The Chief Executive Officer of Pan African Towers Limited, an indigenous infrastructure company, Mr. Wole Abu, speaks about the need for government to support additional deployment of telecoms masts and towers, to bridge Nigeria’s infrastructure gap and enhance access to telecoms services in underserved communities. Excerpts:
What’s your general assessment of the infrastructure segment of the African telecoms market, where you currently operate?
The infrastructure segment of the African telecoms market has actually seen a lot of growth since the entrance of major players at the global level into Africa around 2012. From then, infrastructure and tower deals have grown year on year. Also, it is beginning to see cloud and fibre deployment at an increasing rate in Africa. So, infrastructure for telecommunication is growing and this is being driven by demand. In terms of adequacy, off course, there is still a demand-supply gap. Infrastructure is still not adequate. We still have a huge gap in that space. In Nigeria, filling the gap will demand an estimated investment worth $136 billion, according to the Ministry of Communication and Digital Economy, and the Nigerian Communications Commission (NCC) .
Over the years, and even before the coming of Pan-African Towers, deploying infrastructure has been faced with some bottlenecks. What are those challenges you have identified since you commenced operation?
Truly, many challenges are bedeviling the sector. There are social challenges like theft, vandalism, community issues and so on. And also, there are the business environment issues like multiple taxation, unfavourable or harsh government policies, forex scarcity and lack of long-term capital for investment in infrastructure in local currency. All these are the issues. Then of course, you also look at failure in power supply. Availability of power is important since all telecoms infrastructure, which are distributed across the country, rely on energy. So, we have to make additional investments in providing energy for our customers. This actually drives up the cost and it makes us susceptible to all the shocks in the energy market and that, sometimes, makes our business difficult. If you look at it, the environment of doing business, capital inadequacy, and poor power infrastructure, those are the things that are really affecting the growth of our sector.
Focusing on the power challenge as you have just mentioned, how much of the cost of operation do you expend on providing power to run telecoms infrastructure?
Let me say that power is both a challenge and an opportunity. It is a challenge in the sense that we are currently relying on a grid that is epileptic and non-available in certain areas; and on diesel generators which make us susceptible to volatility of diesel supply and off course, all the issues around constant maintenance of generators, noise pollution, environmental pollution and everything that is associated with running the generator for 24 hours. It is a challenge. In terms of capital expenditure (CAPEX), we are talking about putting in probably 50 per cent of your CAPEX into power equipment, which you would otherwise have saved. On the other hand, even in operating expenditure (OPEX), you will also see that you are spending a lot of money, say another 50 per cent on your OPEX. The cost is a significant part of our operations, both CAPEX and OPEX, which is the challenging part.
However, the opportunity is that with the rise in and reliability on renewable energy, you can provide that power service at a lower rate than using diesel generators. The opportunity there is to save cost.
In the face of the current accelerated migration of businesses to the online space, experts have observed that there will be increasing pressure on available telecoms infrastructure. What can be done to avoid service breakdown in this situation?
The mobile network operators (MNOs), who are the people that deliver the last-mile service to customers, are experts and they always know how to handle the situation.
Remember, we just serve them and they are the ones that serve the customers. The MNOs are global experts and they know how to plan demand and uptime very easily.
They have tools for all that. So, the uptake in data traffic, for example, is not unanticipated. You know that people are going to use more data. It has been rising for a long time. What has just happened is a shift in usage. For instance, people working more from home means that residential areas during the day will see more data traffic than they would have normally seen. Those people ideally would have been in the office. So that capacity is there, it is just that it is in a different place. An example is that if you shut down the markets in some areas, what you are going to see is that because the businesses are not working there, the traffic will reduce there. But the people are still doing something and they are working from home. The tendency is that you now see the traffic go up in areas where people live.
But it is still the same Internet and everything will still aggregate. For the MNOs, they have a way of shifting capacity. The challenge now lies on us that provides the infrastructure.
Infrastructure cannot be shifted over the internet. Infrastructure is hard and you must dig up something. If it is fibre, you must put the physical duct, put the cable inside and terminate it somewhere. It is not something you can do overnight. It is not software-driven. If you are going to build a tower, the process is the same thing. You have to secure a location, construct the mast and get the work done.
So for me as an infrastructure provider, the solution is to deal with what is slowing us down to deploy infrastructure more speedily. It boils down to key government policy implementation like government’s permit to a right of Way (RoW), attitude of landlord, and attitude of estate agents.
Another challenge to quick deployment of telecoms infrastructure, is the government angle. We can work quickly and fast but you have government offices that do not work at the same pace.
How is the non-approval of RoW permit by some state governments, affecting the growth of the sector?
