Interview with Nigerian CDMA Operator - Warning, very long
source: library.northernlight.com
Government Should Do More For Telecoms -El Rufai
Story Filed: Wednesday, June 28, 2000 12:29 PM EST
Lagos (Vanguard Daily, June 28, 2000) - With the deregulation of the telecommunications industry, there emerged certain characters hitherto, unknown in the country. Mallam Bashir Ahmed el Rufai, the chief executive office (CEO) of Inter-cellular.
Now, Intercellular is a name that has become very popular in Lagos because of its genuine but modest contributions to the growth of the communications industry. Interestingly, el Rufai doesn't nurse the greed of most business but a sincerity that is, at once, infectious.
When Vanguard Hi-Tech Inter@ctive cornered him in his opulent office on Marina, Lagos, he was very sincere in telling us that the present crop of PTOs cannot do much to open up the Telecoms sector.
You will enjoy this interview with Okoh Aihe, the High-Tech Inter@ctive Editor.
Can you just introduce yourself for the purpose of our talk?
My name is Ahmed El-Rufai. I am the President and Chief Executive of Intercellular . Well, I don't know what I can say my profession is. I took a degree in Science; Biochemistry and Microbiology, combined honours. I went for a master in Business Administration and have a professional diploma from the Institute of Marketing in London. After I was in food processing industry as a marketing manager. I then joined the Telecoms. First with a job with the Nigerian External Telecommunication. I think it was reorganized and merged with Post & Telecom (P&T) to form NITEL, while I was posted to the Jos as the Territorial Manager. I was the only non-engineer. From there I went to Lagos as TM, then rose to the General Manager in Lagos zone, until I was compulsorily retired by the former military government. And when we left, you, know, through the goodwill of people, because we feel we have some vision for the industry. The same group that was responsible for the reorganization of the Telecom sector during Buhari regime, General Abdulsalami was the minister of communication, Ibrahim Aliyu was permanent secretary, Communications. They midwifed the formation of NITEL. So it didn't take me time to establish contact with them and other people across the industry, to form Intercellular. We got support and Intercellular was formed.
My first question really is what is the base of your operation as Intercellular?
When we formed this company, we formed it to provide information movement and management, I mean we desire to provide a one-stop shop for the telecommunication
requirement of our customers and with the convergence in site, you find that we formed this company with the aim of meeting the requirements of the customer, a one-stop shop where everything you require is under one roof. We started virtually with some bundle of value added services, then we started cellular and now we are doing an expansion which will steer through in August, that will provide data, because you see in the market the world over, data is playing a crucial role. In the next three or four years, the traffic which any Telecoms company will carry, at least 60-65% will be data. Therefore, you will have to get ready, to put the required infrastructure in place, to provide this data
Okay. If I am an outsider who doesn't know so much about Intercellular, what would you want me to know about it? Are there primary advantages?
To start with, in Intercellular we have a crop of young men and women who can provide customer service. We are fully indigenous as a company. We are remaining here, we are
investing in Nigeria, our country, and we are going to remain here. So we are not investing on short-term basis, we want to remain in business today, tomorrow. And Intercellular is deploying the latest technology in the wireless industry today. And the latest technology has an advantage in the sense that it gives us freer growth quality, greater than any other technology. Secondly, it gives more capacity and coverage, which means you can serve more areas and you can serve more people. The more capacity you have, the more the quality of services you provide because for each call you make, some calls have to bet lost. So, if you have capacity few calls get lost. And thirdly, you find that the more capacity, you have, that you can serve people more, the less your cost of service provision. That means that you'd be able to charge lower prices and you can see that right from when we started till date, we are at the forefront in charging lower prices. If you look at our total bundle of charges, you find that we charge less than any other person. And then, some of us who operated in the industry. I ran the NITEL cellular when it was first introduced in Lagos. We lost quite a lot of money. The money that we lost at the time I left was almost N200 million, through malpractice's, cloning, and other things and up till today, M-TEL is losing huge sums of money. And the world is losing up to about US$10 billion in cloning malpractice's and other fraud in the wireless industry. So, we looked at our Nigerian situation, drew from M-TEL's experience and then from other operators in other places of the world, like Britain where GSM is reigning. You find that in CDMA you cannot clone. The probability of cloning in CDMA system that we are using is one out of 10 million. Even the one out of 10 million has to deploy super computers to be able to do that, which runs into millions of dollars. I mean, it is not worth the trouble. And you know our billing system and customer care is really good. We have customer tracking, bills tracking system. You can credit your phone from your house. You call at any time to know your balance. It is highly automated. We have now graduated into putting an automated complain cabin where you can complain on telephone. You just dial, you're taken through our menu and then it is served in all terminals that 'Yes' you have complained and there's no way anybody can escape. If you look at value added services we provide, we provide a variety of them free; you find that we are the only company that provides a variety of terminals to choose from. You find that our company is really in the forefront and we are the first to go outside of Lagos. We are in Port Harcourt and plans are underway to go to Onitsha, Abu, Kaduna, Kano and Abuja this year and we are working very hard to achieve that.
