Banigbe: We Are Repositioning 9mobile for Efficient Service Delivery

CEO, 9mobile, Obafemi Banigbe, speaks about the multi-dimensional challenges facing 9mobile since the exit of Etisalat in 2017, and how the new management is repositioning the brand for competition and efficient service delivery to its customers. Emma Okonji presents the excerpts:

 
You have been at the helm of affairs in 9mobile since July last year. What do you think are the most critical challenges facing the telecoms company right now, and what are your plans to address them?

It’s been a privilege to have been appointed as the CEO of 9mobile to lead the company, especially in this space where it is pursuing a transformation agenda. As you will recall, the company started out as Etisalat, and then it became a major competitive force in the industry. It reached its peak between 2014 and 2016, celebrating 22 million subscribers, but unfortunately, the business could not sustain the old competitive edge in the industry after the exit of its initial parent body, Etisalat, in 2017.
Since its exit, the performance of the business has been on the decline. So at the time the new shareholders and the new management took over the business, the business was really grappling with multi-dimensional challenges that we had to take on headlong.
Some of the most critical challenges that 9mobile is currently facing, are issues around infrastructure, declining revenue, declining subscriber number and market share, high cost of telecoms business, among others. The overall infrastructure of the business has really not been upgraded for some time, and so we are dealing with a lot of obsolete infrastructure, and we are also dealing with a whole lot of issues of declining revenue, declining subscribers, and high cost of doing telecoms business. To address these challenges headlong, we broke down our recovery plan into four phases. The first is the stabilisation phase, and this is where we are looking at how to keep the business going, and stabilise it from a network stability point of view, from a cost management point of view, and from an employee morale point of view. The second phase of the agenda, is the modernisation phase of the business. So we’re currently in the process of refreshing our radio network, our core network, our transmission infrastructure, our billing system, and our charging system, which is like rebuilding the entire network from the scratch.

The third phase is the transformation phase, while the fourth phase is the growth phase, where we will be pursuing our growth objectives.

The good news is that we have gotten the commitment of our shareholders and the new investors to secure the required amount of money that we need to implement all of these things, in order to make sure that the business can return back as a competitive force in the market. We are in the process of repositioning the brand for efficient service delivery and to regain its lost market share and subscriber number.

Your market share has declined, and your penetration level is low, including your subscriber base, which affected investment and network connectivity in 9mobile. How do you intend to revamp all of these?

Investment in telecoms business is key, to avoid service deterioration. When you do not invest in infrastructure for multiple years, up to seven, eight or nine years, it becomes very difficult to sustain a level of service that the customer is accustomed to.
Again, when you do not invest in the right technology and in the right infrastructure, what’s going to happen is that the customer is going to suffer a decline in the quality of experience. And when they suffer a decline in quality of experience, they’re going to definitely drop the SIM card. So, what we are doing to recapture our market share, is to first reposition as a service organisation. And to do that, it means that we have to refresh our entire infrastructure from everything you can think of in making a telecoms network to work effectively. What we have done is to secure investment from our new investors, to be able to power the investment we need to do in the market. And at the same time, we’re also looking at opportunities to take advantage of the use of fibre sharing, because we’re not able to build every single fibre, and every single base station by ourselves, given that we are far away in the market. We have the weakest coverage as far as the competition is concerned, and we also have weak 4G coverage. So, effectively, it means that even from the point of view of fibre infrastructure, we have one of the lowest fiber infrastructure in the market. So, we believe that in order for us to leapfrog and make sure that we reclaim our position in the market, it requires us to do multiple investments at the same time, which is going to be the bedrock of our recovery plan.

So, once we have the network service out there, then we’re going to go back into our subscriber win-back and acquisition campaign. And that requires us to engage the customers more.

But in all of these, we need to fix the basics first, which is making sure that we have a network that works, a service portfolio that is more appealing to the demography we have positioned ourselves, to be able to attract customers. At a time, we were very big in terms of the youth market and the SME market. Those are market shares that we can still regain because, as you know, the population of Nigeria is increasing and new businesses are springing up every day.
Young people are still the majority from the point of view of demography as far as the Nigerian population is concerned. So there is still a chance for us to be able to recapture our lost ground.
It requires a lot of work, but the underlining thing that has to happen is that we must bring back service quality in our network and revamp our customer touch points across the country, from our shop, through our digital interfaces, to how the customer interacts with our products.

There have been some concerns about the sustainability of Nigeria’s telecoms sector amid ongoing economic challenges prompting calls by several operators to warn that without appropriate tariff adjustments, the industry risks stagnation, network degradation, and potential shutdowns. How can your industry navigate this path?

The telecoms industry has been a major contributor to the GDP of Nigeria and it has been the bedrock for the entire digital economy of Nigeria over the last 20 years. Now this was possible because the industry was experiencing impressive growth as service penetration and adoption increased, which allowed the industry to scale and to enjoy some cost efficiencies as a result of scaling. So the level of growth experienced by the industry did encourage a lot of inflow of capital, both from foreign and local investors. The investments were channeled to cover underserved areas, including capacity expansion and quality of service improvement. However, the recent macroeconomic challenges facing the nation, which is basically fueled by inflation and currency devaluation, has been a major challenge. As you can imagine, both our capital investment costs and operational costs have skyrocketed massively because they are mostly denominated in foreign currency or indexed against foreign currency, whereas our revenues are in local currency.
So even though the industry is growing in its top line revenues, the rate of growth of revenue in local currency is not commensurate with the rate of growth of the cost-base that we have. So, when we are speaking about industry sustainability, what we are saying is that every business must be in a position to generate revenues that can cover its cost and also give it the opportunity to be able to reinvest back into the business. So if we do not generate enough revenues to cover our cost, we’ll have to resort to borrowing either from shareholders or from the capital market. In the last two years, this is what most of us have had to do, and this is not sustainable.

