In 2001, Chief Executive Officer (CEO) of Vodacom, Alan Knott-Craig, infamously said-when GSM licences were being auctioned in Nigeria- that he would not bid because he did not like doing business with those who are “smarter than we are” – a veiled reference to the stereotypical view of Nigerians as scammers.
Barely four years later in 2005 Knott-Craig was singing a different tune, when he said in an interview that “losing the investment opportunity in Nigeria was a real disappointment for us as a management team.”
Rival MTN had no such qualms, and today it is Nigeria’s leading operator with 43 million subscribers as at June 2012 and making $2.5 billion in core profit in 2010 and again in 2011.
The lesson learnt (by prospective investors) from Vodacom’s bad judgment of not investing in Nigeria is a reason for the current scramble for a piece of Nigeria’s power sector.
In spite of the difficult operating environment and numerous risks, investors clearly see the upside for gain in Nigeria’s power sector, which has the potential to dwarf the revenues made in the telecommunication sector.
Nigeria is currently the largest telecoms market in Africa.
The country’s four GSM operators MTN, Globacom, Airtel and Etisalat had a combined subscriber base of 90.3 million at the end of 2011.
With Average Revenues per User (ARPU) per month in Nigeria, hovering in the $10 range, it means the four operators had revenues of about $10.8 billion (N1.7 trillion) in 2011.
Telecoms contribution to Nigeria’s Gross Domestic Product (GDP), has increased from a negligible 0.5 percent in 2001 to 3.6 percent by 2009, according to data from the Nigerian Communications Commission(NCC), website.
Analysts say the telecoms success has raised hopes for Nigeria’s moribund power sector, if the government manages to successfully privatise it.
“Nigeria has often surprised on the upside, and the success in telecoms is a classic example. People are looking at power in the same way,” said Fola Fagbule, Vice President of Origination and Coverage at Africa Finance Corporation (AFC), a Lagos based investment bank.
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