I'll take you up on certain issues later but let's progress. Now you happened to be an insider in NITEL, and you're now standing on your own offering telephone services. As a communications reporter I would say there are problems in the industry. What is the primary reason that there are no phones in Nigeria? You can see, no matter what you have tried to provide it's just like you're putting a needle in the ocean. What are the problems militating against this industry? How do we begin to solve them?
You see, Nigeria requires an investment of between seven and eight billion US dollars for us to have the desired impact in the industry. I would sincerely agree with you that with the present situation this country cannot rely on small, small service providers ....... to achieve the national (penetration) that is desired. This country can boast of over 100 million people.
Unfortunately, we are where we are. The blame should be on government. Government should have to put certain things in place to attract the foreign investment that is badly required. The money you need to develop the sector is not available locally and this money is available outside. For this money to be attracted, this money has competing needs all over the world. Everybody wants to deregulate in his Telecoms sector so that he attracts the money that is required. Unless this is done, you can forget about achieving national Telecom penetration that we desire. And nobody has the solution. Only government has the solution because for us to attract this money, first of all, we require to have a very good telecommunication policy, and then we have to have the required regulatory framework, including the legal. If we have good Telecom policy, you have the regulatory framework in place that would mean that even National Assembly is going to be involved. And forthly, you then have to put up a transparent licensing process and this licensing process, first of all, starts through an open choice of the consultant. Then the rules have to be very clear. It's just like going to the field to play football, you know the rules, all the players know the rules, you know what it takes to get a red card, a yellow card, to score, etc. lf you know the rules fine. Now you just go into the industry, rules are changed sometimes midway. And that is
not helping. All the countries of the world have gone through this process and all of them have to be done in this way. There is no short cut. Another issue is the privatization. NITEL has to be privatized. Like you said, I am an insider. Yes I am an insider. The amount of money that NITEL requires will be up to half billion dollars to provide adequate transmission, and inter-connect facilities. And this money is not there. You can see how government has intervened to reduce prices and all that. That will even put NITEL under a lot of pressure because you see, how do you regulate price of something that is not available? For a typical Nigerian businessman, if I need to make a call, I make a call and get through and pay whatever you may charge at the right time. If l want to make a social call l should do so at the appropriate time. But in making things cheap, the demand will rise and the pressure on the existing facility of NITEL, that is inadequate will rise and then the whole telephone system will become inefficient and NITEL wouldn't have the resources to maintain, expand, and all that. I agree that for international calls that are charged in Nigeria is quite high, it should be addressed. But you know, the blanket order of asking NITEL to charge N15,000 per subscriber is not going to work. The lines are not just available. It will just lead to agitation from the Nigerian people and if they privatize NITEL and then transfer maximum control to a strategic partner, they will be able to get a company that will come, that will attract all this money. If tomorrow you get British Telecomsor AT &T or any big player, as a strategic partner to NITEL, they can place a small piece of paper by way of guarantee in equipment supply and supply 500 million dollars good. The costing is small. They will be able to attract the funding that is required so that they invest heavily for this sector to take off, the private operators. We have heard the managing director of NITEL saying that NITEL has no capacity to interconnect the GSM operators. Even now with the less than EI that they require, they don't have that, let alone saying they should take into consideration the private operators. So, we have to adopt a step-by-step approach, a sensible way of resolving this issue and you know this is a global phenomenon. Anywhere you go all over the world, this is the way. You have to do as the Romans do. If Nigeria has to attract foreign investors, they have to do what other nations are doing. If they don't do it, this will elude us.
