Nigeria’s 5G license auction: old patterns, one unusual winner
Nigeria auctioned two 5G licenses on 3 December that were won by the country’s leading telecom operator MTN – and an obscure local company named Mafab. The company was incorporated in July 2020 and has limited track record, but managed to outbid Airtel, which is the second largest operator in the country. In the absence of further detail, opacity around this USD275 million deal hearkens back to the concerns that accompanied earlier auction of 3G licenses and privatisation of the state-owned operator. It illustrates ways in which scale and growth opportunities can interact with regulatory and political risk.
Significance – Playing field
Mafab is a subsidiary of Althani Group run by little-known businessman Musbahu Muhammad Bashir. Concerns are two-fold: that the newly formed company has not demonstrated the capacity to finance and manage a 5G network, and (b) that there is limited public information about Mafab’s corporate governance structure. No board or management is described on the company’s website as of 17 December. Some local media allege it to be covertly co-owned by political figures such as Bola Tinubu, who helped President Muhammadu Buhari to win two elections and is now preparing to run for the office in 2023 when Buhari will complete his final term. This alleged link Is weighty enough to have drawn a rebuttal from the National Communications Commission (NCC)[1]. Perhaps because of precedent underscoring (a) the commercial value of political access, and (b) these advantages do not always translate into project delivery. For example:
In 2007, Nigerian cement oligarch Aliko Dangote won one of four 3G licenses through a company named Alheri that he owned. However, he held the license for three years without establishing a network and then sold the company (and the 3G license) to UAE-based Etisalat in 2010. This happened just as another deal was unraveling following a sudden change in government that elevated Goodluck Jonathan to be president.
In 2009, a local firm named GiCell was part of a purported consortium that successfully bid USD2.5 billion for the insolvent state-owned Nitel. The privatisation had progressed under the Umar Yar’adua administration, but Yar’adua became terminally ill and eventually passed away in 2010. Jonathan promptly ordered a probe into the Nitel sale and sacked the cabinet after he took charge. Those dismissed included the head of the Bureau of Public Enterprises and ministers who had been working on this bid through the National Council of Privatisation, and soon GiCell’s purported foreign partners denied taking part in the bid as the political transition unfolded. Isolated, the local firm failed to produce a deposit for the Nitel acquisition and the deal collapsed.
In 2015, Nitel was finally sold to another little-known company Natcom that agreed to pay only USD252 million. This company was in turn acquired the following year by Theophilus Danjuma, an ex-military strongman who continues to be part of the country’s ruling elite.
Outlook – Policy capture
Broadband subscriptions increased from 41 million to 76 million (39.9% penetration) between January 2017 and October 2021, according to the most recent NCC estimates[2]. However, connection is at times unreliable, and speeds do not compare well internationally.
Under the 2020-2025 National Broadband Plan, the plan is to increase penetration to 70% of the population, 4G/5G coverage to 90%[3], and to get download speeds up to 10 Mbps in rural areas and 25 Mbps in urban areas. Burgeoning investment in Nigerian payment services providers and wider digital economy will be impacted by policy execution (or failure) in these areas.
Opacity around licensing poses risk. As does the unpredictable direction and timing of regulatory oversight more broadly. This was recently evidenced in the impact on operators when the communications minister Isa Pantami ordered the suspension of SIM card sales in December 2020 in order to implement a national ID scheme. By the time that suspension was lifted in April this year, sector GDP growth had plummeted from 17.64% to 7.69%.[4]
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[1] 5G: NCC clears air on Bola Tinubu’s connection to Mafab Communications (December 2021). Daily Post
[2] Primarily mobile broadband rather than fixed broadband
[3] Up from around 40% in 2020
[4] Nigeria Q1 2021 GDP report (May 2021). National Bureau of Statistics.
Photo credit. Jackson David
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