US embassy cable - 04LAGOS1632

UNCLAS SECTION 01 OF 02 LAGOS 001632 
 
SIPDIS 
 
STATE PLEASE PASS TO FCC, EX-IM, AND OPIC 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, NI 
SUBJECT: NIGERIA: MORE OPTIONS FOR NIGERIAN TELECOMS 
SUBSCRIBERS 
 
 
1. (U) Summary: Two Nigerian telecoms companies (MTS 
First Wireless and Oduatel) will begin services this 
month. MTS expects to attract many customers due to its 
unique area code numbering system and its innovative 24- 
hour, zero dial-up internet service. Oduatel expects to 
carve a unique niche by developing a presence in 
Nigeria's remote villages now shunned by other private 
telecoms operators.  End summary. 
 
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MTS First Wireless Rolls Out 
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2. (U) MTS First Wireless, Nigeria's third national 
long distance carrier, plans to roll out its CDMA 2000 
IX phone network in Lagos, August 9. The company 
launched its long distance operations (LDO) service in 
May and is targeting 250,000 subscribers in Lagos, 
Abuja, and Port Harcourt in the upcoming rollout. 
 
3. (U) MTS, also one of Nigeria's first mobile 
telephone companies, will establish both a wireless 
phone network and an integrated internet service 
network. Richmond Aggrey, the company's chief 
executive, is enthusiastic about its prospects in 
Nigeria's booming telecoms market. Encouraged by a 
license that allows MTS to operate both fixed wireless 
and mobile telephones, the company expects much 
patronage, given its unique area code numbering system. 
According to Aggrey, MTS numbers will enable 
subscribers within a particular geographical zone to 
travel anywhere in that zone without having to 
reprogram their phones. (Note: there are six zones in 
Nigeria, MTS is licensed in three. End note.)  This is 
not possible on the networks of Nigeria's other major 
fixed wireless phone service providers whose 
subscribers are restricted to major city centers like 
Lagos, Port Harcourt and Abuja. 
 
4. (U) Reuben Mouka, Head of MTS Corporate Affairs, 
said the company's rollout will cover Victoria Island, 
Ikoyi, Isolo, Festac, Apapa and Surulere, the main 
districts in Lagos. He added that these locations were 
used for the company's test run.  During the test 
period, MTS subscribers benefited from free calls 
within the MTS network, while calls to non-MTS GSM 
numbers were charged N24.50k ($0.18). These rates will 
be in effect until further notice. 
 
5. (U) Comment: The Nigerian telecoms market is large 
and profitable.   MTS will likely acquire a significant 
share of this market. Providing 24-hour internet 
service to subscribers at a flat rate of N4,000 to 
N7,000 ($30 - $53) will be an important part of MTS's 
marketing strategy. Currently, the other operators 
provide this service on a per hour basis and dial-up 
fees range from N4,500 to N25,000 ($34 - $188) for 30 
to 60 hours during on or off peak periods. End comment. 
 
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Oduatel Also Rolls Out, Interconnects With Major PTOs 
--------------------------------------------- -------- 
 
6. (U) Following its recent signing of a $20 million 
loan agreement with U.S. EXIM Bank, Odu'a 
Telecommunications Limited (Oduatel) has concluded 
plans to interconnect with major private telecoms 
operators (PTOs) in Lagos. Odu'a anticipates a full 
rollout in September. 
 
7. (U) The company's delay connecting to key telecoms 
operators like MTN, VMobile, Multilinks and Starcomms 
in Lagos had held back Oduatel's operations in the five 
southwestern Nigerian states in which it has a license 
to operate, according to Segun Owolabi, Oduatel's 
General Manager (Oduatel is wholly owned by these five 
southwestern states - Ogun, Osun, Ondo, Oyo and Ekiti). 
Oduatel earlier had tried interconnecting with the 
GON's Nigerian Telecommunications Limited (NITEL), but 
was disappointed since its subscribers were unable to 
connect to the NITEL network. Oduatel's new strategy 
calls for it to interconnect with each of the other 
PTOs in Lagos from its new base station at Ota in Ogun 
state. 
 
8. (U) Oduatel has 13 base stations across the five 
states, including Ibadan (4), Ekiti (2), Ota, and 
Agbara.  (The last two are close to Lagos and have one 
base station each). With its interconnectivity problem 
resolved, Oduatel expects to become the major telecoms 
provider in the remote southwestern villages that the 
Lagos-based wireless PTOs cannot reach. Owolabi is 
confident that Oduatel's subscription will grow 
rapidly.  He claims state government offices have 
indicated their willingness to join to the Oduatel 
network. At present, its subscriber-base is growing 
partly because of its recent interconnection with MTN, 
which spent about N75 million ($563,910) to ensure that 
its subscribers can call Oduatel's network, he said. 
9. (U) Like most PTOs, Oduatel will rely heavily on the 
prepaid system of payment, using scratch cards. 
Oduatel's Owolabi said that because of the dominance of 
the government sector in Oduatel's operations area, 
calls from telephones in government offices would be 
prepaid to forestall default. Oduatel may consider 
corporate customers like banks for post-paid services. 
 
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Grapples With Prejudiced Ownership Structure 
-------------------------------------------- 
 
10 (U) Despite Oduatel's optimism, some of its telecoms 
customers are skeptical about its long-term success. 
Now wholly government owned, Oduatel was separated from 
its parent company, Odu'a Investment Holdings, 
effective July 1, and is seeking new investors, local 
or international. Odu'a Investment plans to sell at 
least 70 percent of its shares in the company, 
according to Owolabi.  Swedtel of Sweden and a Chinese 
company have expressed interest in Oduatel. Owolabi 
said Oduatel may seek to raise funds in the capital 
market in 2005, after at least six months of actually 
operating. 
 
11 (U) Comment: A recent press report of a change in 
the Odu'a management team, underscored the need for the 
state governments to "privatize" the company. The owner- 
states' governors had sacked the Chairman and the Group 
Managing Director of Odu'a Investment and Oduatel. 
Owolabi explained to Econoff and Econspec that the 
former state governors (from a different party than the 
current governors in the states) had appointed the 
executives. Though both executives have since left the 
organization, their replacements (usually political 
appointees) have yet to be appointed. End Comment. 
 
BROWNE