Time for a Telecom Bank

One of the greatest milestones achieved since Nigeria transited from military to democratic rule in 1999 has been the liberalisation of the telecommunications industry which has ushered in affordable telephony especially mobile phones with over 90 million lines now in the hands of subscribers; although this does not necessarily translate into over 90 million subscribers, still the quantum leap in just 10 years from a near zero position to this level, is reason enough for commendation, celebration and applause. And the commendation and applause have not been short in coming – from far and near, hence the much talked about Nigerian telecom revolution.

This revolution itself has opened more doors allowing the country to attract foreign direct and local investments to a sector that hitherto could only attract $50 million prior to the granting of Digital Mobile Licences (DML) and the commencement of operations in 2001 by the initian set of licensees offering services using the Global System for Mobile Communications (GSM).

A decade down the line, the mobile revolution has impacted the country greatly, attracting well over $25 billion as at the end of 2010, contributing about 3.5 per of the Gross Domestic Product (GDP), employing many directly and indirectly. This is not to talk about the windows of opportunities that this service has opened up, including positive impact on the social fabric of the country’s life. It has allowed international and local telecom operators to have a strong footing in the country, building telecom facilities across the nooks and crannies of Nigeria.

The mobile revolution has also impacted positively on the image of the country in the international community, uplifting the psyche of Nigerians who were once told that telephone was not for the poor. The bridging of the digital divide has also lifted the country out of the illusion that the internet was only for developed nations as Nigeria previously lacked the submarine and terrestrial backbone to connect its citizens to this global information superhighway.

Today, Nigeria boasts well over 43 million internet users, becoming the topmost nation in Africa both in mobile connectivity and internet usage. All this was due to the liberalised policy and level playing field created for all investors.

Despite the huge development and growth in telecom over the last decade however, there remain challenges. With success comes further challenges and Nigeria is again at cross-roads on how to remove the digital divide between its urban and rural areas.

Digital divide refers to the differing amount of information between those who have access to the means of modern communication – telephony and Internet (especially broadband access) – and those who do not have access. Digital divide is not just about the access to these communications platforms; but the quality of connection, and the related service availability.

One of the main goals to have Universal Broadband Service is to narrow the digital divide among the haves and the have-nots. While Nigeria may boast of success in narrowing the mobile disconnect, it faces an uphill task in connecting the urban and rural areas with broadband connectivity.

Universal broadband service refers to government efforts to ensure all citizens have access to Internet service. While there had been an initial rush to offer mobile phone services at the beginning of the telecom revolution, there has not been a commensurate uptake in offering internet services. As a result of the pent-up demand for telephony services therefore, operators experienced huge growth over a relatively short time; yet, concentration has remained hugely more in the urban and city centres, leaving the rural areas still yawning for connectivity and quality services. As for the internet, where the future lies for providing access to communication and bridging the real digital divide, the rural and so-called under-served are still begging for attention.

To offer services in such areas therefore, where the return on investment (ROI) would not necessarily be as huge and as fast in coming as would be possible in the city centres, service providers would need to access funds to motivate and encourage them to enter such places.

Hence, Nigeria needs a well structured telecom bank to push its broadband development forward. Such a bank must be able to grant specific and well targeted purely telecom related banking services, including the grant of loans and grants for operations to roll out services in such areas. And, this is where the Federal Government through the Ministry of Communication Technology, the Nigerian Communications Commission (NCC) and the Universal Service Provision Fund (USPF) needs to come in.

The establishment of a telecommunications bank would aid the fast roll-out of broadband services across the country connecting the underserved rural and semi-urban communities with internet access. Telecom companies and investors have for long resisted moves to invest in rural areas citing low profit margins that make it difficult to recoup investments.

Setting up a telecom bank by the government would reassure investors and give them the needed funding base that would be necessary for a rural broadband operator to kick start operations.

Governments elsewhere grant subsidies and loans for local operators to cover the rural communities. For some countries this has come in the form of stimulus package. In Nigeria, unfortunately, despite the growth in mobile telephony, many telcos, which started the race at about the same time when mobile telephone took off, have either since gone out of circulation or are shrinking in operations day by day; hence threatening any real focus on the rural areas.

The establishment of a telecom bank will help to revive the dying telcos and lead to the establishment of new ones with eyes on the rural and under-served areas. This will in turn create job opportunities, reduce the rural urban migration and open up the rural areas for rapid development. Connecting rural communities is a major issue for the telecom industry globally; but it is a very huge one for Nigeria. And, it can be solved; with a telecom bank, Nigeria may well be on the way to solving this nagging problem.

A telecom bank would help to accelerate the bringing of broadband service and strengthen education, entrepreneurship, and innovation in rural communities, thus harnessing the full power of the Internet. The challenge of connecting the unconnected remains great. While mobile coverage has improved significantly across Nigeria, high speed broadband connectivity required for key business and government applications and services is either not available or prohibitively expensive.

The establishment of a telecom development bank would help USPF easily handle the granting of funds to telecom companies. It would make it easier for any operator albeit broadband operator to avoid the stringent bottlenecks commercial banks put in the way of genuine investors in accessing funds. It would also help computer companies and Internet Service providers (ISPs) bring their services to rural communities.