europe has the most extensive 5G coverage, with 68 per cent of the population covered, followed by the Americas region (59 per cent) and the Asia-Pacific region (42 per cent). Coverage reached 12 per cent of the population in the Arab States region and less than 10 per cent in the CIS region (eight per cent) and Africa region (six per cent).
Indeed, in Nigeria, with 5G going into the third year of deployment, for licences alone, the operators paid over $800 million. This is outside other costs of deploying and expanding the services across the country.
As stated, 5G deployment is about 30 months old in Nigeria, but the euphoria that greeted its coming in December 2021, has not been felt in the services offered by the licensees. The Nigerian Communications Commission (NCC) statistics showed that as of February, the penetration was just 1.18 per cent, earning that out of the 219 million active mobile connections in Nigeria, it can be deduced that only about 2.5 million Nigerians currently have the service, albeit not enjoying the quality. The game changer claims that MTN Nigeria Chief Executive Officer, Karl Toriola, said 5G will bring, appears dim.
While MTN and Airtel have demonstrated resilience by expanding, though, slowly across the country, majority of Nigerians are still asking, which part of the market, Mafab Communications is servicing.
Indeed, this lack of return on investment challenge came to the fore at the FutureNet World 2024 in London, United Kingdom. High-level executives from Vodafone UK, BT, Orange and others, complained, not for the first time, that the current investment climate is making it ‘tough’ for network operators to get a decent return on their hefty spending on 5G and fibre access networks.
The opening keynote panel, ‘Redefining the telco: How far have we got?’ focused on the current state of play for telco network operators: The significant fiscal pain point that is currently torturing telcos was first highlighted by Vodafone UK’s chief network officer, Andrea Donà.
He noted that it is essential for operators to “unburden” themselves from legacy networks and technologies before they can add new capabilities and functionalities.
Donà described this situation as “tough” because “you’ve got all the legacy you need to address and then in the current investment climate we’re in, it’s a constant battle between spending money – because you must spend money to address the legacy – and at the same time, keep ahead of the game in terms of new capability.
“It’s difficult in this current climate. I would love to have a lot more money to be able to address the legacy (issue) a lot quicker so that I can unburden myself and then drive the new capability.”
Besides this, he added, telco players are “constantly battling” against factors such as inflation, energy costs and interest rate hikes. This is why, he pointed out, operators need to inject a new business model that takes them beyond connectivity and helps them to innovate so they can unlock new value and revenue streams.
“If you don’t inject those new business models, you’re not going to survive. That’s the real challenge not only for operators but for the whole industry,” he warned.
Group CTO and chief security and networks officer at BT, Howard Watson, concurred that the telcos are currently “in a period of toughness” that could be likened to the ‘Roaring Twenties’ of investment.
“We’re almost halfway through the decade. The first half of the decade has been – certainly here in the UK – about investing to refresh the access network, whether that’s FTTC (fiber-to-the-cabinet) moving to FTTP (fiber-to-the-premises), or 4G moving to 5G. And the good news is we’re well beyond halfway through both of those transformations,” Watson explained. “The challenge, of course, is that they are expensive – we are spending £5bn a year at BT right now doing that.”
He noted that the telco sector goes through cycles of heavy investment, followed by periods of monetising that investment. “The problem is that much of the investment community has forgotten that piece. So, with today’s desire… for immediate returns, it’s getting harder to find patient investors,” he added.
To alleviate this, BT’s network’s head stressed that the industry needs a period to allow it to monetise the investments made so far. “It will come good, provided we as the technologists have some discipline with how fast we want to refresh this stuff…. [so] let’s not rush 6G too soon. Let’s make it 2032, not 2028,” suggested Watson.
He was bullish about the “real light at the end of the tunnel” that he expects to see in the second half of the decade which, according to his vision, will be when telcos see “the payback [of] this investment phase, particularly on the fixed side – we’re building fibre for the next 50 years, not just for the next 10 years.”
Another silver lining, he added, is that “now we can start using that investment… we can launch new services at lightning speed, much quicker than we ever used to. It used to take us 18 months, we should be able to do that in [a matter of] weeks now.”
To make all of this happen, though, he urged the industry to “have that discipline” as it heads towards “the latter part of the investment cycle.”
POST AUTHOR: Guardian Nigeria
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