telecom

Toriola: The Pace, Scale and Growth of Nigeria’s Telecoms Industry Has Surpassed Expectations

August 9, 2021

The Chief Executive Officer, MTN Nigeria, Mr. Karl Toriola, speaks on the 20 years transformational journey of telecoms revolution in Nigeria, its impact and challenges. He also provides firt-time insight on the evolution of MTN as Nigeria’s largest telecoms company. Emma Okonji presents the excerpts:

Nigeria is celebrating 20 years of GSM revolution. How will you describe the journey so far in terms of coverage, service quality and customer satisfaction?

I think it’s been a process of constant evolution and constant learning for all of us, not just the industry, but for our customers and the government as well. Even the most optimistic market analysts did not anticipate the pace and scale of the growth in Nigeria’s telecoms industry when it was born in 2000.

As an industry, we are delivering services to every local government area (LGA) in the country and every sector of the economy; and the depth and breadth of our service delivery are continuing to expand. Today, our network connects 65.12 per cent of Nigerians to 4G services, while 81.63 per cent have access to 3G connectivity and 89.24 per cent to 2G. That is an incredible journey in just 20 years, but we still have more to do.

In the beginning, the social and economic transformation that the telecoms sector catalysed was driven by voice and Short Message Service (SMS). By the present ability to communicate with loved ones and teams at will, it is surprising to many of us that it was only 20 years ago when it was impossible to let someone know you would be late for an appointment. That first wave of transition is so deeply embedded in daily life now that it’s taken entirely for granted.

But we mustn’t forget that despite the ongoing transition to data, millions of Nigerians still rely on voice and SMS services, especially the most vulnerable. That was so clear during the COVID lockdowns when we gave every customer free 300 SMS per month and saw more than 52 million customers send more than four billion messages in less than three months.

We still have work to do here, with voice connections continuing to grow on the back of existing growth opportunities and a fast-growing population. We need to continue to expand into rural areas and serve the under-served, bridging the remaining connectivity divide.

While we do this, the transition to data is happening very rapidly and has accelerated since the onset of COVID-19. With more and more businesses reliant on remote working and e-commerce, demand is growing, and it’s essential that we continue to enhance service quality and reliability while being cognisant that these services need to be affordable and accessible to as many people as possible.

The data journey has really evolved over time. From the 2G connections that introduced broad access to mobile connectivity in 2001, through the 3G proposition that enabled more tasks to be delivered remotely, through to 4G, which is the backbone for video calling, and other data-heavy services, and that process never stops. We’re on the verge of introducing 5G services, which is another potential game-changer, really driving the adoption of the Internet of Things (IoTs).

When an industry is growing this rapidly and dynamically, it’s inevitable that we will take a few wrong turns; I think that is a part of every organisation’s growth. The important thing is to ensure that you identify them, learn from them and correct them.

Pursuing the ultimate customer proposition is at the heart of my focus as CEO. We know that millions of Nigerians rely on the services that we provide, and it is our responsibility to ensure they can. We’re getting better and better at it, but we will never stop trying to improve.

How has telecoms impacted the Nigerian economy in the last 20 years?

I think it’s been transformational in so many ways, some that are clear to all and some that are perhaps less easy for the ordinary person to see. As I said earlier, I think many of the changes have become so embedded that it’s often difficult to relate to life without them.

But let’s start with basic economics. In Q4 2020, the telecoms sector constituted 12.2 per cent of Nigeria’s Gross Domestic Product (GDP). That’s an industry that was virtually nascent in 2001, contributing N1.20k for every N10 the Nigerian economy generates. But that doesn’t tell the whole story. Apart from the huge revenues from the wider Information and Communications Technology (ICT) sector, the numbers don’t incorporate the catalytic growth that the telecoms industry enables in other sectors.

Think about the operational efficiencies that connectivity has enabled over the last 20 years. If you are a taxi driver, you can find your customers much faster, increasing the number of journeys you do in a day. If you are a farmer, you can access your markets remotely, optimising pricing. If you are a bank customer, you can run almost all your transactions through mobile applications or the Unstructured Supplementary Service Data (USSD), and banks no longer have to invest substantially in bricks and mortar. If you are into Fast Moving Consumer Goods (FMCG), you can monitor your distribution network and supply chain in real-time. These are just some of the examples where connectivity and innovation are enabling other sectors to achieve growth faster.

