The Nigerian telecoms industry has in the last 10 years evolved to become the number one market in Africa and one of the major players, Etisalat Nigeria marks three years of operation this week. In this interview, chief executive officer, Etisalat Nigeria, Mr. Steve Evans, reveals to CHIMA AKWAJA the burden of being a late entrant and how they were able to surmount the challenges.
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Etisalat entered the Nigerian telecoms market as the fourth GSM operator in the country; now three years down the line, can you tell us the challenges you faced on entry and the strategy you deployed to build your network???
Initially, when we came into the marketplace nobody wanted to allow us to co-locate on their base stations and they saw us as a significant competitor and obviously if they could make things difficult for us, it was a better strategy, they felt. Initially we had to build all our own base stations from the scratch apart from some base stations we took from people like Helios Towers and co-located on those base stations.
Once we had gone though two or three phases of our rollout, I think the other GSM (Global System for Mobile Communication) operators started to say well they are here to stay, they are not going to go away and we had asked them why don’t you let us co-locate on your base stations because it is good for the environment, it is good for reducing our cost, it is good for reducing your cost, it is a win-win situation.
The first major breakthrough we had in terms of co-location was when MTN decided that it was good for us to co-locate on 100 of their base stations. That was a big co-location agreement between us and MTN. So, we give them five for them to co-locate on and we take five from them. Obviously they have many more sites than us at the moment and we co-locate on more of their sites. But for us, it is not the intention to build our own sites. It is better for the consumer and for us if we are able to co-locate on other people’s sites and reduce the down cost and then we can pass on the advantage to the consumer by lowering prices.
So, it is a strategy and everybody is now much more open about co-location. There are lot more opportunities to co-locate now and a lot of the Code Division Multiple Access (CDMA) operators have sold their base stations to the tower companies like Helios Towers, IHS, Swap Telecoms, for those companies have got quite good portfolios of sites and so we always go first of all to see if we can find the site, put somebody there before we rebuild.
So much has been invested in the telecoms market by all the operators, but it is not clear how much Etisalat Nigeria has invested in Nigeria’s telecom market to build its network since inception???
So far the shareholders have invested $1.8 billion in Etisalat Nigeria and they’ve put those funds into the business. Most of them have been spent on building cell sites, building data centres, building transmission backbone. But obviously some of it has gone into subsidising the operating cost of the business initially because when you operate at the beginning you are not generating an operating profit, you have to? buy buildings; you have to hire staff and everything else.
$1.8 billion is the figure that the shareholders have invested and on top of that, recently, we borrowed $660 million from syndicate of eight Nigerian banks to continue investing and building out the network.
But it is important to say that coming up to our third anniversary we have become EBITDA positive, (Earnings Before Interest Tax Depreciation and Amortisation). Effectively, what it means is that from an operating perspective we are profitable and that was achieved in August for the first time. We have achieved an operating profit within three years of operation and we cover in terms of coverage of the network, 73 per cent of the population of Nigeria.
It’s been a lot of very big challenges but also we got a very good team and that has been our key ingredient for success. In terms of fibre, we have relatively small amount of fibre.
Our entire backbone network is microwave at the moment so they easily fit into a bigger pipe which is typically 70, 80, 90 metres size with big microwave dishes. We are looking at various options in terms of fibre, either we will build a fibre network ourselves or we will build it in a joint venture or potentially we could buy a fibre network if one would be available in the market.
Etisalat is in 18 markets now, it is operating in 18 countries and in all of these countries we’ve always seen ourselves as technology leader, we are always in the forefront of technology, coming to the market with the latest technology just like we did with the Third Generation (3G) network that we have got which we are calling the 3.75G which is the latest 3G technology available. We’ve always been a technology leader and an innovator in whichever market we go into.
We always think not innovation for innovation sake but we think innovating to the customer needs, listen to the customers, and understand what they want and then innovate with products and services which better suits them. In Egypt for example, even though we were the third operator there, we are the leading operator in terms of 3G in that marketplace.
We’ve been most aggressive in terms of the latest technologies and we intend to do the same here with 3G. We’ve launched our 3G network and we are still building more 3G networks as we speak, aggressively rolling out 3G network to cover all of the major cities.
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?There is no company that does not get complaints from its customers, you can’t be an exception, how do you manage your customers and especially your brand perception out there in the market???
