Rising cost, operational challenges hamper 5G deployment 

By AYOOLA OLAOLUWA 

The much anticipated roll-out of the Fifth-Generation (5G) network in Nigeria has been dogged by myriads of challenges, Business Hallmark investigation can revealed.

The Nigerian Communications Commission (NCC), it would be recalled, had on December 13, 2021, announced MTN Nigeria and Mafab Communications as winners of the 3.5GHz spectrum after the duo surpassed the winning price of $273.6million with $15,900,000 and $11,120,000 respectively. While MTN was awarded Lot 1, MAFAB got Lot 2.

The third bidder, Airtel Nigeria, however, lost out, with its bid of $270m falling short by just $3.6million.

However, despite the two firms meeting the February 24, 2022 deadline to pay up the licence fees and promising to launch the technology across the country on August 24, the deployment of the 5G network has not worked out to plans.

For instance, while MTN Nigeria has only been able to deploy the technology in just five states as against the whole 36 states of the federation and the FCT as promised, the second licensee, Mafab Communications is currently bogged down by infrastructural challenges and is far from being ready.

On August 26, MTN deployed 5G services in seven Nigerian cities – Lagos, Abuja, Port Harcourt, Ibadan, Kano, Owerri and Maiduguri to the disappointment of Nigerians in other states who had eagerly awaited the technology in their domain.

While MTN has been able to partially deploy the 5G services in seven states, Mafab could not, for reasons the company’s management blamed on the delay in getting its unified operational license (USAL) and numbering plan from the NCC.

The development prompted the NCC to grant Mafab five months extension to enable it to adequately prepare for the rollout.

“The goal remains to launch before the 5-month extension period and we will be sharing more information in the near future.

“We are fully committed to bringing the benefits of 5G services to Nigerians and deploying a network that will drive economic development with increased broadband capabilities nationwide,” assured the Chairman of Mafab Communications Limited, Musbahu Bashir.

However, several sources in the communications industry confided in BH that the affected firms and regulator NCC are economical with the truth.

According to them, the problems being encountered by licensees transcend the excuse of late release of the unified operational license (USAL) and numbering plan to Mafab by the NCC.

“Let us even take the explanation of the late release of the unified operational license and numbering plan to Mafab on its face value. But why the extension of another five months grace to role out the services?

“MTN, despite all the promises and fanfare, could only roll out the services in just seven states. Feelers from the states where the 5G services had been deployed also suggests the roll out had not turned out as expected”, said a telecoms expert who demanded anonymity.

Another telecoms expert questioned the rationale of awarding Mafab a 5G licence when it has no telecoms operational licence.

“It is wrong for NCC to have allowed Mafab Communications Limited to bid for a 5G spectrum licence. A company without any expertise and experience.

“The result is what we are seeing. I can assure you that except something urgent is done to salvage the situation, the successful rollout of the technology across the country will be seriously affected”, the telecoms expert warned.

BH reliably gathered that Mafab’s bid should not have been considered or allowed to pass the first stage, but for the strings pulled by some powerful political forces behind the scene.

“How do you explain an unknown entity like Mafab upstaging Airtel? Just because the company’s promoters were able to come up with the winning bid should not have been the only consideration for granting it the licence.

“Pedigree, experience and competence should all have been factored in. Why not err on the side of caution by giving the second licence to Airtel?

“But it is too late now. Let’s wait and see what they (Mafab) will do with the licence. I don’t see a way out for the firm than for its promoters to sell  a majority stake in the firm to a partner with the necessary technical competence”, another source noted.

The promoters, it was learnt, are not unaware of the challenges ahead. As a result, they are said to have reached out to several investors, including Airtel, with the offer to acquire a substantial stake in the little known company.

“I can reliably inform you that a mouthwatering letter of offer to the company (Airtel) to take up a substantial stake in Mafab has landed on the chairman’s desk.

“The company’s egghead and lawyers are currently looking into the possibility of forming a partnership with Mafab on the deployment of the 5G network and will soon come up with their recommendations.

