Just after two years as the Chief Executive Officer of Spectranet Nigeria, a dogged 4G Broadband Internet service provider, MR DAVID VENN, has brought the company to higher ground in the Nigerian telecommunication market. In this interview with CHIDIEBERE NWANKWO, Mr Venn, looks at the industry, the future for voice communication and how to ensure good data service across board. He further speaks on the next step for Spectranet.
How will you assess growth in Nigerian market?
The initial investment was in 2009 with the licencing, and the 4G-LTE wasn’t available then, so the company launched with an earlier technology. As soon as LTE was available, we got it swapped out with 4G-LTE Technology. So 4G-LTE has only been around here with Spectranet for about three to four years. So that is what we have here, we don’t have the old technology.
And that is when the growth really started, because 4G drive much faster and better experience for the customer. And it is more affordable too, be the technology is more efficient in the way it uses the spectrum to get more data.
The investments in that period, we cannot talk about numbers but it is in hundreds of millions in dollars that has been invested. All these equipment, and the modems as well, mostly the network equipment all come from overseas, because there is only a certain number of suppliers around the world that make these equipment. It’s extremely sophisticated equipment. None of that is made in Nigeria, it’s all imported. All of that is in dollars and there’s been a huge investment in all that. We have spent a bit more in the past couple of years in rolling out, in marketing and in trying to get our name out there, but most of the investment is going to equipment and network infrastructure. We have a lot of base stations out there. People are quite often surprised by how many towers it takes to service a city. In Lagos alone we have 400 towers. We have over 600 towers across the four cities. Lagos is more spread out. And you provide towers not just for coverage, but for capacity. So most of the investments we spent in the past year have really been to enhance the capacity of the network, because the coverage was already there. But as the tower starts to get busy, we need to put more towers to take up the capacity, so that you can support the customers. Because you can just get so many customers on the tower before it starts getting congested. We do that all the time, we install new base stations all the time.
What is the big thing about 4G Technology and Speed
I will explain this, but at the end of the day customers don’t really care if its 3G or 4G, it’s just, does it work? Is it fast? And also the price as well.
3G was designed as a voice network with good data. You make most of your money out of voice calls. They don’t make much money out of data. It is not because data is not used very much, but because per megabit of voice phone call, they make about 100 times more revenue from voice calls than they will make for data. This is because data is quite cheap based on network capacity. This is one of the reasons why the mobile operators they don’t really want data everywhere. Because if there’s data everywhere, most people will start using WhatsApp and Skype, they will stop using the voice networks, they will stop paying for voice calls. I see in Nigeria that in the next couple of years, maybe two or three years, no one is going to pay for calls, they’ll just be buying data bundles, that is what is happening in Europe now. In UK, I have 5 sim cards on one network, and they are all one account, and I have a 10 Gigabyte plan. I pay a certain amount for that and they are all shared. All the phone calls and sms are free, unlimited. But if you say that to MTN, they make about $200 million a month on phone calls, the last thing they want is all that to go to WhatsApp.
A 3G network takes data and voice and handles both. But you have to configure it as to how much capacity you have to configure for voice and how much capacity you have to configure for data. So you can be full on data, but still have space for voice. That is how 3G works. So, if you are making a 100 times more revenue from voice calls, you are going to make sure that it doesn’t get congested. But if you make just 1 percent on data, it doesn’t matter if it gets congested.
With 4G, its different. 4G is all about data. And actually using Voice Over 4G is a new thing. You see that some of our competitors have launched Voice-Over-LTE, that is actually special because LTE wasn’t designed for voice, it was designed for data. It is designed so that you can use any voice app you want on your data to do your voice call.
Some of the older technologies that happened between 3G and 4G, things like Wimax, they are all prejudiced to be called 4G. Because it is more that 3G, they called it 4G. But it is not actually really 4G, because the speed is not fast enough. So, that is why in Nigeria, the new operators that won the latest technology call 4G-LTE. It is actually a standard for what is proper 4G. And the idea is that there is a specification that says, this is what 4G-LTE should deliver, not today, but the plan is that it evolves over the next 10 years. So, the specification says you should be able to get 100 Mb per second speed when you are mobile, that is when you are moving; and you should be able to get 1Gb per second when you are static. This is the standard, but no one does it here. That is the plan. And when we upgrade and upgrade, that is where we should reach. So, you can imagine, there is nothing like 3G. with 3G, in my experience in Nigeria, is awful. Some places, when you speed-test you get a good speed, and you move down the road, there is nothing. This is because its 3G, you get signal here, and u get signal there. But with 4G is data everywhere, and its continuous data. The 4G spec that says that you should be able getting 100Mb speed when you are mobile, also says that if you are doing a 150 mile per hour on a high speed train, you should on 4G get 150 Mb per sec on your data. That is the standard, that is what they are aiming for. But currently, what you get with the 4G is probably from a few MB to about 40-50 MB. I have done a speed test while coming to work from Osborne Estate, I get 35-38 MB. Now that is better than what you might get for 3G, which is like 8 MB and 9 MB.