The issue of RoW permit has been an issue to deal with, but early this year, the federal government reminded state governors of the agreement they earlier had to reduce RoW charges to a flat rate of N145/per linear metre, and this has been a very welcome development. I think six states or so have aligned with the charges recommended by the federal government. At least, prima facie, addressing the RoW charges brings down the cost. But as I told you, there is a plan. If you are going to run fibre from the landing point in Lagos to Abuja, you will probably pass through eight to ten states. Along that road, maybe it is just only one state that has reduced RoW charges to the N145 per linear metre stipulated by the federal government. But you cannot fly to avoid other states that have not aligned with the price. You still have to deal with other people that have not done it. That is one thing about the fibre infrastructure. Fibre is a point to point connection. If I am running from Lagos through Ogun State, through Oyo State, to Osun and to Ekiti; even if Ekiti has done the needful, what about these other ones? If I am running, let say, a 300 kilometre fibre, it is over the 50 kilometres inside Ekiti that I will enjoy reduced charges; the remaining 250 kilometres will still be at high rates. In this kind of arrangement, Ekiti State may still not reap that reward internally. That is why all the state governors have to align with the agreed charges. That is the challenge.
However, there are other hidden charges; the RoW is just one charge. If you really look at what goes into it, there are many other hidden charges that are not spoken about. It came up at the last meeting and we need to consider that. When you say the charges is N145, then it should be N145, without any hidden charges.
The NCC introduced infrastructure sharing as a policy to help in broadening deployment of telecoms infrastructure. What opportunity has this created for operators such as the Pan African Towers?
Infrastructure sharing is a global trend and the NCC has done very well by bringing it to the country so that people can be served better. First, it is good for the environment and it is also good for the business because with it, one tower can now serve various operators. You do not need four or five towers again. To build about four towers in Nigeria is money but with the policy, the amount of forex we use to get tower equipment would be diligently utilised. What the policy also means is that most of the services have significantly improved because of the efficiency around infrastructure sharing. It has also created an industry for some operators, which is widening the telecoms value chain. So, instead of just having the MNOs, we now have the tower companies (Towercos) and also the infrastructure companies (Infracos). And if you look at the collective investment that each of them has done in these areas, it is very significant. This will also make our telecoms industry more resilient from shocks, unlike if you have concentrated all the investments, resources and risks in one leg, the way it used to be when the MNOs were the telcos, the infracos and they have to do everything. Now, it has been broken down into more efficient work streams. People who are focused on infrastructure are there; we have the ones who are focusing on customer service qualities, and many other divisions that are also there. So, that is how it should be. Infrastructure sharing is a welcome development and we hope to see more in that area.
The 5G network is not yet available in Nigeria but obviously, efforts are being made towards its deployment in the country. What new demands does this put on you as an infrastructure company?
Like every other technology, 5G is going to come. It has already been deployed in some part of the world and even in some African countries. If you look at it, Nigeria is the largest market in Africa, and definitely, 5G is going to take off here. If it can work in South Africa, it can work here. What we need to start looking at is that 5G is not just a technology, 5G is a complete disruptive technology because the reason why you are having 5G is because of Internet of Things (IoT); it is being driven by the shared amount of devices that are internet enabled that are coming into the market. You have street lights that are Intelligent and smart. You do not just have passive street cameras that are just there anymore, they are connected to the internet. Also, you have autonomous vehicle that is coming. The mobile industry is changing. 5G is actually all about smart cities. I know that Lagos state even has a smart city plan, what this means is that you will have to restructure your entire community and regulatory systems for 5G to take its root. It is not just for us building stuff using the current model. We are going to look at the entire ecosystem. During the initial stage of Coronavirus pandemic, out of fear and mischief, certain people started spreading rumours that the virus was being caused by communications equipment. This is not the first time they have said it. In the past, they have linked communications to cancer. There are people who believe that anything technology is to be suspected. Although, there are legitimate concerns about a disruptive technology but the truth is that artificial intelligence did not just start today. Machine learning has started about 40 years ago; it is just getting better. You now have robots that can do different tasks. As a country, we must compete with people who are using technology to fight our industry because that is our job and we are supposed to make it available. So, 5G must be done. For me, it is a golden opportunity for Nigeria. In fact, I am an apostle of 5G because I believe that technology, especially this technology that have evolved in the past 10 years – blockchain, fibre, security, artificial intelligence, cloud and co – they are all sitting on top of this 5G. Things are being able to talk to each other. We have seen Towercos in China, laying their fibres and towers along expressways in anticipation of autonomous vehicles, driverless cars. You can now imagine Nigeria, if we really want to have a smart city and you have Ikorodu road with all these vehicles that are usually on the road. It will be a serious work for use and we have to really think ahead.
So, it is not me or the infrastructure company alone that will do it, it is a collaborative effort. Where the government should come in is that they should not see 5G as another opportunity for them to rake in money. 5G is much more than that.
Pan African Towers entered the Nigerian market in 2018, how has the journey been?
Well, the journey has been challenging and rewarding at the same time. We have tried to prove that Nigerian companies can also compete in the space and we have been able to win the confidence of the market. We have been able to put together a team that can deliver world class services in this area. The journey has really been interesting for us, we just celebrated two years of business operations in Africa and we have been able to make some strides in the industry despite the challenges we face. There are also huge opportunities as we move and we have come this far because of our mission to provide broadband penetration and other telecom services across Africa especially to remote areas. There are people who do not have the network to make a phone call and so they do not have GSM phones. They have no access to quality education, healthcare services, and other critical infrastructural services that foster their livelihoods. Imagine these people being completely cut off from the global world. This is why we do what we do. We need to build more towers in these remote areas so these people can access life-enhancing services and get connected to the global community. Technology makes the world better and erecting towers in these areas, could be a life-changing moment for a whole community. So, the journey has been really interesting for us at Pan African Towers.
