Telecoms firms spend N730bn to generate electricity

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The increase in electricity tariffs, high cost of diesel and the rising number of base stations is expected to make telecoms’ firms energy cost to rise by at least 35 per cent, OZIOMA UBABUKOH writes

The amount of money that telecommunications companies spend to power their Base Transceiver Stations nationwide will rise from N540bn in 2014 to at least N730bn when their operating results for 2015 are released in the coming weeks, it has been learnt.

Top industry executives working on an industry data, which is expected to be released before the end of the second quarter of this year, said the amount that the telecoms firms spent on buying diesel to power about 30,000 BTS across the country would rise by at least 35 per cent.

They linked the increase to the rise in electricity tariff, cost of diesel, and telcos’ expansion drive, leading to increase in the number of the BTS across the country.

From insights provided by the Executive Secretary, Association of Licensed Telecommunications Operators of Nigeria, Gbolahan Awonuga, the Global System for Mobile communications companies, LTE operators and Internet Service Providers remain the largest consumers of diesel in the country.

He said as of 2014, the firms were spending an estimated N175m daily or N45bn monthly on diesel for powering their BTS nationwide, amounting to N540bn at the end of the year.

Awonuga said, “This figure is bound to have risen by about 35 per cent in the year ended December 31, 2015, going by the expansion of base stations across the country and the fluctuation in the price of diesel, as well as the worsening power situation in the country.

“Operators in the sector have always relied on generators in an industry that does not tolerate recurrent downtimes, and the decision by the telecoms operators to outsource most of the sites to tower operators has not significantly reduced the cost of managing the sites.

“This is because the cost of managing the sites was passed to the service providers who in turn pass it down to telecoms consumers.”

The President, Association of Telecommunications Companies of Nigeria, Mr. Lanre Ajayi, stated that subscribers in the country were losing an average of N1tn annually to poor quality service.

“This could have been addressed if there was steady power supply from the mains so that telecoms operators could connect their networks directly to the national grid as it is done in other countries,” he said.

However, the Chief Executive Officer of Airtel Nigeria, Mr. Segun Ogunsanya, said the power cost of a site connected to the power grid was only about one sixth of those of a fuel-powered site, “but only about 10 to 15 per cent of the BTS are connected to the electric power grid.”

“Primarily, because of fuel costs, the average network cost in Nigeria is twice or thrice higher than the cost in a number of other African markets. The implications of such absence of reliable power infrastructure are far-reaching,” he stated.

There have been serious concerns over the state of electricity in the country. Consequently, companies have to generate their own electricity to power their systems.

For instance, in 2014, MTN Nigeria said it spent N30.5bn on the purchase of diesel. This amount, experts noted, could have been used to build another 5,000 BTS, which could have helped improve the quality of service and probably help to reduce call rates.

Should the Minister of Power, Works and Housing, Mr. Babatunde Fashola, fail to take urgent steps to address the issue, researchers have said that the rising energy cost is bound to affect the push for fourth generation (4G) technology by the telecoms companies.

A telecoms researcher and development expert, Mr. Ikenna Onyekanna, said, “There is bound to be knee jerk cost-cutting approaches that could push the expenditure of telecoms companies away from 4G transition.

“Secondly, it can cause a shift from infrastructure to the development of alternative sources, thereby delaying the transition. Finally, there is likelihood of divestment from the country in the long run.”

The External Relations Leader, Central and West Africa, IBM, Mr. Muyiwa Moyela, shared Onyekanna’s views, but stated that in the midst of the challenges, the transition to 4G would have been a lot easier had many Nigerian companies understood cloud computing.

Moyela said, “Investing in cloud computing cuts out the need for organisations to buy, maintain and configure technological hardware. It allows employees, critical stakeholders and service consumers to access information and services far more flexibly, independent of location and device.

“The benefits of cloud will be felt beyond the telecoms/Information Technology team and bottom lines will be transformed.”

Global research firm, Gartner, forecasts cloud to be a $250bn global market by 2017, as enterprises worldwide increasingly rely on cloud to market, sell, develop products and manage supply chains and more.

Onyekanna said that telecoms companies should be forward looking rather than see the present situation as an escape route to continue its poor service delivery.

According to him, many newspaper publishing outfits generate their electric energy through gas turbines, adding, “Notably, there is a beverage company that has never bothered connecting to the national grid in its many years of doing profitable business in Nigeria.

“One feature, which douses whatever complaints telecoms providers may have is that the Nigerian market is very huge. So, with proper planning and taking into consideration the country’s electricity supply hiccups, efficient service delivery could ensure profitability that would write off cost of incidental investment in power generation.”

He added, “A ready example is the Nigerian Brewery. In its Ama brewery at Enugu, the company generates its energy and posts astonishing net profits on a yearly basis. If MTN was able to spend N30.5bn on the purchase of diesel to power generators, what it needs is to think outside the box in searching for alternative energy sources to power its platforms.

“The firm can also borrow a leaf from Orange Telecoms in Israel, which has long dispensed with the idea of base stations. The missing side in MTN’s energy cost outlay is why it has not explored the possibility of solar energy to power its stations.”

A lecturer in communications, Dr. Dele Odunlami, did not buy the idea of telcos generating their own energy, saying that it was the duty of the government to provide the necessary infrastructure for organisations to operate.

He said, “But, when organisations, particularly privately-owned, have to invest in such infrastructure themselves, then it has become an abnormal situation.

“In the case of telecoms companies spending huge sums of money on diesel to power their electricity generators, the implication is that it will result in higher tariffs or other innovative means of recouping the expenditure.”

Findings from researches showed that the power infrastructure had been, for many years, a barrier to the country’s telecoms operators, especially in a country with about 25,000 to 30,000 base stations, and which needs about twice that number over the next 10 years.

MTN Nigeria had in the past four years rolled out over 6,700 2G sites and over 1,600 3G sites, bringing the total number of sites to over 7,000. It deployed the most extensive fibre optic (over 8,530km) and microwave infrastructure (Yello bahn 11,500km) in sub-Saharan Africa.

Its core network infrastructure has network nodes with hundreds of switch sites, Mobile Switching Centres, Transit Switching Centres, Home Location Registers, 131,797 TRUs, 26 Fixed network RDLUs and over 12,000 generators, supporting network operations across the country.

Currently, MTN has over 10,000 base stations and is as well the network with the largest subscribers, with over 63 million. It bears the brunt of the quality of services issues.

Analysis shows that smaller telecoms operators spend around N15bn to N18bn annually on diesel to power up their base stations. Such amounts account for about 60 per cent of the network costs.

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