VZCZCXRO6055
RR RUEHMA RUEHPA
DE RUEHOS #0111/01 0700753
ZNR UUUUU ZZH
R 110753Z MAR 09
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 0575
INFO RUEHUJA/AMEMBASSY ABUJA 0192
RUEHOR/AMEMBASSY GABORONE 0060
RUEHZK/ECOWAS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAWJA/DEPT OF JUSTICE WASHDC

UNCLAS SECTION 01 OF 02 LAGOS 000111 
 
SENSITIVE 
SIPDIS 
 
FOR GABORONE PASS PDROUIN 
STATE PASS USAID FOR NFREEMAN, GBERTOLIN 
STATE PASS EXIM FOR JRICHTER, KJACKSON 
STATE PASS OPIC FOR ZHAN, MSTUCKART, JEDWARDS 
STATE PASS TDA FOR LFITTS, PMARIN 
DOC FOR 3317/ITA/OA/KBURRESS 
DOC FOR 3310/USFC/OIO/ANESA/DHARRIS 
DOC FOR USPTO-PAUL SALMON 
TREASURY FOR RHALL, DPETERS 
 
E.O. 12958: N/A 
TAGS: ECON ECPS EFIN NI
 
SUBJECT: NIGERIA: TELECOM SECTOR TO WEATHER FINANCIAL STORM IN 2009 
 
¶1. (SBU) Summary: Nigeria logs approximately 55 million active GSM 
lines as of first quarter 2009, up by 13 million new lines from 
¶2008. Local mobile operators are cash-strapped given the global 
credit crunch and are seeking financing and alternative payment 
schemes from suppliers.  Quality in services has suffered due to 
operators' inability to find funds for new equipment purchases. 
Chinese suppliers are upping the competition by providing support to 
local operators and vendors. Despite difficult conditions in the 
financial market and economic environment, the telecom sector will 
continue to grow in 2009 given Nigeria's high and inelastic demand 
for mobile telephone services. End Summary. 
 
Nigeria Logs 55 Million GSM Users 
--------------------------------- 
 
¶2. (U) Raphael Udeogu, Country Manager, Motorola, told EconOff March 
3 that there are about 55 million active GSM lines in Nigeria, up 
from 42.5 million in April 2008.  He estimated about one million new 
GSM lines were added every month in 2008.  Udeogu believes Nigeria 
will log around 80 million GSM lines before the market reaches 
saturation point; this will happen within two years. However, Udeogu 
noted that currently about 50 percent of the total GSM line services 
are double-counted. (Note: Due to the poor quality of services, it 
is common for many users to have multiple phone lines with various 
operators. End note) Udeogu argued that the double, if not multiple 
subscriptions, by each user should not negate the sector's 
tremendous growth achievement because the average holding time for 
each service line is still very high, making each subscription line 
valid. In April 2008, the Nigerian Communication Commission (NCC) 
announced that Nigeria had invested USD 11.5 billion in the 
telecommunication sector.  Expansion of network, decreasing tariffs 
due to growing consumer volume, and a widening of access to 
lower-income customer base all contributed to the sector's 
exponential growth in 2008, Udeogu added. 
 
Local Mobile Operators Cash-Strapped, Seek 
Alternative Financing and Payment Schemes 
------------------------------------------ 
 
¶3. (SBU) Given the global credit crunch and depreciation of the 
Naira, local operators are finding it extremely difficult to borrow 
money from commercial banks to purchase new equipments and expand 
their operations, Udeogu said. Operators are now asking suppliers 
such as Motorola for vendor financing and for deferred or extended 
payment plans.  According to Udeogu, the market is still too risky 
for vendor financing; as a result, Motorola can only consider 
financing for older operators such as MTN or Zain. 
 
Quality in Services Suffers from Credit Crunch 
--------------------------------------------- - 
 
¶4. (SBU) Quality in GSM services has declined dramatically in the 
first quarter of 2009 because local operators, while unable to find 
funds to purchase new equipments, continue to add new subscribers to 
their networks, Udeogu intimated.  The rate of growth in terms of 
equipment expansion has not been commensurate with the rate of new 
subscriber addition.  Moreover, Udeogu noted that the Nigerian 
Communication Commission has relaxed its enforcement on the quality 
of services in the past year.  Telecommunication operators have 
focused on building subscriber traffic in the past seven years, he 
contended, and that trend will persist in the near term future. 
 
Telecom to Continue Growth in 
2009 Despite Economic Downturn 
------------------------------ 
 
¶5. (U) Despite the financial crisis and economic downturn, Udeogu 
strongly believes that the high, inelastic demand for mobile 
telephone services and Nigeria's cash-based economy will allow the 
telecom sector to grow in 2009, albeit at a lower rate than those in 
the previous years. (Note: Fixed line service is extremely 
unreliable due to dilapidating infrastructure, making mobile phones 
the only realistic option for communication. End note) In the fourth 
quarter of 2008 and first quarter of 2009, mobile operators were 
still adding subscribers.  The market is 20 million subscribers 
 
LAGOS 00000111  002 OF 002 
 
 
below saturation point: even if operators were to increase tariffs 
on GSM services to offset the weakening exchange rate and boost 
their revenue, consumer demand would not decline, Udeogu projected. 
Moreover, Nigeria's cash-based economy means money is circulating 
outside the financial system, and mobile users will continue their 
subscriptions by buying phone and recharge cards on the street. For 
Nigerian GSM subscribers, the key is accessibility and quality, not 
price, Udeogu emphasized. 
 
Chinese Suppliers Upping the Competition 
---------------------------------------- 
 
¶6. (SBU) Chinese telecom suppliers are becoming more competitive in 
the market, Udeogu said.  The technologies of their telecom products 
are getting better, and Chinese suppliers are able to provide a lot 
of support to local operators and vendors in these economic hard 
times.  Udeogu believes Chinese suppliers have more money to "buy 
the market" because they are not public companies and, hence, are 
not accountable to shareholders. 
 
¶7. (SBU) Comment: Rates of new GSM subscription in Nigeria have 
grown exponentially over the last few years as fixed line 
telecommunication continues to deteriorate.  The telecommunication 
sector will weather the financial storm due to high unmet demand. 
However, more investment in telecom infrastructure, particularly in 
fixed land line, and in rolling telecommunication out to the rural 
areas remains critical to Nigeria's overall development. End 
Comment 
 
¶8. (U) This cable has been cleared with Embassy Abuja. 
 
BLAIR