You have made a very strong point on the privatization of NITEL, appointing a strategic partner, that will be strong. Will it be right, in this respect, to say that has a very serious role to play in making sure that they are privatized as soon as possible? Can I say that they are foot-dragging? Can't this thing be done as soon as possible?
I sincerely believe that it is not something that should really take time. If there is a political will to do that, I believe it can be done. I mean you can privatize NITEL within a year. Whoever is buying NITEL is not buying because of the assets of NITEL. He is buying the market potential of Nigeria. You will look at Nigeria's 120 million people. You look at the dynamic Telecom sector, where so many are springing up. You look at all that. He's not buying the cost of assets. So, those people who are saying; oh you have to take time, to value NITEL. No investor is buying NITEL because of the asset that NITEL has. If it is that then nobody will come. Even if you advise today you want NITEL privatized as long as you don't have a regulatory framework put in place, one that is transparent and consistent with the demand in the industry you find that no big player will come. Let me take you to GSM licensing. When it was advertised, except MTN of South Africa that has maybe 1 million lines, there isn't any other serious outside player. Because the level of marketing in the sector is yet to come to the level of satisfaction that will be attractive for them to invest.
Now I was going to ask. What is your stand on GSM and CDMA. That for me is really urgent. Now is it possible, because of our lack of telecommunication facilities, to roll out these 2 technologies in the industry instead of somebody to saying "Look these are the advantages of the GSM. These are the advantages of CDMA, can we not roll them out at the same time?
I mean GSM is just a commercial name given by Europeans. The technology is CDMA and we have it in Nigeria. Multilinks is using PDMA. So people should check, rather than being blind just because of this Eurocentric approach to issues. They said we have to do GSM because GSM is tested and GSM is a 15-year- old technology. Telecom is becoming more or less computer software and any computer and computer that gets to 15 years, you know that so many things have overtaken. And it is because of this inadequacies of the GSM system that led to the evolution of CDMA before we started with analogue, like the one M-Tel is using. Because of the inadequacies of that technology they developed CDMA which has more capacity and so many other considerations. Data market is a function of a technology that will provide capacity, that you can pump data at high speed. GSM doesn't have that. And now even after the evolution of CDMA, there is the third generation technology that is springing up. You have heard in Europe where British government made more than 20 billion pounds in licensing for the third generation technology and this third generation technology is evolved using CDMA platform. How can Nigeria in the year 2000 sit down and say they will prescribe a technology of choice.
Perhaps I should also be talking of my little experience. I do know that in African you have more GSM companies more people using GSM, than CDMA and in Europe you probably have quite a number of companies. Now that you're also talking of third generation of mobile phones I wouldn't know on what platform they're going to operate but I know that there are a few companies already talking of third generation GSM that will enable you to broadband, or whatever you want to do. Do you see that as an disadvantage against your company? Or do you see yourself overriding that with development?
You see, it is true that one of the advantages of GSM is that has wide, wide application in the sense that you have more than 400 million subscribers in the world. With 400 million subscribers that means you can roll. One of the advantages why a lot of indigenous people from Europe, who're willing to do business with us, especially during the military, is because they are trying to mitigate their risks, and increase the pay backs, because if there is roll-in you earn foreign exchange. This is what they do. But you find that now this roll-in is becoming less, and less and less relevant. You can go to UK and immediately you enter you have your GSM phone. Immediately you go, instead of roaming you just buy another chip that you attach. So you're not roaming. You're just using your hardware, the set. So most people are not using roaming. Roaming is very experience. Otherwise, anywhere you go now, pre-paid is being done on such a very large scale that even if you don't have any GSM in Nigeria, you go to UK. At the airport if
you go to 'cargoes' you can pay 60 pounds and collect a set, buy your pre-paid card, use it, after going you just drop it. You can afford to throw it away or you can use it. When our don't use it after 3 months they recover the line. When next you come you just buy another one. So what is the advantage of the roaming. You know this roaming that they are talking about the fastest growing technology now in CDMA. They are building 5 million lines per month. It's just a matter of time they will take over.
