EVALUATING THE IMPACT OF GSM OPERATING COMPANIES ON NIGERIAN ECONOMY

ABSTRACT

The dissertation is on evaluating the impact of GSM operating companies on Nigerian economy. The objectives of the study were: to ascertain the impact of GSM operating companies on Nigerian economy; to determine the impact of GSM technology on the people of Nigeria; to identify the challenges faced by GSM operating companies in Nigeria. The study used both primary and secondary sources of data. A total of 300 copies of questionnaire were administered and 285 were received and analyzed. The statistical tools for data analyses include tables, percentages, and chi-square. The findings indicate that the advent of GSM companies facilitate economic development, increase GDP and attract foreign direct investment (FDI); the introduction of GSM technology enhances business operation, quality of life and offer employment opportunities to Nigerians; Inadequate power supply; transmission infrastructural problems; vandalization of network installations; lack of good access road network; etc, are some of the challenges facing GSM operating companies in Nigeria. The study concludes that; the deregulation of the Nigerian telecommunication sector, hence, the introduction of GSM technology has made very significant positive impact on the economic situations of Nigeria. The study from its findings recommends that: the government should expand tele-density and directly make telephone communications cheaper and accessible by giving more licenses to GSM operators in order to allow for healthy competition among the GSM operators; there is need for the Federal government to provide the necessary economic infrastructures (particularly power supply) to the GSM operators in order for them to deliver efficient services and to be able to reduce their call charges; and government should encourage local manufacture of GSM operating equipments and components, and above all, strengthen the security apparatus of the country so as to protect GSM installations from vandalization by the men of the underworld.

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.

The summary is that the telecommunications sector has, in respect of tele-density exceeded its targets under NEEDS. This is essentially due to the advent of GSM companies in 2001 which has resulted in a dramatic increase in the total number of lines from just 866,782 in 1999, to over

60million in year 2008, out of which GSM operators accounted for 57,622,901 lines, while fixed line  operators  accounted  for  2,537,504  code  division  multiple  access,  CDMA,  operators connected 780,938 lines (Ndukwe, 2008).

Finally, from the foregoing, it is pertinent to note that this recent drive in telecomm reform policy initiatives has made noticeable impacts on the Nigerian economy. It is however instructive to investigate the extent and the magnitude of the impacts on the Nigerian economy. Indeed, this forms the background of the study.

1.1  STATEMENT OF THE PROBLEM

It is a well known fact that before the advent of GSM in Nigeria, the telecommunications industry in Nigeria was nothing to write home about. Obviously, in the words of (Adegboyega,

2008), the journey to success in Nigeria telecommunications sector has been long and tortuous. Telecommunications facilities in Nigeria were first established in 1886 by the colonial administration. At independence in 1960, with a population of roughly 45 million people, the country only had about  18,724 phone lines. This translated into a tele-density of about 0.5 telephone line per 1,000 people (Magneto, 1998). He however asserted that in those early days, services were primitive as the coordinated pegboard switching system was used.

According to Ndukwe (2000), the commercialization of the then P & T, gave birth to NITEL in 1985. He however noted that though the network growth rate improved following the birth of NITEL, the rate was however too small to compensate for the rate of population growth, and hence did not reflect the improved wealth of the nation. Ndukwe stressed that the Nigerian

Telecommunications Limited (NITEL), the only national monopoly operator in the sector, was synonymous with epileptic services and bad management which made the quality of telephone services then to be unreliable, congested, and expensive, customer unfriendly and generally unsatisfactory.

More so, this period was dominated by chaotic, hopeless and frustrating circumstances. As the Network was bad, there was weak transmission infrastructural base,  inadequate power supply, huge unmet demand, concentration of lines in selected urban centers, vandalization of equipments belonging to NITEL which caused long term break- down in communications, slow growth of subscriber base as well as limited investment”.

