Listing MTC before reforms is a big mistake
By Robert Gatonye
Legal and industry reforms that will truly level the playing field in the telecommunications industry and also attract investments especially in the ICT infrastructure are needed before privatisation of MTC. These reforms must instigate a disruption in the industry with the impact of ‘Telcos’ (telecommunication operators) competing only on service delivery and products, and not on infrastructure or footprint.
After spending more than eight years in the Telco industry my observation is; bragging rights are currently earned by infrastructure dominance and not on the quality of services and products offered. To put it in context, MTC currently owns over 800 towers and plans to build another 500 more in the next five years giving a total of over 1 300 towers. The next big operator, Telecom Namibia and its subsidiary PowerCom own and control about 400 towers. Pumping 3 billion now in MTC will most definitely kill off competition and widen the digital divide.
As you drive to the coast a few kilometres from Usakos on the left-hand side you will see two conspicuous towers barely 20 metres apart, a blue one, owned by MTC and a red one, owned by PowerCom. This is the epitome of buffoonery for lack of a better word.
Nonetheless, if only one tower was built there and shared by the operators while the second one is built somewhere else with no coverage, it will be more beneficial to the consumers.
I am a strong proponent of infrastructure sharing, a position shared by the Communications Regulatory Authority of Namibia (CRAN). In pursuit of its noble mandate, CRAN did an industry study whose results were published in gazette No. 192CRAN: Report on the outcomes of the Infrastructure Sharing Study by the Authority (2014).
Significantly, the report defined communications infrastructure as “bottleneck facilities” or “essential facilities” that are enablers of education, healthcare, business, etc. Further, the report was forthright, “…dominant operators become an obstacle to the development of new infrastructure and the expansionof competition and market growth”.
Among other several conclusions from the report, “bottleneck facilities” ought to be shared and an infrastructure strategy including a framework for infrastructure sharing agreements be formulated. I could not establish where these developments are at this point in time.
According to Jochen Traut, a former colleague of mine at LEO now TN Mobile, and the current Chief Operations Officer (COO) at CRAN, infrastructure sharing will lead to, “…reduction in capital and operational investment requirements for infrastructure investments, lowering environmental impact and energy requirements, creation of a new revenue stream, the release of capital for strategic investments and new services and decreased barriers to market entry for new players”.
The reality is, 3G coverage is barely one third of the country, 4G is enjoyed by less than 30 percentof residents in urban areas mainly Windhoek and the coast, and 5G is likely to see even a lower percentage of uptake in urban areas. This is why I posit a widening digital gap.
The industry must be disrupted big time otherwise ‘digital segregation’ is coming. At least two things must happen. First is levelling the infrastructure playing field and, second, a paradigm shift where operators channel their funds into telco equipment or the active infrastructurewhile sharing the passive infrastructure.
Championing this kind of a disruption is not going to be for the faint-hearted. The biggest huddle will be the legal reforms to create a conducive environment, morespecifically, laws around real estate and investment.
In my opinion, Telcos must not own the passive infrastructure. In other words, to objectively share the infrastructure by all Telcos in Namibia, it should be owned and managed by an entity not offering telecommunication services, nor its parent company. Imagine if every transport company in Namibia had to build its road network to pretty much the same destinations, it would be very messy and costly.
The trend in Europe, the USA, Asia, and recently West Africa is for telecommunication towers to be owned and managed by real estate companies referred to as ‘Towercos’ or ‘Infracos’.
To tap into private funding, special investment vehicles are used. These vehicles are Real Estate Investment Trusts or REITs. A REIT is a mutual fund that focuses on investment in properties and real estate and derives income from such investments for its unitholders. Unlike other equity companies, REITs are required to distribute at least 90 percent of their taxable income to shareholders annually in the form of dividends making them a very attractive investment to diversify a portfolio.
Sadly our current laws do not make provision for REITs. Africa as a whole presently has “relatively undeveloped” listed public REIT markets, says Bronwyn Corbett CEO of Grit Real Estate, the largest pan-African focused real estate group listed on the Johannesburg Stock Exchange and the Stock Exchange of Mauritius.
I conclude by saying what Lakshmi Mittal said of the steel industry in 2006 when Mittal Steel and Arcelor merged to create the industrial giant ArcelorMittal; public listing of MTC should not be about creating a giant but actualising the developmental aspirations enshrined in Vision 2030.
* Robert Gatonye is a doctoral student (finance) at the Namibia Business School (NBS) with an interest in Real Estate Investment Trusts.