How do you cope with competition with GSM Operators ?
There are almost 100 million internet users in Nigeria. About 95 percent are using 3G. but there are a few of the operators that operate 4G, and we know that in time everyone will have 4G. we only operate 4G network, and we only provide data at Spectranet. We don’t do voice, we don’t do 2G or 3G.
When you are introducing a new technology like 4G, If you are a mobile operator you will tend to be careful. You don’t want to be disruptive because then you will damage your existing revenue stream; if you don’t have an existing revenue stream, you don’t care about that. That is why I am happy to say phone calls should be free, because I haven’t got any phone revenue.
When it comes to competition, we have a few 4G operators around and we have a small part of the market between us. There are a few cable operators cabling up communities and very small percentage of people got broadband and fibre, and that will be the case for a very long time in Nigeria. So, majority of the people on internet are on 3G. one of our biggest challenges is to get people to try out 4G. For a lot of people, their only experience of the internet is 3G. That is what they are used to. They are not used to watching Netflix on big TV screen on High Definition (HD). The quality of satellite TV is not as good as the HD. It changes your experience totally.
Data cost seem to a controversial issue, How do we address it?
The actual cost of data at the moment is too low. The problem is that the GSM operators have been competing on price for data, and they are taking the data way down below the cost of provision. And they are complaining that Whatsapp shouldn’t be allowed because it is eating into their voice revenue. That is because they are charging too low for data. And the problem is that when the data charge is too low, no one is going to invest in rolling out more network for data.
What we are talking about is affordability, maybe it is too high for the people to afford. That is different from how much does it cost me to deliver it in the first place.
Spectranet is probably the lowest cost operator in terms of delivering data to people in their homes and we try to reflect that in the pricing as well. The mobile operators have huge revenue stream from voice. So they can supply data cheap at a loss so they can win voice customers and make money out of voice revenue. So, what they are doing is that they are charging more for the voice calls to make up for data. NCC is going to regulate this. They have announced that they are going to regulate the price of data, so that people are not unfairly competing. You shouldn’t be allowed to sell below cost, that is anti-competitive. But Spectranet will not do an upwards review.
The different between customers on 3G network and customers on Spectranet is that our customers use a lot of data. If you don’t use much data, maybe do your email and occasional browsing, use your phone. Maybe you use a few hundred megabits , or at most 1Gb a month. But our average customer uses 25Gb a month. And the modem can be shared with the whole family. The 3G is quite expensive for data, and it is not that fast. We are a Broadband company and our customers are much more heavier users than your average internet user.
Are we on track regarding Federal Government’s 30% Broadband penetration target?
I think we are moving in the right direction. Things slowed down a bit, but now we seem to have caught up a little bit. The biggest problem at the moment is that of roll out. To get that penetration up, you have to roll out broadband to new areas. At the moment just some of the main cities have broadband. But you have to roll out in all the cities, and you have to roll out to other areas as well before you can achieve that target.
The challenge is that very few network operators can get hold of the equipment. You can’t import it because of lack of dollars and because of lack of funding. In the past, you can go to an equipment supply and you buy a whole chunk of network equipment, they will deliver it and you will pay in two years’ time or on your payment schedule. It doesn’t work in Nigeria anymore. You can’t pay over a period of five years financing scheme, the banks can’t do it unless you have a Letter of Credit (LC). If I want to buy equipment in dollars, I have to open an LC and give it to the supplier. But the bank won’t open an LC unless I give them a million dollars cash. So what’s the use? So that makes it extremely difficult to import equipment. And if you can’t import equipment, you can’t roll out to new areas. So as I mentioned earlier, we managed to get Port Harcourt done this year. All the other base stations we have we are saving for capacity because as out business grows in existing cities we need to put up more capacities so that it won’t get congested.
In spectrum allocation, Is revenue sharing a good option?