In light of the enabling role of the sector, it will interest you to note that telecommunications is probably the only sector where consumer prices have dropped consistently year-on-year since 2001. The steady decline in tariffs has been driven by increasing demand for telecommunication services, stimulating increasing minutes of usage and activities on the networks by a growing number of people.

So, I want to throw the question back at you. Can you give me a sector or individual in Nigeria or globally that the telecoms sector has not impacted substantively in the last 20 years? What would the world be like today without it?

MTN is one of the first GSM operators to launch in Nigeria, at a time when other foreign operators were afraid to venture into the Nigerian market, considering the perceived risk factors at that time. What actually encouraged MTN to enter the Nigerian market at that time?

We’ve always been an ambitious brand, keen to pioneer the growth of telecoms across the continent, and often in markets where others have not chosen to tread. We had strong local partners, who worked tirelessly to bring on board domestic investors and we believed in the market opportunity. Ironically, we believed in the opportunity based on considerably more conservative estimates than ultimately manifested.

We entered the market thinking we could access maybe 10 million customers. Today we have over 70 million, and still counting. For anyone that looks at it today, it seems like it would have been a complete no-brainer to invest in 2001. It wasn’t, and that is why so many didn’t.

Any regret 20 years after, for taking the decision to launch in Nigeria?

None. Not one. Like any story, there are things we might have done differently on the journey since launch and important lessons we’ve learned that have helped us evolve and grow. But the decision to launch in Nigeria was the single best decision the business has ever made, and today we can confidently say that we are a wholly-Nigerian success story.

What do I mean by that? First of all, MTN Nigeria is run and managed by homegrown talent, with Nigerians – representing all geo-political zones, making up over 99 per cent of our 1,856 permanent workforce. It’s also worthy of note that many Nigerians hold leadership positions across the MTN Group. For instance, we have Uche Ofodile, the CEO of MTN Benin, Chika Ekeji, the MTN Group Executive for Strategy and Titilope Fakuade, the CIO for MTN Liberia, to name a few.

Second, and most importantly, everything MTN Nigeria has achieved was enabled by the overwhelming support of our customers, the guidance and enabling environment created by our government and regulators, and the commitment of our partners.

Together, since MTN Nigeria began operations, we have created over 2.5 million jobs, contributed over N2.3 trillion in taxes, levies and fees, and provided innovative services that impacted Nigeria’s socio-economic growth and development favourably.

There is this controversy about which operator first launched its GSM services in Nigeria. What do you have to say about this?

All I can say is that we know exactly where and when we made our first call on the MTN network because it was made by our founding Chairman, Dr. Pascal Dozie, on 16th May, 2001. Following that, we began commercial operations on 8th August 2001, and that is why we will celebrate our 20th anniversary on 8th August.

Looking back now, many have said that we took a massive risk launching such resource-intensive operations here at a time when few believed in the potential of Nigeria. I believe my predecessors saw a winning formula in the tenacity, industriousness and can-do spirit of Nigerians, but no one foresaw the scale and breadth of the growth that ultimately manifested.

Subscribers’ expectations from MTN are high, being the largest telecoms network in Nigeria. What are the plans of MTN for subscribers as Nigeria celebrates GSM at 20 years?

I can’t provide details of our plans for our numerous customers as we clock 20. Suffice it to say that we recognise the fact that without them, we won’t be where we are today. We have lined up celebratory campaigns with one theme running through all of them, and that is ‘together in progress. This is because for the past 20 years, MTN has been on a journey with Nigerians, and our success is also their success. In recognition of this, we plan to excite our customers with many offerings to show our gratitude to them.

You became the second Nigerian CEO of MTN Nigeria at a time when customers’ expectations are high. What are your passion and your goal? What are you bringing to the table?

I am obsessively focused on trying to ensure that we can bring the most accessible, most reliable service to all Nigerians. We are ultimately judged on our service quality and our relationship with our customers. So, that’s the lens I use for every decision I take. How can we serve them better? How can we deepen the value we provide? How can we help them to achieve their goals?

