NIGERIA: MORE OPTIONS FOR NIGERIAN TELECOMS

UNCLAS SECTION 01 OF 02 LAGOS 001632

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E.O. 12958: N/A
TAGS: ECPS ECON NI
SUBJECT: NIGERIA: MORE OPTIONS FOR NIGERIAN TELECOMS
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1. (U) Summary: Two Nigerian telecoms companies (MTS
First Wireless and Oduatel) will begin services this
month. MTS expects to attract many customers due to its
unique area code numbering system and its innovative 24-
hour, zero dial-up internet service. Oduatel expects to
carve a unique niche by developing a presence in
Nigeria's remote villages now shunned by other private
telecoms operators. End summary.

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MTS First Wireless Rolls Out
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2. (U) MTS First Wireless, Nigeria's third national
long distance carrier, plans to roll out its CDMA 2000
IX phone network in Lagos, August 9. The company
launched its long distance operations (LDO) service in
May and is targeting 250,000 subscribers in Lagos,
Abuja, and Port Harcourt in the upcoming rollout.


3. (U) MTS, also one of Nigeria's first mobile
telephone companies, will establish both a wireless
phone network and an integrated internet service
network. Richmond Aggrey, the company's chief
executive, is enthusiastic about its prospects in
Nigeria's booming telecoms market. Encouraged by a
license that allows MTS to operate both fixed wireless
and mobile telephones, the company expects much
patronage, given its unique area code numbering system.
According to Aggrey, MTS numbers will enable
subscribers within a particular geographical zone to
travel anywhere in that zone without having to
reprogram their phones. (Note: there are six zones in
Nigeria, MTS is licensed in three. End note.) This is
not possible on the networks of Nigeria's other major
fixed wireless phone service providers whose
subscribers are restricted to major city centers like
Lagos, Port Harcourt and Abuja.


4. (U) Reuben Mouka, Head of MTS Corporate Affairs,
said the company's rollout will cover Victoria Island,
Ikoyi, Isolo, Festac, Apapa and Surulere, the main
districts in Lagos. He added that these locations were
used for the company's test run. During the test
period, MTS subscribers benefited from free calls
within the MTS network, while calls to non-MTS GSM
numbers were charged N24.50k ($0.18). These rates will
be in effect until further notice.


5. (U) Comment: The Nigerian telecoms market is large
and profitable. MTS will likely acquire a significant
share of this market. Providing 24-hour internet
service to subscribers at a flat rate of N4,000 to
N7,000 ($30 - $53) will be an important part of MTS's
marketing strategy. Currently, the other operators
provide this service on a per hour basis and dial-up
fees range from N4,500 to N25,000 ($34 - $188) for 30
to 60 hours during on or off peak periods. End comment.

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Oduatel Also Rolls Out, Interconnects With Major PTOs
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6. (U) Following its recent signing of a $20 million
loan agreement with U.S. EXIM Bank, Odu'a
Telecommunications Limited (Oduatel) has concluded
plans to interconnect with major private telecoms
operators (PTOs) in Lagos. Odu'a anticipates a full
rollout in September.


7. (U) The company's delay connecting to key telecoms
operators like MTN, VMobile, Multilinks and Starcomms
in Lagos had held back Oduatel's operations in the five
southwestern Nigerian states in which it has a license
to operate, according to Segun Owolabi, Oduatel's
General Manager (Oduatel is wholly owned by these five
southwestern states - Ogun, Osun, Ondo, Oyo and Ekiti).
Oduatel earlier had tried interconnecting with the
GON's Nigerian Telecommunications Limited (NITEL),but
was disappointed since its subscribers were unable to
connect to the NITEL network. Oduatel's new strategy
calls for it to interconnect with each of the other
PTOs in Lagos from its new base station at Ota in Ogun
state.


8. (U) Oduatel has 13 base stations across the five
states, including Ibadan (4),Ekiti (2),Ota, and
Agbara. (The last two are close to Lagos and have one
base station each). With its interconnectivity problem
resolved, Oduatel expects to become the major telecoms
provider in the remote southwestern villages that the
Lagos-based wireless PTOs cannot reach. Owolabi is
confident that Oduatel's subscription will grow
rapidly. He claims state government offices have
indicated their willingness to join to the Oduatel
network. At present, its subscriber-base is growing
partly because of its recent interconnection with MTN,
which spent about N75 million ($563,910) to ensure that
its subscribers can call Oduatel's network, he said.

9. (U) Like most PTOs, Oduatel will rely heavily on the
prepaid system of payment, using scratch cards.
Oduatel's Owolabi said that because of the dominance of
the government sector in Oduatel's operations area,
calls from telephones in government offices would be
prepaid to forestall default. Oduatel may consider
corporate customers like banks for post-paid services.

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Grapples With Prejudiced Ownership Structure
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10 (U) Despite Oduatel's optimism, some of its telecoms
customers are skeptical about its long-term success.
Now wholly government owned, Oduatel was separated from
its parent company, Odu'a Investment Holdings,
effective July 1, and is seeking new investors, local
or international. Odu'a Investment plans to sell at
least 70 percent of its shares in the company,
according to Owolabi. Swedtel of Sweden and a Chinese
company have expressed interest in Oduatel. Owolabi
said Oduatel may seek to raise funds in the capital
market in 2005, after at least six months of actually
operating.

11 (U) Comment: A recent press report of a change in
the Odu'a management team, underscored the need for the
state governments to "privatize" the company. The owner-
states' governors had sacked the Chairman and the Group
Managing Director of Odu'a Investment and Oduatel.
Owolabi explained to Econoff and Econspec that the
former state governors (from a different party than the
current governors in the states) had appointed the
executives. Though both executives have since left the
organization, their replacements (usually political
appointees) have yet to be appointed. End Comment.

BROWNE