“Meanwhile, I learnt Mafab is not putting its eggs in only one basket as other companies with the much needed expertise have been approached, a source in Airtel informed our correspondent.

There have also been speculations that the Mafab may warehouse the 3.5GHz spectrum licence and look for a buyer in the future to take it over at a premium. This paper could, however, not corroborate the claim.

However, if Mafab decides to go that route, it won’t be the first. In  2010, Etisalat had purchased Alheri Mobile Services Limited, a subsidiary of Dangote Group for a princely amount.

Alheri Mobile had acquired the 3G licence from the NCC, warehoused it and later sold it to Etisalat Nigeria which became the 4th GSM operator in the country with a 3G licence after Econet Nigeria (now Airtel), MTN Nigeria and Globacom.

Apart from the challenge of operational challenges dogging the rollout of the 5G network, the high cost of equipment, especially 5G enabled smartphones is stalling the rollout.

According to BH checks, an average  5G smart phone comes at a huge cost of $350 (N252,000) or more.

When our correspondent contacted Huawei of China through email, the company offered to sell a smart phone at a wholesale price of  $325 (N234,000), with the caveat that he must purchase at least 100 pieces.

The huge cost of the devices has led to MTN only able to procure a small quantity ahead of the rollout. The telecommunications giants, some interested customers informed BH, had been directing them to order and pay ahead for the phones which will then be procured from China with a waiting period of 90 days.

Experts maintained that most Nigerian subscribers would not be able to afford the phones, thus endangering the huge resources already expended on the development of the technology in the country.

“The success and profitability of the scheme lies on the volume of devices traded (economy of scale). Without it, the scheme is doomed”, another expert argued.

The NCC also alluded to this argument when it claimed in a recent statement that the 5G services won’t be available to over 28 million Nigerians living outside strong network coverage and many others who might not be able to afford the right smartphones required to access 5G services.

A report by Strategy Analytics obtained by BH predicted that operators will have to reinstate device subsidy offers in order to bring pricey 5G handsets within reach of consumers, or else face slower uptake of the next-generation technology.

“It requires magical thinking to expect that consumers are going to rush to buy 5G smartphones that are bigger, and more expensive than any phone that they’ve ever bought before.

“Slower uptake is a real threat unless someone closes the gap to 4G performance,” warned the company’s Director of Emerging Device Technologies, Ken Hyers.

Apart from the huge cost of obtaining 5G smartphones by customers, the two licencees bid to build the infrastructure needed for the services, checks revealed, is being hampered by the massive funds needed for the venture.

Based on BH findings, it will cost about $220,000 to set up a 5G mast, with the two licensees needing over 12,000 to ensure wide coverage.

“In Nigeria, MTN is starting with127 sites to test the waters. Before that, they had conducted 5G trials costing several millions of dollars.

“However, building a site (mast) costs between $100,000 to $150,000. This is excluding some other costs such as, security, human resources among others. So, there could be additional $50,000 to $70,000 expenses per site. It is not a small investment to set up sites,” a  source in MTN revealed.

Based on BH calculation, the 127 sites already built for the first phase of 5G rollout at $220,000 per one would have put a huge hole of about $27.9 million in MTN’s finances.

According to a document obtained by BH, Mafab Communications set a five-year target, which would see it deploy over 6,000 sites in the country.

The firm is targeting 1,000 sites rollout in the first 12 months of rolling out; 3,000 sites by the second year, 4,000 sites in the 3rd  year; 5,000 site roll outs in four years and 6,000 sites and a subscription base of 7.5 million in the 5th year.

While MTN had not publicly disclosed the number of sites it intends to build, experts believe it won’t be less than the 6,000 proposed by Mafab.

The 12,000 sites will cost the two companies nothing less than $2billion to build, according to analysis of costs in other climes where the 5G network had been deployed.

According to checks, it costs an average of $750 million to roll out the service. For instance, a United States firm, Dish Network, pegged the cost of building a new 5G network at $500million in its Q4 2020.