There is a mystique around the Etisalat brand. The advertising we really have is quality advertising. Already if you do survey and you say which company has the best communication, the best branding, the name Etisalat comes top even though the other companies have been here for several years longer than us. We’ve managed to achieve wonders with our brand and if you talk to a lot of our customers, they say why they are with Etisalat is because it is a good brand and they treat us as customer. It doesn’t mean that we are going to get things wrong or things don’t work.
Just last week as you probably know, the BlackBerry service was down for three days. It was a disaster. It wasn’t really an Etisalat issue, it was Research In Motion (RIM) issue in their datacentre and for our customers they are thinking wow, my service doesn’t work and so we went back to our customers and said okay all our BlackBerry users we are sorry for what happened last week, we are going to give you three days free of BlackBerry service to compensate for what happened last week. Now, we haven’t got an agreement with
Blackberry for them to reimburse us for those three days but what we think is that the right thing for us to do for our customers is to reimburse our customers anyway. That is the essence of our brand- taking care of our customers.
It took Etisalat time to enter Nigerian telecom space, how do you rate the regulatory environment?
The regulatory environment has been a very good one actually. There has been a lot of stability. We had Engineer Ernest Ndukwe, who was here as regulator for a number of years. I think he had put in place a very stable regulatory environment which gave the operating companies some stability and the belief that we are not going to be continually surprised by things which will change our operating costs or change the basis on which our shareholders have made the investments.
I think in Nigeria, the regulatory environment in telecoms is a very good one and if you look at telecoms it’s been a massive success because it’s been a completely liberalised market and independent regulator was put in place and you’ve got today 80 million lines that are in the marketplace. I think that Dr. Eugene Juwah who has taken over the mantle as the new regulator has shown every sign of following the same sort of strategy of making sure that it is a very transparent and stable regulatory environment for the operators to invest their money.
Nigeria’s telecom market has been adjudged one of the most challenging, a market where operators have to build their infrastructures from the scratch, what are your takes on the operating environment?
If you look at the operating environment, the single biggest challenge that drives a lot of cost is power because every single base station that we have must have two generators, diesel supplied regularly to the base stations in a timely way to make sure that the generators never go down. We have to maintain the generators which operate 24 hours every day.
The two generators, each one operate 12 hours. You have to have two security guards on each base station to make sure that the diesel don’t get stolen or the generators don’t get stolen. Those challenges on power puts a lot of costs into the operation which otherwise would probably end up with the cost being reduced for the customers actually.
Power is a single big issue. After that the second issue is that diesel costs as well has been very erratic and certainly in the last year has gone up very significantly. That has been a challenge for us as a business in 2011.?
Another thing is just purely logistics in terms of roads and transport infrastructure because obviously when you have big operations like ours with thousands of base stations where you are delivering equipment, delivering fuel, changing generators and so on, road transport is your main way of doing that and obviously the road infrastructure is not good and that causes you problems, everything takes longer.?
It has been a challenging environment but we knew at Etisalat that it’s going to be a challenging environment. I think we pride ourselves in perseverance, continuous improvements. We are always looking at ways to improve our operations, make it better, and drive down the cost of operating here.
How have you been able to reciprocate the kind gestures from Nigerian customers who have supported your company all these while, do you really carry out corporate social responsibility?
The main area we have invested in terms of corporate social responsibility (CSR) is education actually. Mainly because of our perception that there has not really been any single sector which is more important in terms of development of Nigeria because if you have well educated population no matter what natural resources you’ve got you can develop. And if you look at countries like Singapore, South Korea, if you go back to those countries 50 year ago, they were investing heavily in education and education eventually led them to have a well educated and trained population. It is the human capital that is the single most important thing for a country, not necessarily its natural resources.
We took a view at the beginning that if we could do anything which would be meaningful and appreciated by Nigeria then education would be where we should place most of our corporate social responsibility investments. We had a number of different projects; we participated in Governor Fashola’s project in Lagos which is the Adopt-A-School project were we adopted three schools.
Two of which we rebuilt. We decided to have a merit award scheme for university students which focused on encouraging studies in electrical engineering, business studies and information technology (IT). We have awarded over 500 scholarships now to students across 26 different universities across the country and we are now in the third year of that project. We have a teachers training scheme that we are running and supporting in Kaduna which has been a successful scheme.
And a little bit innovative way, we have supported Lagos Business School (LBS) to put in place a corporate social responsibility centre and we are basically committed to support that for the next five years.