Prior to this, Nigeria had maintained an unenviable record as the world’s third lowest in terms tele-density, after Mongolia and Afghanistan, with a Tele-density of 0.73% before 1999 (OKereocha, 2008).

Thus, the study focuses on evaluating the impact of GSM operating companies on Nigerian economy.

1.2: OBJECTIVES OF THE STUDY.

The specific objectives of the study include the following:

1. To ascertain the impact of GSM operating companies on Nigerian economy.

2. To determine the impact of GSM technology on the people of Nigeria.

3. To identify the challenges faced by GSM operating companies in Nigeria.

1.3  RESEARCH QUESTIONS

The research questions for the study are as follows:

          What is the impact of GSM operating companies on Nigerian economy?

          What is the impact of GSM technology on the people of Nigeria?

          What are the challenges facing GSM operating companies in Nigeria?

1.4  RESEARCH HYPOTHESES

Based on the objectives of the study, the following hypotheses were formulated.

1. HO: GSM companies do not facilitate economic development, increase GDP and attract foreign direct investment in Nigeria.

H1: GSM companies facilitate economic development, increase GDP and attract foreign direct investment.

2. HO: The introduction of GSM technology does not enhance business operation, quality of life and offer employment opportunities to Nigerians.

H1: the introduction of GSM technology enhances business operation, quality of life and offer employment opportunities to Nigerians.

3. HO: Inadequate power supply; transmission infrastructural problems; vandalization of network installations; lack of good access road network; etc, are not the challenges facing GSM operating companies in Nigeria.

H1: Inadequate power supply; transmission infrastructural problems; vandalization of network installations; lack of good access road network; etc, are some of the challenges facing GSM operating companies in Nigeria.

1.5: SCOPE OF THE STUDY.

The study is evaluating the impact of GSM operating companies on Nigerian economy. It focuses mainly on GSM operating companies and job creation in Nigeria; GSM companies and GDP in Nigeria; GSM companies and Foreign Direct   Investment (FDI) in Nigeria; impact of GSM  technology on  the  people  of Nigeria;  and  the  challenges  faced  by  GSM  operating companies in Nigeria.

However, the research was conducted using three selected GSM operating companies in Enugu. They include; Mtn Nigeria Communications Ltd, Globacom Nigeria Ltd, and Airtel Nigeria Ltd.

1.6: LIMITATIONS OF THE STUDY

The following are the limitations encountered by the researcher in the course of this work. They are:

1. Time Constraint: the researcher was quite constrained by the limited time available for the completion of the study.

2. Attitude of the Respondents: actually, some of the respondents especially those in the rural communities were reluctant at co-operating with the researcher because they felt there was nothing to benefit from the study.

3.  Finance: an empirical research of this  nature demands  much money for  its successful completion. Much money was required to cover transportation cost and materials used for the study.

1.7: SIGNIFICANCE OF THE STUDY

This study will certainly be of immense benefit to every sector of the economy. For instance, the study highlights the contributions of GSM technology to GDP and to the people of Nigeria. More so, future researchers will also benefit from the study.

Finally, it will also serve as an eye opener for the government to know the areas that the

GSM companies need government intervention in order to sustain their operations in Nigeria.

1.8: OPERATIONAL DEFINITION OF TERMS.

GSM: Global System for Mobile Communications. It is the world’s most widely used cell phone technology.

Subscribers: the users of GSM network.

NICI Policy: National Information and Communications Infrastructure policy. It is the federal government policy document that stipulates the government commitment at developing ICT infrastructure in Nigeria.

GSM Operators: are the GSM network providers.

BTS: Base Transmission Station. This is the reception antenna mast that disseminates GSM

networks to the subscribers.

SIM Card: Subscriber Identity Module. It is a detachable smart card that contains the user’s subscription information and phone book.

NCC: Nigerian Communications Commission, regulator of the industryTele-Density: The ratio of number of serviceable telephone lines to number of population of a given location or country.

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