Lots of countries do that. NCC chooses to do spectrum allocation by public open auction. This is because they seriously want to make sure that there is transparency. My comment is that it is well and good. But if you are going to allocate limited resources like spectrum through an auction, it is going to go to the people with the deepest pockets, and so the smaller players can’t afford to play. In many markets, the government is more interested in getting partners that will roll out, and so rather than pay upfront, they say they need $50 million for licence,, so they give you licence for free or for a very small amount, and in return, as your business grows, you give a percentage of your revenue to government. So, you pay as you grow, rather than pay upfront. It happens all over the world. It could be 3 percent or 4 percent. And it is for the lifespan of the licence. Government makes more money than they would have made if they sold the licence. The only challenge in Nigeria is transparency.
What is Spectranet’s target for 2017?
We have five awards this year. They are recognitions of what we are trying to do. We do have a very tight target market, that is families and small and medium enterprises. There is a big overlap between the two because a lot of the families that we service also have small and medium-sized businesses. So we are very clear as to what our target market is. We have a lot of youths on our network, we have corporates on our network, we have business people and professionals on our network. And that is fine, they use our network, but our target is families, and small and medium enterprises. They people we speak with, they like the service, they are happy with it. They tell their friends. And one of the market differences here is that there is a lot of word of mouth. In any market you are in, when people like your service, they tell their friends, and that is the best adverts you can get, because it is recommendation.
Maybe next year we will get some more of that. The economy is in a particular condition and we are not trying to survive, we are trying to grow. Through this period we are trying to grow and come out a much stronger business. I think in the telecommunication industry, there is going to be a number of companies that don’t exist next year, because times are hard. If they haven’t been looking out for their customers or don’t have the right revenues, they are not going to be here. But we expect to pick up all that business, and more, and grow our market. And we get to new areas, and come out stronger. And if you don’t think that as a business, you shouldn’t be doing it, you should just go.
About David Venn
I have personally been in the telecommunications industry for a very long time, for about 35 years. I left school and joined British Telecom as an engineer. And I have lived and worked all over the world as telecommunication industry has developed I developed and grown with it. I have worked in a lot of markets, including Asia, and a lot of markets in Africa. I was in Zambia for seven years, Ghana for two years, as well as America for five years and Middle East and Asia. I Have world in almost all continents. And as I did that, technology is developed. And here I am now in Nigeria with the latest technology in 4G. I have been here two years. I was brought in by the shareholders to take the company to the next level. It was already doing quite well, though it was smaller and little known two years ago. If you cast your mind back to previous government days, not many had heard or known of Spetranet, but now everybody know of what we do. It is a brand that has come up in the last two years. That is one of the changes we have made here in two years.to push the brand forward and make sure we serve as many customers as possible.
Spectranet is a product company. We provide good quality, at-the-right-price broadband company. We are not a mobile phone company, we don’t offer phone and voice services, we offer data and internet services, and basic broadband. And it is really targeted at the home and offices. We are not talking about the big corporations; we are talking about people’s homes who want broadband services for their families, and also the small and medium sized enterprises. That is our market, that is what we do. We give good quality broadband service. We do that in Abuja, in Lagos, In Ibadan and Port Harcourt at the moment we managed to launch in Port Harcourt early this year before the crisis hit in terms of economy. We managed to get the equipment in and do that. So we have four cities.
Our main market is Nigerian families that want to have broadband in their homes, with WiFi for the whole family to use. And not just to use it for browsing, they use it for entertainment, for TV, YouTube, for Netflix; but also for email, for gaming, for YouTube, for Skype and every other thing the family will use it for. So, what we provide is Modem, put it in your house, scan it to 4G and it picks up our signal. That is the main thing we offer.
We don’t really go for mobility, but we do have a lot of MiFi devices as pocket modems, you can take them with you, so you have data with you everywhere you go. It comes with a 12-hour battery. If I’m watching Netflix at home and the power goes off, and I have got UPS for my TV, nothing changes. So, the light goes out, I’m still watching my Netflix. You can put that in your car and you’ve got broadband in your car.
It’s changing a lot of things. A lot of people now watch video, entertainment via internet streaming, much more than they used to. Two years ago, if someone sent you a Facebook message with a video with it, you delete it straightaway, because you don’t want it to consume your data bundle. But now it starts playing automatically, and people watch it. People now watch more videos, and YouTube. You get a lot more content. And that’s a major change in the past two years in Nigeria.