I’m also incredibly passionate about the role that we can play in supporting national socio-economic development, and I have become even more so since COVID 19. The role that the private sector has to play in addressing complex, national challenges has always been important, but it’s become even more so since the onset of the pandemic. Whether it’s supporting our most vulnerable customers to stay connected when they need it most, working with the government to intervene and deliver innovative solutions to national priorities like education and healthcare, or helping Nigeria attract much needed Foreign Direct Investment (FDI) by showcasing our success story, there is so much we can, and will do.

Finally, I am unashamedly Nigeria-centric. I believe MTN has an incredible heritage in Nigeria, but we can do more to deepen local ownership and value, and that is why you are seeing us focus on a public offer with maximum retail participation, and making a commitment to build a new headquarters. These are all foundations for the next 20 years, in which we build and maintain a deeper, stronger, mutually beneficial relationship with Nigeria.

Before you resumed office as CEO in March this year, you were once the CTO of MTN Nigeria, driving infrastructure roll-out. How will you compare telecoms infrastructure roll-out during your time as CTO and now, given the fact that infrastructure roll-out has slowed down across networks.

I think it’s important to understand that networks go through periods of evolution. In the early stages, it was about coverage, and so it was pretty intense. You are expanding geographically and keeping up with network improvements, while building out the kind of core infrastructure that enables future growth, like tower networks and fibre. But then you reach a point of maturity, expansion becomes more targeted and upgrades are done to existing infrastructure, which is less capital intensive than the initial build.

This does not mean that our absolute spending on Capital Expenditure (CAPEX) has decreased over the last 10 years. We spent more in 2020 than we have since 2013 and we’ve committed to investing a further N640 billion over the next three years to further expand network infrastructure, effectively maintaining that level of spending. What changes, naturally, as you grow and networks mature, is your CAPEX intensity, which is the ratio between revenue and CAPEX, which tends to decline progressively as you grow.

Telecoms operators have been at loggerheads with banks over the use of USSD services and at a time the banks disconnected MTN customers from accessing the USSD code on airtime vending. How was the issue resolved, and what is the current development?

The Minister of Communications and Digital Economy, Dr. Isa Ibrahim Pantami, the Executive Vice Chairman of the Nigeria Communications Commission (NCC), Prof. Umar Garba Danbatta and the Central Bank Governor, Mr. Godwin Emefiele, came together with representatives from the deposit money banks (DMBs) and the telecoms sector, to agree a structure that would be accepted by both parties. We will continue to engage with all the stakeholders to conclude the operational modalities for the new pricing framework that has been agreed upon for USSD services. The mechanism for and timing of the recovery of the industry-wide outstanding debts that exist for USSD services provided to the DMBs, form part of this process.

Recently, delegates from MTN Group in South Africa visited MTN Nigeria and had a meeting with President Muhammadu Buhari. What was the outcome of their three days visit to the country and how would the N640 billion that was announced be spent on broadband expansion?

Yes, the visit was a great opportunity for me to formally introduce myself, as the incoming MTN Nigeria MD/CEO and Ralph Mupita, as the new MTN Group CEO to His Excellency, the President, as well as other senior members of the government. We took the opportunity to update them on our investment plans, including the N640 billion we are committing to capital expenditure and network expansion and upgrades. For instance, in support of the National Broadband Plan in 2021, we plan to have additional 510 2G; 616 3G; 4,745 4G sites as well as 200 U900; 1,226 fibre to site and 232 E-Band connections.

But we also talked them through our wider plans to deepen our support for Nigeria, as we transition through COVID and into an expanded digital economy. It’s important that we, as MTN, are supporting national priorities, not just areas where we have opportunities to grow as a business.

My team has been working hard to define key areas of focus for expanded investments to support key social sectors like healthcare and education, above and beyond the existing commitments we have made through the MTN Foundation. We’ve also been identifying government programmes we can support, like the Road Infrastructure Tax Credit (RITC) scheme, which we have agreed to participate in, fronting the funding for one of the priority road projects in the country, in return for tax credits later on.

Finally, I am pleased that we were able to communicate an expanded partnership with the CACOVID Coalition, to continue to support their priorities for the next two years.

