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EVALUATING THE IMPACT OF GSM OPERATING COMPANIES ON NIGERIAN ECONOMY

Business Administration & Management Project Topics

CHAPTER ONE

1.0   BACKGROUND OF THE STUDY

The world is fast becoming a global village and a necessary tool for this process is communication, of which telecommunication is a key player. The quantum development in the telecommunications industry all over the world is very rapid as one innovation replaces another in a matter of weeks. A major breakthrough is the wireless telephone system, which comes in either fixed wireless lines or the global system for mobile communication (GSM) (Wojuade, 2005).

Without mincing words, communication is a major driver of any economy. Nigeria is not left out in the race for rapid developments, as the years of economic reversal via mismanagement have had adverse effects on its rate of growth and development. The Nigerian telecommunications sector was grossly under-developed before the sector was deregulated under the military regime in 1992 with the establishment of a regulatory body, the Nigerian Communication Commission (NCC). Since then, the NCC has issued various licenses to private telephone operators. These licenses allow private telephone operators (PTOS) to roll out both fixed wireless telephone lines and analogue mobile phones. The return of democracy in 1999 however paved the way for the granting of GSM licenses to three service providers, MTN, ECONET (which later changed to  VMOBILE and now AIRTEL), and NITEL plc in 2001; with GLOBACOM joining in 2003, and finally, ETISALAT which is the latest entrant in the industry in January 2007. In fact, this auction for Digital Mobile Licenses (DML) conducted by the commission- NCC, was acclaimed locally and internationally as one of the best in the world due to the high level of transparency associated with the exercise.

The development of GSM in the world was prompted by the need to provide seamless telecommunications through Europe. Back in the early 1980s, analogue mobile telephony was growing rapidly and operators find it increasingly difficult to interconnect the various networks in Europe. This was so because each implementation of the analogue service was fundamentally different, which made inter- working a serious challenge. To address this challenge, a study group

Called ‘Group Special Mobile’ (where GSM got its name) was formed and was tasked to provide a standardized system for mobile telephony. Out of this group (and seven years later), the GSM standard was realized. In January 1992, the first GSM network, OY Radioing AB in Finland went on air.

Today, GSM covers over 1.2 billion users on 630 networks in over 212 countries, and is the   fastest growing technology of all time. The initial release of GSM was called GSM Phase I, and it is commonly referred to as the first generation. This release made provision for the basic voice, SMS and circuit switched Date (CSD) services. CSD allow a maximum data rate of 9.6kbs and was capable of fax transmission as well. Supplementary services at that point were very basic consisting of call forward and called barring capabilities.

The second generation (GSM Phase 2) was released in 1995 and provided enhanced supplementary services, amongst which were calling line identity (CLI), all waiting and multiparty services. Data services however remained limited to 9.6kbs. GSM Phase 2+ was an enhancement to GSM Phase 2 and was released two years later in 1997. Realizing the need for enhanced data service, Phase 2+ address this requirement by making provision for high speed circuit switched data (HSCSD) and General Packet Radio Services (GPRS). HSCSD and GPRS allowed maximum data rates of 48kbs and 177kbs respectively.

In Nigeria, the National Economic Empowerment Development Strategy (NEEDS) highlights the nation’s socio-economic development aspiration. Specifically, it called for the reform of the public sector, enabling a robust private sector-led economy and the implementation of an effective social charter to reduce poverty, create wealth, generate employment and re-orientate national values. One obvious fundamental feature is that it clearly delineates responsibilities between government and the private sector. While government would provide the enabling business and regulatory environment, the private sector is to invest in and manage ventures that stimulate and support socio-economic development.

In the same vein, being aware of the catalytic role typically played by mobile telecommunications in socio-economic development in Africa, GSM companies in Nigeria have developed a Joint Economic Development (JED) framework to support the government in the actualization of its objectives as set out in NEEDS. JED outlines the positive multiplier effects of mobile telecommunications on virtually every sphere of endeavour in the society, previews further prospects targets, highlights challenges and proffer solutions to such challenges and assigns specific roles to government and operators for further optimization of the benefits of GSM services in Nigeria.

Basically, NEEDS target for the telecommunications sector include: i. Attainment of tele-density of 1:25 by the year 2007; ii. The development of a national communications backbone and multi-media super-corridor. Strategies identified for attaining these targets include the use of fiscal financial incentives to encourage investment, adoption of a local content policy in the manufacture of equipment, accessories and components as well as financial support for rural roll out and Internet access. Today, tele-density stands at about 65%. There is significant improvement in rural telephone access penetration from just one (NTEL’s) transmission backbone in 2001, to at least four other backbones have been constructed across the country today.

In Nigeria, there has been more expeditious roll out in rural areas covering over 50% government areas and at least 5,000 communities and villages. These developments informed the Nigeria’s present rating as the fastest growing telecommunications market in Africa.

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