What informed your decision to go into telecoms masts and towers installation and not other categories of telecoms business?
Well, there are opportunities everywhere in the industry and its various segments.
However, based on the vision of the founders, this is an area that needed the most attention and it is a good sustainable asset class. So, it is not something that you do and go away. It requires long term planning and it has long term rewards. If you look at the environment of business, people who build infrastructure have long term vision. As I said earlier, in Africa and Nigeria, there is huge infrastructure gap and this makes this segment as an area that has not really been tapped and it is an underserved area. There are many areas where you still do not have telecoms service coverage today and there are areas where you have capacity deficit that someone has to build up. For us, it is a good business opportunity and it also resonates with us as citizens where we do not just do short end trading type of activities, which most people try and do because they do not have long term fate in the country. We are just like Dangote and other indigenous companies, once they put a factory down, you know they are not going anywhere. But when you see someone who is just importing containers, the moment they see there is a problem, they stop and ship their containers to the next city. But this is infrastructure and we are building it in every part of the country. So, we all have to join our hands and build the country together. We have both nationalistic and African business orientation. It is a good business and our vision is to help fill that $136 billion telecommunication infrastructure gap that already exists in Nigeria
For indigenous companies like you, what do you think the government can do to further strengthen you in the face of competition with foreign counterparts?
Well, it is expected that foreign companies will have an advantage because if you look at the kind of company that come to Nigeria, they have access to long term funds. They have access to expertise. They probably are also coming in as a global partnership with companies they want to serve in Nigeria. So, when they buy a portfolio, Nigeria just happens to be one of the places they are coming to. That is welcomed frankly because most Nigerian companies do not have what it takes here to cease the whole opportunities in Nigeria. So, we would always need them. And if you look at our particular sector, the technology sector has no colour, it has no country; it just has to do with the resource.
Regardless, where the government should look at, first and foremost, is helping with the right policies for the Nigerian companies who want to do this to grow. For instance, we have got funds earmarked for certain sectors of the economy to cushion Coronavirus pandemic effects. Government should earmark for infrastructure companies as well. The Central Bank of Nigeria (CBN) is intervening in almost everywhere but in a key sector like this, they expect us to go and be looking for dollars. One of the risks that have happened here is that long term funding at dollar rate is a problem but the CBN, I think based on what they have been doing recently, is trying to drive the interest rate down in local currency. Hopefully, a lot of local long term lending will start happening and that is a good thing. But the other issue is around cohesion around government agencies, so that the issue of taxation, stoppage of works, should be eliminated so that people can actually deploy this infrastructure quickly. That is for everybody though, not just for Nigerian companies. And there should be some incentives for people who are willing to deploy their time and capital into this area to grow. For example, government should increase resources for the Universal Service Provision Fund (USPF) to increase funding so that the rural connectivity target can be met. People in the rural areas also need access to the internet, and access to telephone. But what is earmarked for them is just too small.
COVID-19 has come and it is still here. As everyone keeps the hope to see a post pandemic era, what opportunities have you seen as the bright side of the situation?
We thank God that we are alive and that is first and foremost. Nobody saw the pandemic coming. No analysts forewarned us about it. It is quite unfortunate that quite a number of people have paid the ultimate price. However, there are many lessons to be learned from it. One is that our health infrastructure in Nigeria and transportation infrastructure have no resilience at all. People were unable to really keep themselves going during the period of the pandemic. Technology cannot replace all those things, and neither can the towercos do all those things. Also, the government cannot do everything. It is expected to create an enabling environment so that people can come in and build all this infrastructure that is missing. For our own industry, we are negatively correlated to the pandemic in the sense that people now realise what essential service really is. They want to talk and be able to communicate with people and the way it is done today, that is where the services that we render come in. So, we are part of essential service. Again, the government needs to look at what they have been classifying as essential service using this pandemic as a case study. If you know that when you were locked down at home and you had nowhere to go, you needed a telephone, you needed to talk to the external world as you could not fly down there but you were able to talk to them via telephone, that should let you know the importance you should attach to the sector that is making that possible. For example, if you have $30 million and you are thinking of investing in aviation, because you think it is essential, maybe you should think twice and divide it into two and put some in the telecoms sector. Even if you remove telecoms from other sectors, including aviation, there will be problem. Telecoms contribution to the GDP has been growing year after year. In Q2 of 2020, it grew by 18.10 per cent according to the National Bureau of Statistics, helping the ICT sector to contribute 17.83 per cent to Nigeria’s GDP. So, I am happy that there is a dynamic Minister of Communication and Digital Economy. He has been engaging with the industry and we believe the government is listening to him. If he is able to win the heart of the government, governors and the private sector, I believe the telecoms sector will continue to be better.