And they have even started the roaming, but it is also very new to telecoms companies. It's only about 2-3% of the total revenues in telecoms companies that is realized. So really I don't see that advantage compared to the so many disadvantages of GSM. The so many disadvantages of GSM
will make me to choose CDMA. Because with CDMA now you can find that in this cell card I have, I can run into multiple carriers. GSM can't do that. Even in GSM, if you have congestion within a certain area, you have dense population of subscribers you find that you need to have certain distances between one cell site and another cell site. But in CDMA, within same location you can have many cell sites. The issues is not. A very simple way to look at the three
technologies, analogue, GSM and CDMA is like this. Analogue is just this tableware we have fixed for four people that will eat. Unless one has finished then maybe another will come in. So only four people will eat. And then you know they will expect "why do you have tables like this, why don't you put additional chairs, because why don't you put additional chairs because there's some space why do you just restrict to four. That is GSM. There you know instead of four you have eight. So it has move capacity, it can serve more people. Then another person says "Look why do you have to do with tables. These tables is occupying this space area. Why don't you remove the table, remove the chairs. Let's have cocktail. If we have cocktail, instead of eight
people, you can have fifty people standing, each are standing eating, talking, exchanging pleasantries and all that. The only problem that you have to cope with is noise. But how do you suppress the noise level? That is CDMA. So that is how it is.
I am happy that you mentioned something about data. How soon can this happen because you find a primary disadvantage. For instance, I cannot take your line where I stay, where I don't have NITEL, because I cannot go Internet. How soon can you do Internet? If I take your phone now, can I go Internet in my house?
We have data in our lines even right now. We have not gone commercial because the number of circuits we are limited. So we are imputing additional equipment to increase the capacity. We don't want to say that we have data, with people then struggling, calling, and then congest the
network so that you are not happy and we are not happy. But we have data. We can do analogue first in our system. Analogue we can do e-mail we can do Internet, even right now. The only thing is we have not gone commercial. But we can do it. There are few of our subscribers who are using it. We didn't wan to commercialize it because the volume of subscribers will be so much, and we have limited capacity. But before August we will be fully in data. You'll find that
all the terminals w have been bringing, from the last quarter of last year, they are all data cable with terminals all our terminals preparation to the data communication that we are going to introduce. And I can assure you that our data speed is going to be higher than others.
How many lines do you have presently?
We have a little over 8,000 lines. In Port Harcourt we have something like a thousand. You know we have just started Port Harcourt.
But is it not curious. We are talking of dropping prices but your prices remain high. Why aware you finding it difficult coming down?
You can see that we are the cheapest. We are selling cell phones for N85,000. We now have multiple rates for our phones. You see telecoms is a volume business. The more volume you have the more you can drop price. With the present expansion that we want to do in August I foresee a situation where we drop prices.
You say 50/40 you probably have all your lines at the same time and then you make money in transmission.
Yes of course, this is what it mean. You see when you're in a market where you are paying 30% interest rate. In other countries of the world they are using window financing. Then in neighbouring Ghana and Cotonou here, a local bank in Cotonou can raise a local letter of credit and they ship equipment. In Nigeria raising letter of credit mean putting 100% of the money. You know out of operational cost, at least 55% is cost of financing. And then there is no long term financing. These are some of the problem. If you put up a good regulatory framework, it attracts foreign investment. You find that you will have money that comes from abroad. You'll be surprised that there is a Telecom company in Ghana with a share capital of about $30 million. There is no company in Nigeria with a share capital of $30 million. But when you have that, because you're in a long-term business, your business is selling airtime. I agree with you, it's
not the cost of acquisition. I assure you that before the end of the year prices will drop substantially from this company. Substantially. That's a promise. We are doing an expansion and by the time we finish it, at the end of August, we will drop the prices substantially. Thank you
very much. We look forward to seeing that.
Copyright ¸ 2000 Vanguard Daily. Distributed via Africa News Online.
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