FINANCING THE TELECOM SECTOR

1
FINANCING THE TELECOM SECTOR

• NIGERIAN TELECOMMS INDUSTRY
• CAPITAL REQUIREMENTS
• FUNDING OPTIONS
• RISK ASSESSMENT
• SUGGESTED WAY FORWARD

2
NIGERIAN TELECOMM INDUSTRY

• HOSTILE ENVIRONMENT FOR INITIAL ENTRANTS
• LACK OF OPERATORS WITH PROVEN TRACK RECORD
• DIFFICULTY WITH ACQUIRING EQUIPMENT ON FAVOURABLE
  TERMS FROM SUPPLIERS AND BANKS

3
NIGERIAN TELECOMM INDUSTRY CONTD

• OPERATORS FORCED TO SET UP SMALL POORLY
  CAPITALISED NETWORKS JUST TO ESTABLISH PRESENCE
  (lt10,000 SUBCRIBERS, lt8 CELL SITES)
• FUNDING CHARACTERISED BY SMALL EQUITY AND
  INAPPROPRIATE BUT EXPENSIVE SHORT TERM BANK
  FUNDING

4
NIGERIAN TELECOMM INDUSTRY CONTD

• PROMOTERS WANT TO RUN THE COMPANIES
• RELUCTANCE TO GO PUBLIC - LIMITATION TO ACCESS TO
  EQUITY CAPITAL FOR EXPANSION

5
NIGERIAN TELECOMM INDUSTRY CONTD

• NITEL
• TECHNICAL EXPERTISE LACKING
• SERVICE INDUSTRY EXPERTISE LACKING

6
RESOURCE REQUIREMENTS

• ADEQUATE CAPITAL - AMOUNT DEBT/EQUITY MIX
• MANAGERIAL CAPACITY EXPERIENCE
• NEUTRAL REGULATOR
• BALANCED INTERCONNECT AGREEMENT

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CAPITAL REQUIREMENTS

• LOCAL - SITES, TOWERS, GENERATORS, RECURRENT
  EXPENDITURE
• FOREIGN - SWITCHES, BASE STATIONS, BILLING
  SYSTEM, GATEWAY ACCESS, MAINTENANCE, TRAINING ETC

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FINANCING OPTIONS

• EQUITY - LOCAL FOREIGN
• QUASI EQUITY
• TRADE/EQUIPMENT SUPPLIERS CREDIT
• MULTILATERAL FINANCE ORGANISATIONS - IFC, ADB,
  EXPORT CREDIT GUARANTEE SCHEMES OF VARIOUS
  COUNTRIES

9
FINANCING OPTIONS CONTD

• LONG TERM LOANS - DEBENTURES, INSTALMENT
  REPAYMENT LOANS, EQUIPMENT LEASING ETC
• SHORT TERM CREDIT - COMMERCIAL PAPERS, BANKERS
  ACCEPTANCES, OVERDRAFTS

10
RISK ASSESSMENT

• COUNTRY RISK
• POLITICAL RISK
• REGULATORY RISK
• FOREIGN EXCHANGE RISK
• INFLATION RISK
• MGT AVAILABILITY

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SUGGESTED WAY FORWARD

• COMPREHENSIVE REVIEW OF THE ENABLING ENVIRONMENT
• STABILITY OF LICENCES TO GIVE BENEFICIARIES
  OPPORTUNITY TO RECOUP THEIR INVESTMENTS AND
  ENCOURAGE LARGER SCALE INVESTMENTS

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SUGGESTED WAY FORWARD CONTD

• STIPULATE MINIMUM NETWORK SIZES FOR MAJOR
  COMMERCIAL CENTRES
• NCC SHOULD SET UP A COMPREHENSIVE INDUSTRY DATA
  BANK