So I believe that at the end of the day, it’s really about balancing affordability with sustainability, and making sure that the industry will be in a position to remain as a growing concern, where we can generate cash flow that is enough to cover our costs, and also help us to reinvest into the market. The current situation has not resulted in that outcome, and this is the reason why we are talking about industry sustainability.

The push for a tariff hike has been speculative with news making the rounds that telcos want a 100% increase while others say it should be around 40%. What is the appropriate pricing structure?  

Rather than being fixated on the percentage of price increase, I think we should really start talking about the concept of market reflective pricing.
What do I mean by that? On the face value, if for example a telecoms business is facing a cost increase in the range of 100 per cent to 300 per cent on some of its cost lines, the rational thing to do would be to try to push for a pricing regime that can put the business in a position to adjust its pricing, to generate incremental revenue that is higher than its blended cost. So what do I mean? See, if everyone of us is looking at our business, the rational thing that people want to do is to say they want to pass all the cost increase to the end user, in form of a significant pricing increase. But we also have to be mindful of the fact that the customers may not be able to pay for the services.
So affordability will then remain a concern in defining how we put up a price point that is market reflective, and that is also able to allow us to generate enough cash flow to cover our costs and to reinvest in the business. So from the policy point of view as well, I’m sure they are also considering this whole idea of affordability, and I’m sure that’s one of the reasons why government has really dragged its foot in being able to address this whole conversation around tariff increase. So I will not necessarily focus on what percentage is better, whether it’s 100 per cent or whether it’s 30 per cent or 40 per cent or 60 per cent or 70 per cent. The most important thing is that we need to look at the pricing regime. We know that our market is regulated, so because our market is regulated, we need to start thinking around the whole concept of market reflective tariff, which is reflecting the realities on ground. So we are confident that the regulator will do the right thing and approve the most appropriate tariff that puts into consideration the fact that customers must be able to afford the services we are offering.

Can you share with us what the investors have brought to the table and how this is going to stimulate the expected transformation of 9mobile?
I would not necessarily give you a fixed number, but I’m going to give you an idea of what we need to do. As a CEO and investment manager, I will ensure that whatever monies that have been invested in the business, should have appreciable returns on investment because the investors should be able to have a payback in an appreciable turnaround time.

If we were to compete traditionally like we used to do, we would need to invest about $3 billion (N4.8 trillion) over the next four years in order for us to have a chance of catching up. The total telecoms industry in 2023, generated about N4 trillion in terms of revenue. In 2024, when the results are out, we expect this to increase to about N4.5 trillion in terms of the overall industry.

So, raising capital is not the challenge for 9mobile, but the ability to guarantee payback. However, I must also say that during the time of Etisalat, the business was never profitable, even though the revenues were growing, but from a profitability point of view, the business never got to the point whereby it was able to generate profit until the time when it sold its towers.
So, I cannot go into the market to borrow money, even in local currency, because I will have to spend around 30 per cent in interest rate.

So, my challenge is not necessarily securing capital. My challenge is how much of that capital do I want to consume and invest, knowing that I also have the responsibility to pay back the investment in a shorter time horizon. So, I have adopted a mantra ‘to build infrastructure where I must, and to share infrastructure where I can’.

Is your industry not worried about the delay by the NCC in addressing the issue of tariff hike that was first raised in 2022 by the Association of Licensed Telecoms Operators of Nigeria (ALTON)?

It may appear that there is delay on the part of NCC and the federal government in deciding on the issue of proposed tariff hike, but I must say that the government understands that people are going through a lot because of the policy decisions and the economic reforms in the country. So, everything has gone up. Fuel has gone up. Electricity has gone up. Food prices have gone up. Inflation is rocking everybody. So, I think the government is more of weighing these whole ideas of whether to approve a tariff increase that will inflict more pains on the end users, or to balance this whole question of affordability and sustainability.

I am sure NCC and the government will come up with a policy regime that will effectively help the industry to remain sustainable, without putting too much pain and pressure on the consumer. So, it’s really a delicate balance.

Should telecoms regulator be allowed to fix prices for operators in a sector that is centred around promoting true competition?

The regulator does not really fix prices for operators and the regulator does not decide what we charge per megabyte of data in terms of our overall proposition or the pricing regime that we do for voice. NCC is not concerned about who is charging N1,000 per gigabyte, or who is charging N500 per gigabyte, or who is charging 15 kilobyte per second, or other kind of charges. Now, what NCC does is to basically define a price floor that guides the entire industry, which helps to avoid a situation whereby operators will engage in predatory pricing, through which, they price below the NCC’s regulated price floor in order to gain market share, which eventually creates a monopolistic market.

How do you see the future of Nigerian telecoms market?

The telecoms market has been quite exciting, and it has grown in leaps and bounds over the last 20 years. So I think the future of the Nigerian telecoms industry is bright. From a population advantage, Nigeria has a size advantage, and according to the United Nations, Nigeria is expected to increase its population from around 220 million to about 400 million in the next 20 to 25 years. That will make us the third most populous country after India and China. Now, this massive market will require a robust communication infrastructure that will keep the population connected, and will continue to power the overall digital economy that the Nigerian government is trying to push as an agenda. So we see massive opportunities in the broadband data, both in fixed and mobile broadband data, and in the adoption of digital services. For us at 9mobile, our goal is to reposition ourselves, and reposition our business to take advantage of these opportunities in the market.