CO-LOCATION, THE WAY TO GO IN NIGERIAN TELECOMS

By Valentine Anozia M.N.S.E.

24th Sept 2007

Abstract
The question being asked in the developed world is whether the developing countries like Nigeria can harness and sustain the telecommunications boom. The high cost of building telecoms infrastructure in view expansion and market entry remains a major concern in the industry in Nigeria. This paper examines co-location between operators as a solution to the problem.

Introduction
At the inception of the democratic dispensation in May 1999, Nigeria had a total of less than 850,000 telephone lines. Since then, the tempo of communication activities in Nigeria has increased considerably. The Telecom sub sector has been responsible for Nigeria’s newfound image. Regionally and internationally, Nigeria has gained admiration for the galloping growth in her telecom sector. Perhaps what has attracted the attention of the international investor community is the transparency of the process that gave rise to the growth in mobile telephony. The digital mobile phone operator license (GSM) auction of January 2001 in which winners emerged (and paid a princely ransom of $285,000,000.00 each), has been one investment which has been worth while to Nigeria’s economic growth. This signaled the seriousness of and importance with which the government considered the need to ensure rapid growth of the sector. It is now known that the Nigerian mobile sector is the fastest growing in Africa if not the world.

The growth in this sector is dramatic and the trend is aggressively on the upwards swing. With the improved performance in the communication sector in the last three years or so, there is a widespread optimism among participants in this sector of a brighter future for business outlook.  Current statistics on communication services appear to support the optimism expressed by the participants.  Statistics also show a continued pattern of significant rise in demand outstripping the capacity of the operators to expand their infrastructures. The cost of building Infrastructure remains ever so high and militates against the progress in the rollout of more capacity and coverage.

Problem Definition
The unrestricted incidences of Masts and Towers all over Nigeria is partly due to the failings of the National Operator Nitel to live up to its duties and responsibilities in the Telecommunications sub-sector in over 45 years of her existence. The situation has left players in the sub-sector to literally fend for themselves in everyway they can, building their own telecommunications infrastructure including the construction of Masts and Towers for signal relays, Repeaters and Cell Sites. 

Since Telecommunications infrastructure of whatever sort is capital intensive from a business point of view, it becomes more difficult for ICT, PTOs and GSM companies in Nigeria to operate profitably and making expansion plans towards meeting subscribers growth even more difficult.
 
There is also the constraint in getting approval from Local Government Authorities and State Governments in the laying of transmission links such as cables and fibre and building communication towers. As we all know, this is a limitation for most providers, big or small because of the financial commitment involved, adding that "Return On Investment - ROI is slow." after huge amount of money are spent on these infrastructure.

On the contrary, this is different in developed countries, where operators, new and old do not have to face the worries of building cost of communication infrastructure. Backbone telecommunication infrastructure and other communications facilities are mainly available and provided for sharing and  co-location of operators.
The cost of sharing facilities and co-locating is reasonable compared to the cost of building one’s own infrastructure hence a faster return on investment and an opportunity to focus more on core business of the companies which is providing telecoms services.

Solution
In order to meet the increased Communications infrastructures sites rollout demand, statutory requirements for infrastructure sharing and harness economic advantages derivable from co-location and sharing telecoms infrastructure, it is important for operators to explore the possibility of site infrastructure co-location with other telecom operators.

In general, co-location is moving or placing things together, and is used to mean the provision of space for a customer's telecommunications equipment on the service provider's premises. In the internet world  for example, a Web site or an ISP could place its network routers on the premises of the company offering switching services with other ISPs while in the GSM/Telephony world, Operator could decide to share facilities/sites for cost savings reasons. Collocation is sometimes provided by third party company that specializes in collocations.

Benefits of Co-location

•  Operators can derive savings on  Capex and Opex required for site infrastructure build allowing for more efficient utilisation of Capex to expand for coverage and capacity
•  Scarce capital and management attention can be diverted to key value-creating activities such as

1. Customer acquisition
2. Service quality
3. Operational and strategic excellence

• Provide solutions to problems on capital-constrained, high interest rate, high growth environments.
• Join in the worldwide trend among leading mobile operators of outsourcing Tower build and operation.
• No need for Operators to maintain in-house expertise to build, operate and service site infrastructure.
• Reduced cost to Operators under Towers/Equipment lease, on built in Capex costs and Opex costs resulting in increased operating margins.
• Addresses regulatory pressure to co-locate and admin costs to operators of managing the co-location process and activity.
• Increased entry speed for new companies.
• Reduced Environmental hazard caused by having so many sites.

There are two options available to operators for  co-location:

1. Operator to Operator agreements where an operator will offer one or more operators a space in his location to share some infrastructure.
2. Third party Service provider can provide a site and facilities, for example a Tower for one or more operators to mount their equipments like radios and antennas.

What can be shared through co-location?

1. Shelter Space
2. Tower or Mast Structures
3. Cable Ducts
4. Earthing Protection System
5. Lighting Protection System
6. Rack Space
7. Fence-wall or palisade fencing
8. Equipment Shelter Plinth
9. Transmission Link
10. AC power (public & private source)
11. Security Hut

Steps required towards co-location

1.  Identification of the technical requirements of co-location with a view to strategizing on meeting the requirements.
2.  Development criteria for achieving a fair, effective and balanced site co-location evaluation and implementation arrangement with other operators.
3.  Development of Operator’s policy for co-location and provision of framework for accommodating statutory guidelines within the operator’s policy document. 
4.  Provision of basic information to Operator’s management to enhance management decision making on proposed infrastructure sharing with a view to harnessing economic advantages derivable from the project

Conclusion:

The time has come for the telecom companies in Nigeria to stop playing the number game of how much infrastructure and sites they own and start looking at ways like co-locating and have agreed shared infrastructure with other operators. Operators should start focusing on network expansion, and increasing coverage using the most economic and efficient means possible to promote rapid growth in the industry and reduce the environmental hazards and other disadvantages caused by having so many individual communications infrastructure.

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