The contribution of the telecoms industry to GDP dropped from 17 per cent in Q4, 2020 to 7 per cent in Q1, 2021, as released recently by the National Bureau of Statistics. What must have led to the drop, and how do you feel about the slide at a time when Nigerians are hoping that telecoms will drive the Nigerian economy?

I am not sure these figures are correct. Our numbers suggest that in Q4 2020, the telecoms sector constituted 12.2 per cent of Nigeria’s GDP and declined slightly in Q1 2021 to 11.66 per cent. So, it’s certainly not a worrying decline, and I think if you tracked the contribution year-on-year, you would find it has been growing. I don’t think there is any doubt that the growth in Nigeria’s digital economy will continue. It’s a core focus of the government, from the president, through the minister and to the regulators, and we are working closely with them to try and optimise the growth trajectory.

It’s also important to remember that growth in the core telecoms sector is only an indicator of how infrastructure usage is expanding, and this can be impacted by short term interventions like the NIN-SIM linkage programme, which actually have the potential to drive longer-term growth because they pull more people into the formal digital economy.

You have to look at the wider GDP numbers as well. How much of the growth in other sectors was potentially powered by the transition to e-commerce, for example? Defining what constitutes the digital economy and how it is measured is an important area in which everyone needs to be aligned.

MTN was part of the operators that enjoyed five years exclusivity period from the telecoms regulator at the beginning of GSM roll-out in Nigeria, where several rights were allowed and taxes waived. How did this impact on telecoms operations?

It is very common for new industries to be offered investment incentives, especially if the government is looking to attract new investors, and that was the case at the beginning of the GSM roll-out. Don’t forget that the early stage estimates for potential subscriber numbers were very small.

The MTN business model was built on a target customer base of a few millions. The rights and waivers gave us the confidence to invest more aggressively, and so played an important role in the subsequent rapid pace of growth. Today, the telecoms sector is the largest single contributor to GDP. That alone is enough testimony on how the enabling environment and the initial incentives have yielded fruits immensely.

Core Internet Service Providers are threatened that the tier one telecoms operators like MTN are offering internet services to their customers, thereby making incursions into an area of business that was specifically licensed for ISPs. What is your take on this?

That is simply not true. Mobile Network Operators (MNOs) hold Unified Access Services licences, which enable us to provide a bouquet of services, including voice, data, multi-media, among others, to the consumer and corporate segments of the market.

The tier two telecoms operators are complaining about the difficulties in accessing Forex to expand their business. Are tier one operators like MTN also complaining?

I think you have to view the current situation as a national challenge, triggered by a global pandemic that was outside the control of policy makers.

Of course, it is exacerbated by structural challenges in the Nigerian economy that the government is working hard to address, but I don’t think anyone achieves anything by complaining. We have to work together to try and overcome these challenges, in partnership with the government. We’ve been able to deliver our capital expenditure programmes throughout COVID, despite liquidity challenges with forex. So, we’ve been able to keep building and growing the network, ensuring that Nigerians can not only stay connected, but also access the faster, more reliable data services they need to manage remote working.

Insecurity in the country is threatening network expansion in the telecoms industry. How is MTN coping with such challenges and what is the solution?

First of all, insecurity is not a new challenge for us, not just in Nigeria but in other countries where we operate. So it’s factored into our operating model. We’ve been operating networks in remote locations that are heavily impacted by insurgency for decades.

The idea that something has suddenly happened to threaten our network integrity in Nigeria is wrong, it hasn’t. We routinely have situations where it might be challenging to reach a particular site, or solve a particular problem, and so we alert our customers when that happens as we are obliged to, given how important uptime on our service is.

I think the recent issues around this were blown significantly out of proportion by a sensationalist interpretation of standard customer communications.

Besides, when our customers live in areas that are challenging to access, we do not cut them off. Instead, we work harder to meet an even greater responsibility, ensuring that they have reliable connections. It will interest you to note that we serve more than 20 million customers across Nigeria for whom MTN is the only available service provider.

In 2020, we extended our rural connectivity programme to 583 live rural sites nationwide. We will continue to explore new locations to connect, and thus far, we have identified over 3,000 locations across the country for a phased roll-out in the next three years.

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