Nigeria - Will it ever become Africa's largest telecom market?
Nick Mackenzie and Isabelle Paradis
January 2007
More info in our Nigeria report >>

Nigeria 's total number of fixed lines increased from 473,316 in 1999 to 1.5 million at the end of June 2006, entirely as a result of the introduction of private telecom operators (PTOs). The growth of lines operated by PTOs led to a dramatic increase in the level of fixed penetration from 0.4% in 2000 to 1.1% in 2Q 2006. The NCC (Nigerian telecom regulator) reports that the total number of fixed lines has increased consistently by 3-4% every month in 2006.

Despite the rapid increase in fixed line connections, there remain considerable opportunities in the Nigerian market, and there are signs that the incumbent operator and its competitors are only just beginning to connect potential subscribers. The NCC estimates that the total addressable market is 25-30 million households requiring telephone service.

With the recent privatisation of NITEL and probable improvement in network expansion, we forecast that the number of fixed lines will grow at an average rate of 23.6% over the next 5 years to reach 3.4 million at the end of 2010. Even with such a grow rate, fixed penetration would only stand at 2.2% at the end of the forecasted period.

NITEL was finally privatised in August 2006, when the Transnational Corporation of Nigeria plc (Transcorp) paid N63 billion (US$500 million) for a 51% stake in the incumbent operator. It also has a possible option of acquiring an additional 24% of Nitel's shares for an additional US$275 million. Transcorp is a Nigerian investment company, claiming 4,000 domestic corporate and personal investors, and owns the Abuja Hilton.

Transcorp announced that BT would act as technical partner and that Transcorp would invest an additional US$1 billion in NITEL's network in the next two years. Transcorp carried-out an N60 billion IPO on December 28, 2006 .

In the mobile sector, the total number of lines increased from 35,000 in 1999, when the only operator was NITEL's subsidiary M-Tel, to 22.6 million in 2Q 2006, with four active network operators and a range of resellers. The total number of mobile subscribers effectively doubled every year from 2002 to 2005. This is largely a manifestation of the poor fixed line coverage and high cost of fixed line connections, as subscribers see mobile telephones as easier to acquire and more reliable than fixed services.

Nigeria 's Internet market continues to be plagued by low fixed line and PC penetration (0.7%), poor network quality and roll-out, high connection cost and a high level of poverty, all factors which curb Internet expansion. This situation is however set to change as new wholesale Internet access providers enter the market.

At the end of 2Q 2006, there were an estimated 938,000 Internet subscribers and 5.6 million Internet users in Nigeria , translating into a mere 0.7% penetration rate. The number of Internet subscribers is forecasted to grow by an average of 28.8% over the next 5 years to reach 2.6 million and a 1.7% penetration. The number of Internet users is on the other hand expected to have reached 15.7 million.

Broadband services, which were launched as late as 2005, represent only 1.1% of the Internet connections with an estimated 10,000 subscribers at the end of June 2006. This technology is however forecasted to rapidly increase in popularity and should represent 32.4% of all Internet customers by the end of 2010 with 850,000 connections.

Find out more about this market in our new 30-page Nigeria telecom country profile report: More info >>